Kathmandu, April 13 (IANS) Two days after Nepal's embattled government was compelled to cancel a controversial deal with India to print new Nepali passports, India Tuesday expressed its displeasure, saying it was a matter of regret that the issue had been politicised in Nepal.

The Indian ambassador to Nepal, Rakesh Sood, met Nepal's Prime Minister Madhav Kumar Nepal Tuesday to convey the Indian government's unhappiness with the developments.

After the meeting, the Indian Embassy in Kathmandu issued a statement, saying it was regrettable that a confidential letter written by the ambassador to Nepal's Foreign Minister Sujata Koirala was made public.

Defending India's desire to get a contract to print nearly four million Nepali passports, the statement said India had agreed to supply the passport booklets through its government undertaking, Security Printing and Minting Corporation of India (SPMCIL), at a concessional price 'as a gesture of goodwill and in keeping with the friendly relations between the two countries'.

In the spirit of mutual cooperation, the statement said India further agreed to provide, at its cost, technical assistance, which included supply of software and hardware equipment, installation of the equipment at the central passport office in Kathmandu and training of Nepal officials for personalization of the new passports.

'The arrangements agreed with the government of Nepal would have allowed it to issue the machine readable passports by early-June 2010,' the statement added. 'To ensure this, SPMCIL and the government of India have already initiated action.'

'It is a matter of regret that the issue has been politicized in Nepal and confidential communication from the Embassy has been publicized,' it said.

The statement came as Nepal's coalition government and India both came under fire in Nepal after the opposition Maoist party tabled a confidential letter in parliament Sunday.

The letter, written by the Indian ambassador to Nepal, Rakesh Sood, to Sujata Koirala had urged the government to award the contract to the Indian company even though a global tender had been floated and four companies were shortlisted.

'India and Nepal share an open border regime under which Nepali citizens do not require a visa to travel to India and vice-a-versa,' Sood wrote to the foreign minister. 'In recent times, the open border has also been a source of certain security concerns which have been shared with the Nepali leaders at the highest level.'

'This (India's) offer will not only address some of the security concerns that have been mentioned but, I am certain, will prove to be economical for the government of Nepal,' it added.

After Maoist MP Narayan Kaji Shrestha read out the confidential letter in parliament, there was an uproar with Nepal's political parties saying India would be able to keep tabs on new Nepali passport holders and Nepal would face a security crisis.

The foreign minister Monday sought to hush the matter up, saying she had no knowledge about the Indian ambassador's letter.