Prachanda did the right thing by taking the high moral ground after President Ram Baran Yadav overturned his Cabinet's order removing Army chief Gen Rookmangud Katuwal—an action for which the non-executive president had no mandate.

The CPN-M can be faulted for not keeping its allies together and allowing the crisis to build up. But Prachanda was absolutely correct to dismiss Gen Katuwal after he repeatedly defied the government's orders. No democratic government can countenance such insubordination by its military. The confrontation between Gen Katuwal and the government had been brewing for some time. Matters came to a head in February, when Gen Katuwal started recruiting 2,000 soldiers in defiance of the 2006 Comprehensive Peace Agreement. Under the accord, which enabled Nepal's transition to a republic, the Maoist People's Liberation Army's guerrillas were to be integrated into the Army, whose bloated size was to be reduced.

In March, Gen Katuwal extended the term of eight brigadiers against the government's wishes. Last month, the Army also refused to participate in the National Games, in which the Maoists were to take part. Defence Minister Ram Bahadur Thapa demanded an explanation of all this from Gen Katuwal. He failed to provide a satisfactory explanation and continued his belligerent posturing. Amidst rumours of an impending coup, the government dismissed him.

Gen Katuwal has a long history of defying civilian authority. He was adopted by former Queen Ratna and raised with royal princes in Narayanhity Palace. He has had a fierce lifelong loyalty to the Palace and has always been seen as a surrogate for royalty. For years, he wrote vicious articles against political parties under a pseudonym and propagated the dubious view that there's no substitute for monarchy in Nepal. He did his utmost to suppress the popular uprising of 2006 and to dissuade King Gynanendra from stepping down. When the Constituent Assembly elections were held last year, he actively tried to prevent the formation of a government under the CPN-M, which won a majority of directly elected seats.

Gen Katuwal should have been sacked long ago—especially after the Raymajhi Commission investigated atrocities against civilians during the April Uprising (2006) and recommended action against him. But the then ruling GP Koirala government did nothing. Clearly, Gen Katuwal was seen by conservative forces, who are deeply suspicious of the Maoists—including the Indian government, the Western powers led by the United States, and the Nepali Congress and its allies—as a bulwark of resistance to progressive social change.

These forces delayed government formation by four months. The Nepali Congress walked out of talks for an all-party national government after the Maoists refused to make Mr. Koirala Nepal's President. Relations between the CPM-N and its biggest ally, the Communist Party of Nepal (Unified Marxist-Leninist)-UML, also soured. Progress in writing the Constitution, each of whose articles needs a two-thirds majority for approval, ground to a halt. This produced a government paralysis.

Prachanda's resignation coincides with Nepal's multiple crises, including rising unemployment, 16 hour-long power cuts, breakdown of law and order, discontent with governmental paralysis, and cutbacks in public services badly needed in this dirt-poor country. Attempts are now afoot to form a government led by the UML-NC, which excludes the Maoists. Anything short of a national all-party government will lack a political and numerical mandate and will be poorly equipped to deal with Nepal's crises.

It bears restating that the NC and UML are exhausted, corrupt, and in many ways, discredited parties, which have no vision of a free, republican, democratic and egalitarian society, which includes hitherto-excluded groupings like the janajatis (small indigenous communities), madhesis (living in the terai plains bordering India), and in general, the poor and landless living outside the Kathmandu Valley, where power has been concentrated for centuries.

Despite their indefensible use of violence, especially against civilians, the Maoists did offer such a vision and inspired millions. They were able to ignite and prolong the 2006 movement called Jana Andolan-II, which brought King Gyanendra to his knees, and inaugurated Nepal's transition to a republic through the 12-point agreement among all the major parties in November that year. The CPN-M thus transformed itself from a force which fought a bitter guerrilla war for a decade, to a party committed to multi-party democracy.

The 12-point agreement was facilitated by India and included a commitment by all concerned to disband the Maoists' PLA under international supervision and to integrate it into the regular Army. The Army, which has historically been close to the Palace, has failed to evolve into a professional force reporting to a civilian government. If Gen Katuwal, who is due to retire in three months, is allowed to get away with brazenly defying civilian authority, the Army will never make the transition. It will shackle and impede Nepal's democratisation.

Even if a ragtag coalition is stitched together into a new government by excluding the CPN-M which has 40 percent of parliamentary seats, it will lack adequate authority. So the sponsors of the arrangement are being extremely shortsighted in imagining that it will break Nepal's political impasse. It will merely prolong Nepal's crisis.

Regrettably, India is among these sponsors. India's ambassador Rakesh Sood has been hyperactive in Nepal's internal politics. With his US counterpart, he lobbied against Gen Katuwal's removal on the bogus theory that the Maoists were about to take over the Army. This is gross imperial- or Viceregal-style interference in a country whose proud people don't want it treated as India's 29th state. Such interference is wrong in principle and counterproductive in effect. In the past too, New Delhi lost goodwill and stature in Nepal because of its arrogant treatment of Nepal as a minor adjunct or virtual protectorate.

The present interference is of a piece with New Delhi's past role in backing Gyanendra until it became clear that the hated monarchy wouldn't survive Jana Andolan-II, one of the most impressive grassroots movements of its kind anywhere. Wisdom didn't dawn upon our policymakers when they dispatched Dr. Karan Singh, a royal, as a special envoy to express solidarity with Gyanendra at the movement's peak. It's only after India's efforts to counsel restraint on him were rudely rebuffed that our policymakers woke up and helped negotiate the 12-point agreement.

India's myopia often combines with meanness. In the late 1980s, India blocked essential supplies to land-locked Nepal merely because Kathmandu wanted to renegotiate the treaty of trade and transit. This caused immense hardship to the people. Last year, India spent four times more on refurbishing its embassy in Kathmandu than on flood relief for Nepal.

India has again regressed to imperial arrogance under a policy crafted primarily by National Security Adviser MK Narayanan and a section of the Foreign Ministry, which believes Prachanda might play the “China card”. But China has always been hostile to the CPN-M and backed the King against it. Mr. Narayanan is an ultra-conservative manipulator with a khaki mindset which is suspicious of all political currents from the liberals to social democrats to reformed communists to extremists. Days before polling in Nepal last year, he famously declared that India would like Mr. Koirala's NC to come to power.

Imagine what would have happened if, say, the US had expressed its preference for the BJP or the Congress in Indian elections. There would have been a furore and the US would have been disliked even more passionately than it is. Such a strategically maladroit and politically mindless person shouldn't determine India's policies towards its neighbours.

Under Mr. Narayanan's approach, India risks alienating large numbers of Nepalis, and precipitating something far worse than a “soft” coup or army takeover: a bloody civil war in Nepal, which will make our entire region insecure. India has an open border with Nepal. Its citizens don't need visas or work permits to live, earn or buy property in Nepal (and vice versa). A crisis in Nepal will instantly and automatically be transmitted to India.

In any foreign policy perspective with foresight, sobriety and wisdom, India must understand the critical imperative of developing good relations with Nepal based on mutual trust. Not only is Nepal a close, very special neighbour, it holds the key to India's water and energy security. It's in the Himalayas that the greatest of India's rivers, including the Ganga, the Indus and the Brahmaputra, originate. And it's at the India-Nepal border that the key to controlling the floods of the Kosi and Brahmaputra lies.

Nepal's cooperation in hydroelectricity will be crucial to developing renewable energy, in which India's sustainable future lies. Jettisoning these security benefits and economic and ecological gains for presumed—in reality, illusory—short-term strategic “advantage” speaks of an abysmal policy failure. India must correct course before it's too late. (IPA Service)