The Mahakali Treaty concluded between Nepal and India, on February 12, 1996 is said to be on an ‘equal footing’ unlike other agreements/treaties on water resources before. However, the provisions of the treaty have not been implemented even after more than two decades of its enforcement. This paper, written following a study involving key informant interviews, direct field observations and study of documents, looks for the reasons behind the delay in implementation of the treaty and the resulting impacts from Nepal's perspectives. The study shows that the controversies of the treaty are around: (1) India's strategy to legitimatize its unilateral construction at Tanakpur; (2) interpretation of the Article of the treaty concerning equal entitlement to water; and (3) the extent of existing irrigation use on the Indian side having its direct implication on benefit assessment, which, in turn, has its implication on proportional cost sharing. The delay in implementation of Mahakali Treaty has created a deadlock in Nepal–India water cooperation. If an agreement could be worked out and the project could be implemented, that would set a very good precendent, useful for many other storage projects like Karnali Chisapani, Koshi High Dam, etc., in the future.

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