Email received from........[NepalWatch] DeshCalling: China deal creates rift between India, Nepal ISN SECURITY WATCH (27/12/05) – The rift between South Asian neighbors Nepal and India has widened further after the Royal Nepalese Army (RNA) purchased arms and ammunition from China, paying hard cash while continuing to ignore older debts to India that have mounted up to over US$26 million. The cash-strapped RNA last month paid US$80,000 to buy 18,000 grenades and four million rounds of 7.62mm bullets from Poly Technologies Incorporated in Beijing in a surprisingly prompt transaction, with the consignments arriving in the capital, Kathmandu, in November and the payment also being made by 15 November. This has ruffled the feathers of India, Nepal’s largest trading partner, as over 20 private companies, including some of India’s biggest automobile manufacturers, are yet to be paid for military supplies sent to the RNA by New Delhi since 2002. Before India suspended military supplies to Nepal in February to show concern at Nepalese King Gyanendra’s power grab with the help of the army, New Delhi had been the Himalayan kingdom’s largest arms donor, selling weapons and equipment to the RNA at a 70 per cent markoff. Between 2002 and 2005, Indian military assistance to Nepal has been worth over US$110 million, of which the RNA was asked to pay about one-third when it had the funds. The Indian aid - which included helicopters, mine-protected vehicles, rifles and ammunition, grenades, ambulances, bullet-proof jackets, night-vision equipment, and concertina wire coils - was obtained from private Indian companies, which are now pressing New Delhi for payment. Over 20 private companies are involved, including some of the top automobile makers in the country, like Tata Motors, Mahindra and Mahindra, Maruti, and Ashok Leyland. The creditor’s list also includes Hindustan Aeronautics, the largest public-sector undertaking under the Defense Ministry’s Department of Defense Production, which has until now exported two indigenously-made Lancer light attack helicopters and two Advanced Light Helicopters (ALHs) to the RNA. Sources in India’s defense department, who did not wish to be named, said some of the manufacturers had also threatened the Indian government with legal action. Though India says the bills have been pending with the RNA for over one-and-a-half years, Nepal’s newly appointed Home Minister Kamal Thapa professed ignorance about the debt. “Let the Indian government approach us officially, we will study the bills after that,” Thapa told ISN Security Watch on Tuesday. Defense sources say the prompt payment to the Chinese company was made because of the commissions involved. A section of senior officers in the RNA had been unhappy with the Indian aid, since it involved a government-to-government transaction and elbowed out brokers. However, after the Indian military aid stopped, the RNA issued a public notification asking for interested arms manufacturers abroad to enlist in coordination with a local partner. Most of the arms supplies obtained by the RNA since then have likely benefited brokers, who are often senior army officials. Indian defense sources predicted that the Chinese deal would sour future transactions with India. Nepal currently has a great need for arms, since King Gyanendra is going ahead with his decision to hold elections on 8 February, despite even though the major parliamentary parties will be boycotting them. - http://www.isn.ethz.ch/news/sw/details.cfm?ID=14049