The World Bank decision to allow India construct hydroelectric power facilities on tributaries of Jhelum and Chenab rivers with certain restrictions under the 1960 Indus Waters Treaty (IWT) has reiterated India’s right to tap the potentials of river waters to the maximum within its territory. The 40-year-old water treaty has been an outstanding example of conflict resolution but scarcity of water in the basin states since the early 1990s has brought the agreement under strain and its “survival appeared weak”. The treaty so long had failed to address two issues: the division of shortages in dry years between India and Pakistan, when flows are almost half as compared to wet years, and the cumulative impact of storages on the flows of the River Chenab into Pakistan. Wular Barrage and Kishenganga project on the Jhelum and Neelum Rivers present a similar problem whereby water storage during the Rabi season is critical as flows are almost one-fifth of the Kharif season. Pakistan has gone as far as calling the treaty an inefficient forum for resolving water issues, elevating the water issue to a “core issue” and including it in the composite dialogue. But India has refused to include the issue in the composite dialogue because it is not ready to discard the treaty. The treaty permitted India to create storages on the western rivers of 1.25, 1.60 and 0.75 Million Acre Feet (MAF) for general, power and flood storages, respectively, amounting to a total permissible storage of 3.6 MAF. The ambiguity arises on its varying interpretation, thereby creating conflicts between Pakistan and India. The treaty also fails to clearly address India’s share of shortages in relation to storage dams on the western rivers, an issue of major concern. Pakistan had opposed the construction of Kishanganga (330 megawatts) and Ratle (850 megawatts) hydroelectric power plants being built by India in Jammu and Kashmir. Noting that the two countries disagree over whether the technical design features of the two projects contravene the treaty, the World Bank said the IWT designates these two rivers as well as the Indus as the “Western Rivers” to which Pakistan has unrestricted use. Thus permitting India to construct hydroelectric power facilities on Jhelum and Chenab rivers subject to constraints specified in the treaty