Fact Sheet: The Indus Waters Treaty 1960 and the Role of the World Bank

June 11, 2018

Origins of the Treaty:

The Indus Waters Treaty was signed in 1960 after nine years of negotiations between India and Pakistan with the help of the World Bank, which is also a signatory. The negotiations were the initiative of former World Bank President Eugene Black. Seen as one of the most successful international treaties, it has survived frequent tensions, including conflict, and has provided a framework for irrigation and hydropower development for more than half a century. Former U.S. President Dwight Eisenhower described it as "one bright spot ... in a very depressing world picture that we see so often."

The Treaty allocates the Western Rivers (Indus, Jhelum, Chenab) to Pakistan and the Eastern Rivers (Ravi, Beas, Sutlej) to India. At the same time, the Treaty allows each country certain uses on the rivers allocated to the other.

How the Treaty works:

The Treaty sets out a mechanism for cooperation and information exchange between the two countries regarding their use of the rivers, known as the Permanent Indus Commission, which has a Commissioner from each country. The Treaty also sets forth distinct procedures to handle issues which may arise: “questions” are handled by the Commission; “differences” are to be resolved by a Neutral Expert; and “disputes” are to be referred to a seven-member arbitral tribunal called the “Court of Arbitration.” 

As a signatory to the Treaty, the World Bank’s role is limited and procedural. In particular, its role in relation to “differences” and “disputes” is limited to the designation of individuals to fulfill certain roles in the context of Neutral Expert or Court of Arbitration proceedings when requested by either or both of the Parties.  

Disagreement over two hydroelectric power plants:

The disagreement between India and Pakistan concerns the design features of the Kishenganga (330 megawatts) and Ratle (850 megawatts) hydroelectric power plants. The former was inaugurated in 2018 while the latter is under construction. The World Bank is not financing either project. 

The two countries disagree over whether the technical design features of these two hydroelectric plants contravene the Treaty. The plants are located in India on tributaries of the Jhelum and the Chenab Rivers, respectively. The Treaty designates these two rivers, as well as the Indus, as the “Western Rivers” to which Pakistan has unrestricted use with some exceptions. Under the Treaty, India is permitted to construct hydroelectric power facilities on these rivers, subject to constraints specified in Annexures to the Treaty. 

Different Treaty mechanisms sought by India and Pakistan:

In 2016, Pakistan asked the World Bank to facilitate the setting up of a Court of Arbitration to look into its concerns about the designs of the two hydroelectric power projects. India asked for the appointment of a Neutral Expert for the same purpose. These requests came after the Permanent Indus Commission had been engaged in discussions on the matter for a while.

The World Bank sought to fulfill its procedural obligations with respect to both the Court of Arbitration and the Neutral Expert. The Treaty does not empower the World Bank to decide whether one procedure should take precedence over the other; rather it vests the determination of jurisdictional competence on each of the two mechanisms. At the same time, the World Bank actively encouraged both countries to agree amicably on a mechanism to address the issues.

Working with India and Pakistan:

On December 12, 2016, World Bank Group President Jim Yong Kim announced that the World Bank would pause before taking further steps in each of the two processes requested by the Parties. The announcement by the Bank was taken to protect the Treaty in the interests of both countries.

Since then, the World Bank has worked to seek an amicable resolution. Multiple high-level meetings have been convened and a variety of proposals have been discussed. However, five years of joint efforts have not yielded a solution.  On March 31, 2022, the World Bank, therefore, decided to resume the process of appointing a Neutral Expert and a Chairman for the Court of Arbitration.

The World Bank continues to share the concerns of the Parties that carrying out the two appointments concurrently may pose practical and legal risks. However, the lack of success in finding an acceptable solution, despite the best of efforts by all Parties involved, is also a risk to the Treaty itself.

The World Bank remains committed to act in good faith and with complete impartiality and transparency while continuing to assist the countries and fulfilling its responsibilities under the Treaty.


Last Updated: Apr 06, 2022