Kathmandu, 5 March 1973
The Government of INDIA, hereinafter called ‘the G.O.I.’
His Majesty's Government of NEPAL, hereinafter called ‘H.M.G.”.
BEING desirous of cooperating with each other in promoting the economic development of Nepal,
HAVE agreed as follows :
The GOI agree to make available funds to the extent of Rs. 4.00 crores (Rupees four crores only), in Indian currency for the implementation
of various development projects as appended herewith, hereinafter called the ‘Programme’. This aid will be utilised before March
31, 1973, except for the iodised salt project under the Special Rural Areas Development and the improving and the black-topping of
the Kathmandu-Godavari Road Project for which the aid will be utilised before March 31, 1974, and March 31, 1975, respectively.
Unspent balance would be utilised by mutual agreement.
The Chief Engineer, ICM Highway Projects, will execute the work of improving and black topping of the Kathmandu-Godavari Road and
will submit quarterly expenditure statements to the HMG. He will also render accounts to the concerned Accountant General in India
for the money spent from the Indian aid funds. The building/construction work under the Programme will be executed as far as possible
by the Central Engineering Division. The remaining portion of work including the buildings not taken up by the Central Engineering
Division will be implemented by the concerned Ministries/Departments/Agencies of HMG.
Whereas, generally the Programme would be in accordance with the projects appended herewith and implemented as indicated in Article
II above, any modification and/or addition within the spirit of the Agreement may be made in consultation between HMG and the Indian
Cooperation Mission hereinafter called ‘I.C.M.’
The Director, ICM and/or his nominees would act as Advisers to the concerned Ministries/Departments of HMG for the execution of the
Programme. They will also be Members of the Committees which have already been formed and/or which will be formed by HMG for the
implementation of the Programme in future, except in regard to the Remote Areas Development Committee where they will be invited
to attend all the meetings in which projects under this Agreement are considered. The Director and/or his nominees will be consulted
in the formulation of detailed plans and periodical progress reports would be made available to them in respect of the Programme
executed under this Agreement.
HMG will provide the necessary land for the execution of the Programme, free from all encumberances. The payment of compensation,
if any, and the settlement of claims from disputes arising therefrom, will be the responsibility of HMG. HMG shall also arrange
the supply of timber, sand stone, limestone and other raw materials, required for the projects free of royalty, excise duty, licensing
fee and other levies.
HMG will provide foreign exchange, if any, against the allotment made in Indian currency by the GOI.
HMG will ensure that the goods, materials, equipment, machinery and transport, etc. which are brought into Nepal or are moved from
one place to another within Nepal for the execution of the projects either by the project authorities or by the contractors employed
on the projects are afforded expenditious movement within the territory of Nepal and are exempt from licensing requirements and from
payment of all customs duties, taxes, cesses and levies of any kind. HMG will also ensure that the goods, materials, equipment,
machinery and transport etc. brought into Nepal from India as above will be allowed to be taken back to India when no longer required
for the execution of the projects. Exemptions from licensing requirements and from payment of all customs duties, taxes, cesses
and levies of any kind shall also extend to the transport and goods for personal use of India-based personal working for the projects.
The principles and procedures regarding the facilities to be extended to the Indian contractors and exemption from import and export
duties and other local levies of all supplies, materials, equipment and vehicles etc. imported for contract work, as worked out between
the Director, Indian Cooperation Mission, and HMG for the Trisuli Hydel Project will apply mutatis mutandis to the projects. This
will include exemption from Income and other taxes except contract tax.
The contract tax payable by Indian contractors will be collected by the project authorities and credited to project funds under advice
The Government of India shall depute adequate number of personnel e.g. Technical Advisers, Engineers, Overseas, Horticulturists and
other technicians for advising and assisting the respective departments of HMG in the execution of the Programme.
The project authorities, or their contractors, shall be allowed to import from India skilled and semi-skilled labour to the extent
not available in Nepal. HMG will make arrangements to ensure that the requirements of unskilled labour for the Programme are fully
HMG will extend all possible help and co-operation to the project authorities in the maintenance of peaceful labour relations and
the safeguarding of the personnel and property of the projects.
Contractors of the projects from outside Nepal will be free to import any amount of Indian currency and may be deemed necessary but
will convert it into Nepalese currency at legally recognised exchange counters for the transactions inside Nepal for the execution
of their work. They will be allowed to repatriate their currency holdings which will be converted into Indian currency by the Nepal
HMG will ensure expeditious grant of licences, permits and other such authorisations to enable the project authorities or their contractors
to execute work relating to the Programme.
HMG will make necessary security arrangements for the protection of the personnel as well as materials, equipment, etc. at the various
sites of construction and operations including the transit where necessary.
In the event of legal action arising from activities undertaken in pursuance of the Programme, HMG will assume full responsibility
for the defence of such action in Nepal and will make responsibility for the continued execution of the projects and will assure
immunity from garnishment or any other legal process of title to all contributions made for or property and benefits derived from
the execution of the Programme.
The funds provided by the GOI under this Agreement will be utilised for :
(i) the purchase of equipment essential for the projects required in connection with the execution of the Programme;
(ii) meeting the expenditure on salaries, allowances and travelling allowance etc., of the staff employed for the execution of the
(iii) meeting the cost of personnel obtained from India to advise and assist in the execution of the Programme; and
(iv) meeting the expenditure on construction of buildings, roads and bridges.
The expenditure for any purchases made through GOI, the expenditure under item (iii) of Article XIV and the expenditure under item
(iv) of Article XIV relating to the improving and black topping of the Kathmandu-Godavari Road will be incurred directly by the ICM
and the amounts debited to the aid under this Agreement.
Any expenditure incurred by the GOI before the signing of this Agreement in pursuance of the implementation of the Programme shall
be debited to the overall aid under the Agreement.
Subject to the stipulations in Article XIV and XV above, a detailed procedure for the release of funds in respect of the project
taken under the Programme and submission of utilisation certificates shall be determined by the Director, ICM and HMG. Secretary
in the Ministry of Finance separately.
Arrangements will be made to reflect Indian Assistance under this Agreement in HMG’s budget.
All the equipment, stores, machinery, etc. left over on completion of the works, will be used only for mutually agreed construction
works. All unspent balances and cash advanced by GOI after meeting the liabilities shall either be refunded to the GOI on completion
or termination of this Agreement or otherwise disposed of in accordance with a separate Agreement to be entered into for this purpose.
This Agreement shall come into force with effect from the date on which it is signed and will remain in force up to the 31st March
1975, unless terminated earlier by either Party by giving three months’ notice in writing to the other Party.
IN WITNESS WHEREOF, we, the undersigned, being duly authorised by our respective Governments, have signed the Agreement.
DONE at Kathmandu in the English language in four original copies, all of which are equally authentic on this day of Fifth March
One Thousand Nine Hundred and Seventy Three.
For the Government of India For His Majesty's Government of Nepal
P N KAUL
Indian Cooperation Mission
Ministry of Finance