The Indian Embassy has refuted a new report that India has cut its financial aid to Nepal.

“The attention of the Embassy of India has been drawn to a report that India has cut its financial aid to Nepal. This conclusion, based on the amount allocated to India’s Ministry of External Affairs (MEA) in the recently presented Indian budget for April 2007-March ’08, is completely wrong,” a press release issued by the Indian Embassy said.

The embassy said the MEA’s budget for Nepal represents only one mechanism through which the Indian government resources are allocated for economic cooperation with Nepal while other GoI agencies and mechanisms also significantly contribute to large cooperation programmes with Nepal, such as the recent and ongoing supplies by GoI to support peace process in Nepal worth Rs1.28 billion, USD 100 million line of credit, waiver of defence purchase dues worth over Rs 1.6 billion.

“Such assistance, not reflected in annual budget outlays, is extended frequently and in accordance with priorities of the Government of Nepal, as was the case when a special economic package was announced during PM Mr G.P. Koirala’s visit to India in June 2006, when Government of Nepal made specific requests for assistance to facilitate peace process, amounting to NRs 15 billion,” the statement read.

Quoting an Indian news agency, The Kathmandu Post daily Friday reported that the Indian government had slashed its aid for Nepal to USD31 million for this year from USD47 million the previous fiscal year. The TKP report also said India had significantly increased aid amount for two other smaller SAARC nations – Bhutan and Maldives.

MEA’s ‘Aid to Nepal’ segment, which is for on-going and predetermined programme of action in one financial year, is just one part of the entire Indian assistance to Nepal, the embassy release said, adding, “Also many of the 185 large and small projects being implemented in all of Nepal roll over from one financial year to another, and are not reflected in the annual aid budget of MEA.”

According to the embassy, these projects account for an assistance outlay of over Rs 32 billion. Besides, there are Nepal-specific growth-enabling concessions from GoI resources, such as waiver of 4% additional duty for Nepali products exported to India.

It further said, “India’s economic cooperation engagement with Nepal has grown manifold in the past two-three years, and since the people of Nepal have taken their destiny in their own hands through restoration of multi-party democracy.”