<figure><img width="1500" height="1149" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221108121136/636a40019c7e80680e04a5f8jpeg.jpg" alt=""/><figcaption>Illustration: BHANU BHATTARAI</figcaption></figure>The spate of investment treaty arbitrations that have inundated developing countries in recent times has now reached Nepal. At stake is a Rs39.06 billion tax imposed by the Large Taxpayers Office (LTO) on <a href="https://www.nepalitimes.com/opinion/ncell-ruling-opens-a-can-of-worms/" target="_blank" rel="noopener">Ncell</a>, following a decision of the Supreme Court.Ncell subsequently contested the LTO tax assessment, submitting that it is liable to pay only Rs14.5 billion. It also obtained an interlocutory interim stay from the Supreme Court on these grounds.The initiation of investment treaty arbitration by Axiata Investment UK Ltd (Axiata UK) through an intermediate special purpose vehicle not directly investing in Nepal, while challenging the same action before the Supreme Court of Nepal and bypassing other statutory remedies, raises several questions as to the use of investment treaty arbitration and the International Centre for Settlement of Investment Disputes (ICSID).Read also:<a style="background-color: #ffffff; font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/opinion/ncell-ruling-opens-a-can-of-worms/" target="_blank" rel="noopener">Ncell ruling opens a can of worms</a>, Semanta Dahal<a style="background-color: #ffffff; font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/here-now/supreme-court-weighs-in-on-ncell-tax-dispute/" target="_blank" rel="noopener">Supreme Court weights in on Ncell tax dispute</a>, Sharad OjhaAxiata UK filed a request for arbitration before the ICSID against the Government of Nepal regarding the capital gains tax levied by Nepal’s tax authorities on the indirect transfer to Axiata UK of an 80% stake in <a href="https://www.nepalitimes.com/here-now/supreme-court-weighs-in-on-ncell-tax-dispute/" target="_blank" rel="noopener">Ncell</a> through the sale of Reynolds Holdings Limited, by the previous foreign investor, TeliaSonera Norway Nepal Holdings AS to Axiata UK.The arbitration was initiated on the basis of the bilateral investment treaty between the governments of Nepal and the UK (UK-Nepal BIT) on 2 March 1993. In parallel, Ncell has also initiated proceedings before the Supreme Court of Nepal challenging the CGT assessment by the tax authorities.In doing so, Ncell and its indirect shareholder Axiata UK have not availed statutory remedies otherwise available under Nepal's law to challenge the assessment. This presents the government with some credible arguments to resist the investment treaty claims.First, it is doubtful whether Axiata UK’s indirect acquisition of Ncell’s shares qualifies as an ‘investment’ in terms of Article 1(a) read with Article 8(1) of the UK-Nepal BIT. Axiata UK’s role in the transaction is limited to its acquisition of Reynolds, which owns 80% of the shares of Ncell.Moreover, Axiata UK is a wholly owned subsidiary of Malaysia-based Axiata Group Berhad. The Government of Nepal could argue that Axiata UK Ltd has no real interest in the transaction and is merely being used as a vehicle to bypass the jurisdictional hurdle of the UK-Nepal BIT.Previous investment treaty arbitrations have found that a mere passive investor, such as a company which conducts no business of its own but merely holds shares in a company incorporated in the host state, will not be able to invoke the jurisdiction under a bilateral investment treaty.It could be argued that Axiata UK is required to exhaust local remedies before resorting to arbitration under the UK-Nepal BIT. The ICSID Convention expressly provides that if a dispute arises, parties may refer the dispute to arbitration if they are unable to resolve it within three months ‘through pursuit of local remedies or otherwise’. By its decision on 6 February, the Supreme Court held that capital gains tax could be levied on the transaction. Thereafter, the capital gains tax was computed by the assessing authority, and this assessment was also challenged by Ncell by way of a writ petition before the Supreme Court on 21 April. Subsequently, Axiata UK submitted its request for arbitration, as announced on 26 April.The sequence of events shows that the decision to invoke arbitration under the UK-Nepal BIT was made immediately pursuant to the calculation of capital gains tax liability, instead of pursuing local remedies to challenge the assessment. The strategy of ignoring statutory remedies and instead relying on constitutional and investment treaty protections appears to have been motivated by the desire to avoid the requirement of depositing one-third of the disputed tax liability as a condition to challenge the assessment under Nepali tax laws.The government can now argue that the invocation of arbitration is against the letter and spirit of the UK-Nepal BIT and the ICSID Convention.Ncell’s present challenge before the Supreme Court is limited to the amount of tax, and Ncell has itself admitted a portion of the liability. It is questionable whether a dispute on the quantum of tax can be referred to arbitration under the UK-Nepal BIT.In matters involving taxation, a claim for expropriation will ordinarily involve showing that the tax liability in question has been imposed as part of a designed and deliberate set of measures to deprive the investor of the value of their investment. Such claims in previous cases have typically involved retrospective legislation where local tax law has been applied in a patently arbitrary and discriminatory manner by the host state. Establishing such a high threshold may be difficult for Axiata UK.The Government of Nepal can now consider all options available, including raising preliminary objections on jurisdiction under Rule 41 of the ICSID Arbitration Rules and Article 41 of the ICSID Convention, at the earliest.Semanta Dahal and Vikas Mahendra are lawyers and partners at Abhinawa Law Chambers (Nepal) and Keystone Partners (India).

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Nepal has strong case on Ncell arbitration

<img width="1050" height="696" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221108101144/636a25c89c7e80680e0439dfjpeg.jpg" alt=""/>The Supreme Court’s verdict on Wednesday requiring the Malaysian company Axiata and Ncell Nepal to pay billions capital gains tax on their purchase of Nepal’s largest private telecom provider Ncell will end a <a href="http://archive.nepalitimes.com/blogs/thebrief/2016/06/03/taxing-time-for-ncell/" target="_blank" rel="noopener">controversy</a> that has dragged on for three years, but is expected to further chill <a href="https://archive.nepalitimes.com/regular-columns/Comment/making-nepal-fdi-friendly,853" target="_blank" rel="noopener">Nepal’s foreign investment climate</a>.A full bench of the apex court headed by Chief Justice Cholendra Shumsher Rana decided after two days of hearings that Reynolds Holdings Ltd was a shell company and the real owner of <a href="http://archive.nepalitimes.com/blogs/thebrief/2016/05/16/the-tax-in-question/" target="_blank" rel="noopener">Ncell</a> was <a href="http://archive.nepalitimes.com/blogs/thebrief/2015/12/21/axiata-buys-80-stake-in-ncell/comment-page-1/" target="_blank" rel="noopener">Axiata</a>, and it was liable to pay the tax along with Ncell Nepal.Justices Rana, Mira Khadka, Bishwambhar Prasad Shrestha, Ananda Mohan Bhattarai and Tanka Bahadur Moktan were deliberating on a public interest litigation writ filed by former secretary and advocate Dwarika Nath Dhungel and six others that Ncell Nepal and Axiata were responsible to pay capital gains tax when they bought the company from the <a href="http://archive.nepalitimes.com/article/interview/Nepal-very,1104" target="_blank" rel="noopener">Swedish-Finnish telecom company TeliaSonera</a> in 2016.When TeliaSonera sold Reynolds Holdings shares in Ncell to Axiata for over $1 billion, Nepal’s Large Tax-payers’ Office had said Reynolds owed the government Rs35 billion in taxes and demanded it pay the amount and fines to a total of Rs61 billion.Ncell Nepal refused to pay that full amount, and transferred only Rs21 billion capital gains tax. After this, the writ was filed, and the Supreme Court on Wednesday also rejected a case filed by Ncell.The case became controversial after two foreign investors traded ownership of a Nepal-based telecom company. Since TeliaSonera has already left Nepal, the Court found that the buyer is liable to pay capital gains tax if the seller did not.Senior advocate Surendra Bhandari says that it is international practice that the seller has to pay capital gains tax on any sale of assets, but says the Supreme Court is right in assessing that the seller was allowed to leave the country without paying tax and to put the onus on the buyer.Wednesday decision now sets a precedent for the buyer to also be responsible for paying capital gains tax. Officials at the Internal Revenue Service say that although the country’s treasury will benefit from the tax payment, there has been no investigation into why the seller was allowed to get away without paying taxes, and fears that the case will have negative repercussions on future investment.Eighty percent of Ncell’s ownership is with Reylonds Holding registered in the British Virgin Islands and 20% with Niraj Govinda Shrestha. Ncell’s main promoter was Reynolds Holding through TeliaSonera’s office in Norway.According to Nepal’s tax laws, TeliaSonera’s sale of Ncell to Axiata had a capital gains tax liability of Rs35 billion. Axiata had written to the Internal Revenue Office before the sale if it was liable to pay capital gains tax in Nepal, but there was no reply from its director at the time, Chudamani Sharma.After that the tax controversy got mired in politics, with various party leaders and former CIAA chief <a href="https://archive.nepalitimes.com/regular-columns/Legalese/parliament-and-court-plays,822" target="_blank" rel="noopener">Lokman Singh Karki</a> vying for underhand deals that would let the guilty go free. Says advocate Bhandari: “The Supreme Court decision seems to be driven by the logic that any buyer should first inquire about the liabilities of the seller before any purchase.”However, other retired revenue officials say it is unfair to blame Axiata, and ask it to pay capital gains tax that should have been paid by TeliaSonera. He says the really guilty party here are the politicians who allowed TeliaSonera to leave without paying taxes, and this will dim Nepal’s investment climate just before an Investment Summit planned for next month, and after <a href="https://www.nepalitimes.com/here-now/to-davos-with-hammer-and-sickle/" target="_blank" rel="noopener">Prime Minister KP Oli’s visit to Davos</a> with the message that <a href="https://www.nepalitimes.com/editorial/crony-communism/" target="_blank" rel="noopener">Nepal was open for business</a>.The Surpeme Court verdict has also exposed a loophole in Nepal’s tax laws that allows shell companies to get away without paying taxes. TeliaSonera had its dividends frozen in Nepal by the Large Tax-payers’ Office, but the Supreme Court allowed the company to repatriate its profits.   According to the <a href="https://www.nepalitimes.com/latest/nepalis-in-tax-havens-swiss-banks-money-laundering/" target="_blank" rel="noopener">Nepal Leaks exposes</a> by the Centre for Investigative Journalism and the International Consortium of Investigative Journalists, Ncell owners had used the company to launder money as foreign direct investment. Ajeya Raj Sumargi, a businessman close to the former Maoist party and Birendra Mahato of the Federal Socialist Forum Nepal and brother of billionaire overseas Nepali Upendra Mahato were implicated in documents leaked through the Panama Papers about tax havens.The verdict this week opens the door for Nepal to tax FDI that is coming in from offshore tax havens.   Read also: <a href="https://archive.nepalitimes.com/regular-columns/Comment/making-nepal-fdi-friendly,853" target="_blank" rel="noopener">Making Nepal FDI friendly,</a> Shyamal K Shrestha<a href="http://archive.nepalitimes.com/news.php?id=962#.XFwMylUzaUk" target="_blank" rel="noopener">Fight for FDI</a>, Ashutosh Tiwari<a href="https://archive.nepalitimes.com/article/from-nepali-press/Ncell-has-complied-to-all-obligations,3047" target="_blank" rel="noopener">"Ncell has obliged to all obligations"</a>

Supreme Court weighs in on Ncell tax dispute

This is the first instalment in a new limited series in Nepali Times on the historic transportation infrastructures of Nepal. Nepal’s Forest Railways As<a href="https://nepalitimes.com/here-now/india-s-border-trains-that-connected-nepal"> India’s railway network </a>expanded in the 1890s and 1900s, the demand for wooden railway sleepers, called ‘ties’ in America, likewise increased. The <a href="https://archive.nepalitimes.com/article/Nepali-Times-Buzz/the-rana-reign-a-recap-of-history,3751">Rana regime</a> realised that western Nepal’s dense forests, from which sal trees could be extracted and sold, represented a valuable source of revenue. There was a problem of accessing large tracts of <a href="https://nepalitimes.com/here-now/the-tarai-s-shrinking-forests">Tarai forests</a>. However, once Indian railway lines are extended to Nepal’s border in several places, this issue could be resolved by constructing logging railways, also known as ‘tramways’ or ‘light railways’. The Nepal Government awarded a contract to Punjabi timber contractors to supply 15,000 sal sleepers to Chandan Chauki station of India’s Oudh &amp; Rohilkhand State Railway in 1908. The contractors also received a concession to construct a steam tramway to run 48km into <a href="https://nepalitimes.com/banner/reviving-nepals-community-forestry-success-story">Nepal’s forests</a> for cutting and transporting trees. The author found no records, however, indicating that such an ambitious tramway was built in 1908. The hewn logs were probably carried into India by bullock carts or <a href="https://nepalitimes.com/news/elephants-become-white-elephants">elephants</a>. The earliest known forest railway in Nepal was built in 1914 in the southwestern corner of the present-day Parsa district. A British engineer went to the Indian border town of Bikna Thori to plan a 4-mile portable light railway for the transport of timber from <a href="https://nepalitimes.com/here-now/on-the-tri-junction-of-wildlife-conservation-conflict-and-co-existence">the forest of Chitwan </a>to the Thori depot on the Bengal &amp; Northwestern Railway. This short line was laid upon wooden sleepers, and its rails could be taken up and repositioned when logging in one section of the forest was completed. This forest railway was in operation at least through 1917.&nbsp; A few year down the line in 1923, J V Collier of the Indian Forest Service built a narrow-gauge railway in Kailali district also to export of timber to India. This line, the Nepal Government Forest Railway, departed Chandan Chauki in Uttar Pradesh and ran 48km northwest into Nepal.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250824150820_84ddef57433c2f847b2c7e56c2d9c924084b6e6a504bbca905d2c593fac8eabd.jpg" data-media-id="editor_6" data-image-id="20250824150820_84ddef57433c2f847b2c7e56c2d9c924084b6e6a504bbca905d2c593fac8eabd" data-rendition-name="original" width="1130" height="689" loading="lazy" alt="Nepal's little railways"> <figcaption>A Nepal Government Forest train in Kailali District hauling sal sleepers in 1925. Photo: DAVID CHURCHILL </figcaption> </figure>  It was a 2-foot railway supported by 11kg rails. The line was ‘temporary’ in that as sal trees were thinned out in one area, railway tracks were shifted to uncut areas of the forest. The railway crossed seven small <a href="https://nepalitimes.com/here-now/saving-what-is-left-of-himalayan-rivers">rivers</a>, but the bridges were taken down during the summer and monsoon. Trains ran only from November to April. This forest railway purchased four 4-6-0T ‘tank’ engines built in Leeds, England. Each bogie could carry 100 broad-gauge sleepers, and two engines were needed to haul a 21-car train loaded with 2,100 sleepers. This huge commercial forest operation once employed about 14,000 men, most of them Indians. During one season, nearly 800,000 broad and metre-gauge sleepers were exported to India. When India suffered a depression in 1930, large scale operations came to an end. Read also: <a href="https://nepalitimes.com/news/rust-in-peace?fbclid=IwAR1_eg88TCOS6RGRW1af7WvaWx5mzh_rY8-vT1MnJxSs41QtCpaA988oXk8">Rust in peace</a>, Daniel W Edwards  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250824150828_13a0b894b9ea0c478904d358028f0c976d84f284432ee25106787366598d38e5.jpg" data-media-id="editor_9" data-image-id="20250824150828_13a0b894b9ea0c478904d358028f0c976d84f284432ee25106787366598d38e5" data-rendition-name="original" width="6000" height="4000" loading="lazy" alt="Nepal's railways"> <figcaption>Rails extended north from this spot into the virgin sal forests of Bardia in western Nepal 100 years ago.  DANIEL W EDWARDS</figcaption> </figure>  A third railway was built in <a href="https://nepalitimes.com/here-now/the-big-bulls-of-bardia">Bardia </a>where some scattered rails and signs of an old roadbed were seen in the 1960s. It ran from Nishangada in India to Khairbhatti in Nepal. From there, stations heading south were Ranipur, Karmak, Taratal and Madhuwan. Collier likely <a href="https://nepalitimes.com/here-now/nepal-train-project-struggles-to-stay-on-track">built this railway </a>as well in the 1920s. An elderly man in Bardia in 2022, whose father had worked on this forest railway, was interviewed for this account. Kathmandu Valley’s Motor (Trolley) Railway Merchants importing goods from India via the<a href="https://archive.nepalitimes.com/article/business/ropeways-connecting-nepal,1749"> ropeway</a> Chandra Shamsher built in 1927 had to go to the ropeway’s terminus at Matatirtha near Thankot to claim their goods and then haul them 6km to the customs house Bhansar Adda at Teku for clearance and payment of customs duties. The Motor Railway was built to carry goods from the<a href="https://archive.nepalitimes.com/news.php?id=16839"> ropeway station </a>directly to the customs office, making it cheaper and more convenient for merchants to receive their shipments. In December 1931, Prime Minister Bhim Shamsher issued an order (sanad) putting Lt Gen Singha Shamsher Rana in charge of building this rail line to Teku and on to ‘Nabalak Khana’ in Tripureswar, a distance of 10km. The project was subdivided into four sections or ‘phant’, and for each, budgets and timelines were established. There was bato phant (constructing the roadbed), lik sleeper and jordne phant (laying sleepers and joining the rails), culvert phant (installing culverts) and pul phant (building bridges). Colonel Kishore Narsingh Rana was put in charge of the sleeper and rail section, while Colonel Dilli Jung Thapa, an engineer at Ghar Kaj Adda, also was involved. The Motor Railway was completed by the end of 1933. In the beginning, the railway’s small wagons may have been pulled and pushed by men and bullocks. However, in 1938 a British railway manufacturer sent Nepal a four-wheel, 5½ ton, 2-foot narrow-gauge diesel-powered locomotive with mechanical transmission, hence the name motor railway. Read also: <a href="https://nepalitimes.com/latest/nepal-railways-janakpur-test-drive?fb_comment_id=3554227181262227_4263866616964943">Nepal Railways Janakpur test drive</a> Leaving Matatirtha, the trains passed Satungal, Naikap, the Bishnudevi Temple, crossed an iron bridge over Balkhu Khola, then to Ghattepakha, Sunagau, through what is now a section of Kuleshwor (‘Lik Marg’) to the Customs Office at Teku.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250825020852_033f0cee9775d7dadde7811132f84da876f614c386e3677e560ba7aed79909d9.jpg" data-media-id="editor_15" data-image-id="20250825020852_033f0cee9775d7dadde7811132f84da876f614c386e3677e560ba7aed79909d9" data-rendition-name="original" width="2000" height="1333" loading="lazy" alt="railways in Nepal"> <figcaption>Lik Marg in Kuleswor, the former route of the Motor Trolley Railway. Photo: DANIEL W EDWARDS</figcaption> </figure>  In 1945, Motor Trolley had four engines, but spare parts was badly needed. The charge for transporting one maund (about 40kg) of cargo from Matatirtha to Teku was 50 paisa. Even though the trains ran slowly and only for a short distance, <a href="https://nepalitimes.com/news/fatalism-and-fatalities">accidents were not unknown</a>. A train loaded with rice, salt and cotton derailed on a curve in July 1946, and two railway employees were crushed under the cars and killed, five others were injured. Besides the driver and a brakeman, guards rode the trains to prevent theft of goods.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250824150836_63a327d4db3b067a23dd5c6cf17a31ffe811ffd4a8429bc31011d62298a90060.jpg" data-media-id="editor_17" data-image-id="20250824150836_63a327d4db3b067a23dd5c6cf17a31ffe811ffd4a8429bc31011d62298a90060" data-rendition-name="original" width="6000" height="4000" loading="lazy" alt="Nepal's railways"> <figcaption>The author by the remains of the Balkhu Khola bridge built in 1932 with American steel. Photo: JEEVAN NEPAL</figcaption> </figure>  By 1953, government budget estimates indicated the Motor Railway would break even with an income of Rs70,000 against Rs71,000 in expenditure. It appears the railway stopped service around 1957 with the opening of the Raj Path and the extension of the ropeway from Matatirtha to Bhansar Adda. Bent steel beams of the bridge across Balkhu Khola and two plaques recovered from the river a few years ago are the only remains of this railway today. Photos of the Motor Trolley Railway in operation are hard to come by.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250825020848_3a7cd17d0ffc36bbf5fdad404f5f6e91c7aa0e4f4ed729ed2c7e9c186f32ca9b.jpg" data-media-id="editor_18" data-image-id="20250825020848_3a7cd17d0ffc36bbf5fdad404f5f6e91c7aa0e4f4ed729ed2c7e9c186f32ca9b" data-rendition-name="original" width="5189" height="1979" loading="lazy" alt="railways in Nepal"> <figcaption>Steel plaque commemorating the construction of a Motor Trolley bridge across the Balkhu Khola. Photo: DANIEL W EDWARDS</figcaption> </figure>  The Kosi Project Railway (KPR) As early as 1941, India and Nepal considered building a dam on<a href="https://nepalitimes.com/here-now/the-kosi-s-sorrow-and-scope"> the Kosi River</a> to prevent destructive floods caused by <a href="https://nepalitimes.com/editorial/when-it-rains-it-pours-ksqprbu3">monsoon rains</a>. Floods in 1950 inundated 500 villages in Bihar and left 500,000 people homeless. The two governments signed an agreement in 1954 to build a barrage on the Kosi, and King Mahendra and Prime Minister Nehru laid the foundation stone in April 1959. To transport stones from a quarry near Dharan to use in mixing concrete at the construction site, the Indian government, in charge of building the barrage, made plans to build a narrow-gauge railway linking Bihar and its border town of Bhimnagar with Nepal’s settlements at Chakraghatti, Chatra and Ghopa, the outskirts of Dharan.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250824150816_fc5e13b01022c63c64f1e83589da0015eee7ecd002bdd3d97b88c98c1f3d45b7.jpg" data-media-id="editor_21" data-image-id="20250824150816_fc5e13b01022c63c64f1e83589da0015eee7ecd002bdd3d97b88c98c1f3d45b7" data-rendition-name="original" width="4011" height="2645" loading="lazy" alt="Nepal's railways"> <figcaption>Steel plaque commemorating the construction of a Motor Trolley bridge across the Balkhu Khola. Photo: DANIEL W EDWARDS</figcaption> </figure>  The section of the KPR in Nepal totaled 66km — the country’s longest railway to date. The stations south of Chakraghatti were Rajabas, Maduhuwan, Kushaha, Haripur and Bhantabari. The line built, operated and owned by the Indian Government, was opened in 1958 and known locally as Dhunge (stone) Rail. Procuring locomotives, wagons and other materials was a challenge. India’s Railway Board searched the country for old 41 lb rails, and located steam engines, most built around 1910, in poor condition, and stored in ‘retirement’. These decrepit locomotives were later cannibalised for parts to keep the remaining engines running, and six newer locomotives built in Yugoslavia were sent to the KPR in 1960 to prevent the railway from shutting down and halting construction of the barrage.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250824150832_fd644f9e2674c5047a531de5dfeb2c8860b0f93dddc7a2df3db867bf31b2c94b.bmp" data-media-id="editor_22" data-image-id="20250824150832_fd644f9e2674c5047a531de5dfeb2c8860b0f93dddc7a2df3db867bf31b2c94b" data-rendition-name="original" width="3171" height="2069" loading="lazy" alt="Nepal's railways"> <figcaption>KPR locomotives, water tank and staff at Chakraghatti in Nepal. Photo: JOHN BENSON</figcaption> </figure>  Used bogie-wagons (gondolas) came from <a href="https://nepalitimes.com/here-now/india-nepal-rail-diplomacy">Indian railways</a> that had been converted to metre-gauge, others were manufactured in Muzaffarpur without couplers due to the non-availability of steel. A hundred new wagons arrived from Japan, but only half could be put in service, as couplers from the other 50 were removed and attached to the Muzaffarpur wagons. This smorgasbord of equipment kept shop mechanics and work crews busy, but now-abandoned railways in Nepal always operated under less-than-ideal conditions. Although the purpose of the KPR was to transport gravel, stones and boulders to the site of the barrage, photographs show people riding in loaded wagons. Excluding Dharan, there was no bus service through the wild animal infested jungle between Dharan and Chakraghatti or along the dusty paths linking other small villages on the KPR, so patient locals sat in wagons at Dharan, waiting perhaps for hours for trains to depart.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250825020852_7d011dcc8e9b8cb0fe745b352486ebc4a84dac99419eadb35875333db20837c6.jpg" data-media-id="editor_24" data-image-id="20250825020852_7d011dcc8e9b8cb0fe745b352486ebc4a84dac99419eadb35875333db20837c6" data-rendition-name="original" width="3965" height="2659" loading="lazy" alt="railways in Nepal"> <figcaption>Ticketless riders on a train of gravel and stones in the forest between Dharan and Chakragatti in 1966. Photo: JOHN BENSON</figcaption> </figure>  Sons of former railway workers in Chakraghatti say that there were no fixed schedules, three or four trains ran both ways daily in the early 1960s. Southbound trains carried gravel, stones and boulders, while northbound trains would carry coal, cement and provisions, including sacks of coins to pay the workers. Trains even ran at night, and the crews worked long hours. Workers received free housing in project-built tenements but had to buy food supplies and items for personal use. The Babu Saheb or the superintendent lived at Chakraghatti, and at one time supervised more than 1,000 employees, nearly all of them from India. The barrage was completed in 1964, but by 1970, the Kosi Project Railway had passed into history. Daniel W Edwards was a Peace Corps volunteer in 1966 and is the author of several books on Nepal.

Nepal’s five little railways

The cost of preserving Nepal’s past

Turkish Airlines is official airline partner for the second edition of the Vatsalya Everest Women’s Volleyball League (EWV). The league, scheduled for 5-13 September, will take place in Pokhara and feature 18 international players alongside elite Nepali volleyball talent. The agreement was signed by Turkish General Manager Serkan Başar, and EWV CEO Snevy Chapagain. “Turkish Airlines’ support ensures a seamless journey and adds immense prestige to the league’s goal of women’s empowerment through sports as well as the agenda of sports tourism,” said Chapagain. “We are thrilled to partner with Vatsalya Everest Women’s Volleyball League as the official airline. With this association, we aim to support women role models in sports. We believe this association will connect countries to Nepali volleyball,” remarked Basar.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250825030844_36df66612152abbea71f15579358a2bb0fe797f21cbe7e7c7f28e3fe91655ae4.jpg" data-media-id="editor_0" data-image-id="20250825030844_36df66612152abbea71f15579358a2bb0fe797f21cbe7e7c7f28e3fe91655ae4" data-rendition-name="original" width="1920" height="1280" loading="lazy" alt="Turkish"> </figure>

Turkish to sponsor women’s volleyball league

India and China have a long-standing border dispute along their Himalayan border which has erupted in violent skirmishes. But Indian and Chinese officials last week agreed to ignore Nepal’s own border dispute with India to facilitate trade. The Indian Ministry of External Affairs this week flatly rubbished <a href="https://nepalitimes.com/editorial/territorialism">Nepal’s territorial claims</a> to the Lipulek Pass and the Kalapani Region, including Limpiyadhura, which Nepal considers as the source of the Mahakali River that forms Nepal’s western border with India. The latest episode in this dispute has come as Sino-Indian relations have thawed after US President Donald Trump slapped <a href="https://nepalitimes.com/news/nepal-and-the-us-india-tariff-tiff">sanctions on Indian exports</a>. The joint communiqué in Beijing said India and China had agreed to resume their border trade through the Nathu La, Sipki La and Lipulek during Chinese foreign minister Wang Yi’s visit to New Delhi. Lipulek is a pass 10 km north-east of <a href="https://nepalitimes.com/news/there-is-precedent-to-settling-kalapani">Kalapani</a> which has been disputed ever since the Survey of India published its 1879 map, where the source of the Mahakali was suddenly shifted from Limpiyadhura to Lipulek.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250826060824_4e68dd5964e0995b91148de9978a1de52b19691e1b01f52a405924fd130c22bd.jpg" data-media-id="editor_3" data-image-id="20250826060824_4e68dd5964e0995b91148de9978a1de52b19691e1b01f52a405924fd130c22bd" data-rendition-name="original" width="2000" height="2083" loading="lazy" alt="Lipulek dispute explainer"> </figure>  This tributary of the Mahakali was called the Kali on this map, and is a fordable tributary and not the main channel of the border river. The main Kali River was renamed Kuti Yangdi, and this happened while the British were still in India presumably to gain access to the Lipulek in contravention of the 1816 <a href="https://nepalitimes.com/banner/borderline-disorder">Sugauli Treaty</a>.&nbsp; This subterfuge continued even after India gained independence in 1947. Nepal has maintained that the main channel of the Kali is the border as per the 1816 treaty, when Nepal lost a third of its territory to British India. It is all well and good that India and China are now friendly enough to <a href="https://archive.nepalitimes.com/news.php?id=19447">open border trade</a> routes, but it should not be in violation of Nepal’s territorial integrity. Nepal should be called for diplomatic and political negotiations regarding the Lipulek pass and the Kalapani region comprising Limpiyadhura.&nbsp; Read also: <a href="https://nepalitimes.com/opinion/comment/when-xi-meets-modi-and-oli">When Xi meets Modi and Oli</a>, Kanak Mani Dixit China and India, but especially the latter, should invite Nepal to discuss these issues and iron out the disputes based on facts and evidence and maps. Nepal had sent seven diplomatic notes to India and three to China so far regarding the Lipulek and Kalapani. India has not responded to any of them. China replied once saying that Nepal and India should sort out their border disputes first before voicing their opinions. Nepal welcomes the recent talks between India and China that it hopes will positively impact on settling border disputes that are mostly stalled since the 1962 Sino-Indian war, the 73-day military standoff over the disputed Doklam region between China and Bhutan, and the 2020 Galwan clash in Ladakh. Nepal’s two large neighbours seem to have come to their senses and realised that it is in their interest to collaborate rather than confront each other when President <a href="https://nepalitimes.com/opinion/trump-s-first-month">Trump is acting erratically</a> with threats of sanctions and tariffs.&nbsp; Prime Minister K P Oli should bring up Nepal’s grave concerns about the Lipulek during his state visit to India next month when he will meet Prime Minister Narendra Modi in Bodh Gaya. The two are also expected to meet next week at the Shanghai Cooperation Organisation summit in Tianjin when Chinese President Xi Jinping will also be present. But even before that Nepal should send diplomatic notes to both the Indian and the Chinese governments regarding their agreement to resume border trade through the Lipulek.&nbsp; Here is a timeline of the developments regarding the Lipulek: Sino-Indian Agreement of 1954 This 8-year Agreement on Trade and Exchange between Tibet and India was signed in Peking on 29 April, 1954 by the Chinese Vice-Foreign Minister Chang Han Fu and the Indian Ambassador Nedyam Raghavan.&nbsp; There was no explicit mention on the border settlements either on the Line of Actual Control (LAC) or on Ladakh, although trade and pilgrimage through Lipulek and other 5 passes (Sipki La, Mana Pass, Niti Pass, Kungri Bingri Pass and Dharma Pass) were agreed upon.&nbsp; Trade between Uttar Pradesh state and the Tibet Autonomous Region was through ‘border &nbsp;point of the agreement states: ‘With a view to facilitating the visits of persons engaged in border trade and the exchange of commodities and means of transportation, (India and China) have decided that Lipulek (Qiangla) be the border pass for the entrance and exit of the said persons, commodities and means of transportation from the two sides.’ The agreement expired on 6 June 1962 during the Sino-Indian war, and the two sides did not renew it. Bilateral ties started to normalise only in the 1990s with the Indian decision in 1988 to abandon its policy of settling ‘territorial issue’ for ‘normalisation of relations’. India There was no reaction from Nepal to the 1954 agreement since Nepal did not have diplomatic relations with China yet at the time. Sino-Indian Agreement of 2005 The Political Parameters and the Guiding Principles for the Settlement of the Sino-Indian Boundary Question is detailed in 11 Articles, which outline the steps to be taken for a Peaceful and Tranquil Border. The agreement was a direct outcome of the Special Representatives mechanism that had been set up through a 2003 agreement. It also incorporated the Confidence Building Measures in Military Field along the Line of Actual Control (LAC) in the Sino-Indian Border Areas signed in 1996.&nbsp; A protocol on Modalities for the Implementation of Confidence Building Measures in the Military Field along the Line of Actual Control in the India-China Border Areas signed during Chinese Premier Wen Jiabao’s India visit, which stated in Clause 2 of Article 5: ‘Both sides agree to extend in principle to expand the mechanism of border meeting points to include Kibithu Dhamal in the Eastern Sector and Lipulek Pass (Qing La) in the Middle Sector. The precise locations of these border meeting points will be decided upon mutual consultations.’ Nepal’s Foreign Ministry issued a statement in 2005 stating that Nepal had asked China about the issue and the Chinese Embassy clarified that the agreement had nothing to do with Kalapani. This was perhaps the first time that Nepal had objected to the Sino-Indian agreement on Lipulek. King Gyanendra had staged a coup d’état on 1 February 2005, just two months prior to this agreement. The Nepali press voiced criticism of China in particular for disregarding the country’s sentiment.&nbsp; Sino-Indian Agreement of 2015 India and China signed several documents during the state visit of Chinese President XI Jinping to India on 18 September 2011. Number one on the list was: ’Opening a New Route for Indian Pilgrimage (Kailash Mansarovar Yatra) to the Tibet Autonomous Region of the People’s Republic of China’.&nbsp; The Indian foreign ministry stated: ‘The MoU provides for conducting the annual Kailash Mansarovar Yatra through Nathula Pass in Sikkim in addition to the existing Lipulek Pass in Uttarakhand’. On May 15, 2015, China and India issued a Joint Statement during Indian Prime Minister Narendra Modi’s visit to China. Point 28 under the ‘Trans-border Cooperation’, states that the two sides agreed to ‘hold negotiation on augmenting the list of trades commodities, and expand border trade at Nathu La, Quingla/Lipulek Pass and Sipki La Pass’. Nepal’s objection to the 2015 agreement was stronger than in 2005. Prime Minister Sushil Koirala called up Narendra Modi to express Nepal’s displeasure It was not until 2020 that Nepal’s Foreign Minister disclosed that ‘Nepal had expressed its disagreement in 2015 through separate diplomatic notes addressed to the governments of both India and China … including Lipulek Pass as a bilateral trade route without Nepal’s consent.’  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250826060824_d4497e2620bba81211d27e427393974877e09006abc26e13055508996e5b29ea.jpg" data-media-id="editor_8" data-image-id="20250826060824_d4497e2620bba81211d27e427393974877e09006abc26e13055508996e5b29ea" data-rendition-name="original" width="1108" height="1550" loading="lazy" alt="Lipulek dispute explainer"> </figure>  The new political map of India published by the Survey of India in November 2019 that incorporated areas east of the Kali River including Kalapani as Indian territory sparked renewed public, and political, attention to the Mahakali dispute. The Nepal government then countered by formally approving the publication of the new Political and Administrative Map of Nepal including all territories lying to the east of the Mahakali River on May 18, 2020. In June, the House of Representatives unanimously endorsed the second amendment to the Constitution of Nepal to update the country’s new political map in the national emblem. Sino-Indian Consensus of 2024 A 6-point Consensus on Peace and Tranquility on the Line of Actual Control (LAC) was agreed on December 18, 2024 between the Special Representative of the People’s Republic of China, Wang Yi, and the Special Representative of the Republic of India, Ajit Doval.&nbsp; India has not denied that this is a consensus, while China made it clear that this was not a Joint Statement. This Consensus is in line with the 2005 agreement, and was agreed during the 23rd round of the Special Representatives talks held after a gap of five years aimed at restoring bilateral ties frozen because of the military standoff in Ladakh. The agreement included: cross-border communication and cooperation, promoting the resumption of pilgrimages by Indians to Xizang, cooperation on crossborder rivers, and trade at the Nathu La Pass. Nepal made no reaction to the statement despite Lipulek being the pilgrimage route for Mansarovar and Kailash.&nbsp; Prabhakar Sharma is a construction engineer and an international border expert who has worked as a survey engineer for the Cameroon-Nigeria border demarcation by the United Nations.