The Indus River originates in the Tibet Autonomous Region, southwest of Tibet, and flows through the Kashmir region and then pakistan into the Arabian Sea. In addition, there are many tributaries, especially those on the eastern plain of Punjab – the Jhelum, Chenab, Ravi, Beas and Sutlej rivers. The Indus river system has always been used for irrigation. Work in modern irrigation technology began around 1850. During the period of British rule in India, large pipeline systems were built, old canal systems and flood channels were revitalized and modernized. In 1947, British India was divided, leading to the creation of an independent India and Western Pakistan (later Pakistan). As a result, the water system was late, major work in India and canals were passing through Pakistan. After the expiry of the short-term status quo agreement of 1947, on April 1, 1948, India began to retain water from the canals that flowed to Pakistan. The agreement between the projects of 4 May 1948 required India to supply water to the Pakistani parts of the basin, for annual payments.
This was also an emergency solution, and further discussions were to take place in the hope of a lasting solution. Lilienthal`s idea was well received by World Bank officials (then the International Bank for Reconstruction and Development), and then by the Indian and Pakistani authorities. Eugene R. Black, then president of the World Bank, told Lilienthal that his proposal made “all its sense.” Black wrote that the Bank was interested in the economic progress of both countries and was concerned that the dispute over the industrials would be a serious handicap for this development. India`s previous objections to third-party arbitration were resolved by the bank`s insistence not to resolve the dispute, but to work as a channel for an agreement.  One of the last stumbling blocks of an agreement was the financing of the construction of canals and storage facilities that would transfer water from western rivers to Pakistan. This transfer was necessary to catch up with the water that Pakistan abandoned by giving up its rights to the eastern rivers. The World Bank originally predicted that India would pay for this work, but India refused.  The Bank responded with an external financing plan.