Nepal-India IGC meeting on January 9-10; experts, pvt sector suggest gamut of issues for revision

The Nepal-India Inter-Governmental Committee (IGC) on Trade, Transit and Cooperation meeting is set to be held in Kathmandu in January.

The IGC, apex bilateral mechanism for promotion of trade and investments between Nepal and India, is scheduled for January 9-10, confirmed the Ministry of Industry, Commerce, and Supplies. Earlier, the IGC meeting was scheduled for November but the meeting was postponed.

The meeting will review progress made on several agendas in the sphere of trade and commerce, Commerce Secretary Govinda Bahadur Karki said, adding that the IGC is a regular meeting and Nepal has no specific agendas for this meeting.

However, experts have been suggesting a gamut of issues including review of the duty-free access provided to Indian primary agricultural products to revision rules concerning the Certificate of Origin (CoO).

They have also proposed to revise the current arrangement of allowing reciprocal access for agricultural products, horticulture, flowers, forest products, rice, pulses, flour, wheat husk, livestock, poultry, fish, honey, dairy products, and eggs, as Nepali agricultural goods struggle to compete under the current duty-free access provided to Indian products.

The private sector has also suggested the ministry to take up the issue of export hassles on large cardamom, tea, ginger, and anti-dumping duty on jute products, quarantine and food testing lab, parking fee on Integrated Check Post (ICP).

However, the experts have also recommended Nepal to negotiate a reduction in the required value addition for zero-duty access to India. At present, a 30 percent value addition is required for exports to India, but Nepal should advocate to lower it to 20 percent, according to the experts.

India is not only the Nepal's largest trading partner but also a gateway to third country trade. Thus, Nepal should also lobby to revise its transit treaty to secure access to additional Indian seaports, Dhamra Port in Odisha and Mundra Port in Gujarat, experts suggested.

Nepal has requested that Dhamra Port be designated as a gateway for its transit needs and has urged swift action on Mundra Port stating that Dhamra Port can accommodate larger ships and importing goods through this port would significantly reduce import costs for Nepali traders.

Nepal is using Kolkata Port and Visakhapatnam Port currently. However, Kolkata Port accommodates small vessels only.

But the experts have been complaining that the issues have been piling up because Nepal's presentations during discussions with India had been ineffective and lacked thorough preparation before IGC meeting.
(Published at NepalKhabar: https://en.nepalkhabar.com/news/detail/12181/)

India to allow Nepal to use three inland waterways

Nepal is likely to get access to more ports of India for overseas trade as India may allow Nepal to use inland waterways in three routes and movement of bulk cargos via railway from Indian seaports to major Nepal-India border points.
“India has expressed its consent during Nepal-India Transit Treaty Review meeting that kicked off in Kathmandu today,” according to a press note from Ministry of Industry, Commerce and Supplies.
The government teams from both the countries discussed various issues relating to simplifying Nepal’s transit routes via India. The bilateral meeting will conclude on Wednesday.
Nepal has been seeking to use three inland waterways – Kolkata-Kalughat-Raxaul, Kolkata-Sahebgunj-Biratnagar, and Kolkata-Varanasi-Raxaul routes – on Ganges River expanding its transit options to the sea.
During the talks in New Delhi last October, the Indian side had agreed on principle to allow Nepal to use these inland waterways. India has developed a waterway on the Ganges River connecting Varanasi and the seaport of Haldiya in Kolkata. Access to the Indian waterways is expected to facilitate efficient movement of cargo imported from third countries to Nepal.
According to the joint secretary of Ministry of Industry, Commerce and Supplies Nabaraj Dhakal, India is also positive toward facilitating railway-based transportation of bulk cargo from Kolkata and Vishakhapatnam seaports of India to Jogwani and Nautanwa, Sunauli, at the Nepal-India border. “Bulk cargo includes fertilizers, sugar, soybean, salt, animal feed and raw plastic materials among others,” he said, adding that the bulk cargo items currently brought from third countries via Kolkata, Haldiya and Vishakhapatnam ports are imported to Nepal only through Birgunj border point. “Nepal at present has been using West Bengal’s Kolkata and Haldiya ports as well as Visakhapatnam Port of Andhra Pradesh.”
Dhakal is leading the Nepali team whereas joint secretary of the Department of Commerce at the Indian Ministry of Commerce and Industry Bhupinder Singh Bhalla is leading the Indian delegation.
The two countries might ink the deal tomorrow, if everything goes smoothly.
According to former joint secretary at the Ministry of Industry, Commerce and Supplies Ravi Shankar Sainju, the use of additional ports will facilitate Nepal’s overseas trade. “Dhamra Port of Orissa can be an alternative to the infrastructural hurdles at Kolkata Port and the long distance to Visakhapatnam Port,” the government officials opined, adding that Dhamra Port is 1806-km from Nepal’s Krishnanagar. “This new port is 400-km near than Visakhapatnam Port and 300-km near than Kolkata.”
Dhamra Port, which is operated by private sector, provides modern facilities and can accommodate up to 25,000 metric tonnes of goods.
Traders believe this port would be useful for the bulk of Nepal-bound goods from third countries. According to traders, Nepali importers can benefit from Mundra Port of Gujrat as well since it is connected to railway network right up to Krishnanagar.
They have long been demanding to allow diversifying the bulk cargo transport as it often takes more than a month for bulk cargos to reach Birgunj due to various hassles. Citing a lack of railway infrastructure, India had been saying that it was difficult to provide bulk cargo facility at other border points.
In 2012, the Nepal-India Inter-government Committee had agreed to expand the bulk cargo facility to Biratnagar and Bhairahawa border points. The agreement, however, was not implemented as the letter of exchange was not issued.

Nepal, India agree to review trade treaty

Nepal and India today agreed to review the bilateral trade treaty.
During the two-day commerce joint secretary level-talks that ended today, both sides agreed to review issues related to bilateral trade and commerce.
According to minister for Industry, Commerce and Supplies Matrika Yadav, both the nations have agreed to take steps like comprehensive review of the existing bilateral trade treaty, to further boost two-way commerce. “The bilateral talks focused on enhanced cooperation to stop unauthorised trade in both nations,” he said, adding that officials of the two countries sat down for the third round of talks to review the bilateral treaty of trade in New Delhi on Thursday and Friday. “The talk is expected to prepare groundwork and other provisions to review the trade treaty.”
The nine-member committee – led by joint secretary at the Ministry of Industry, Commerce and Supplies Nabaraj Dhakal – comprised of representatives from the Ministry of Foreign Affairs, Department of Customs and Ministry of Agriculture and Livestock Development had left for New Delhi on Thursday to hold talks with joint secretary of the Department of Commerce under Ministry of Commerce and Industry of the Government of India Bhupinder Singh Bhalla led Indian delegation at the joint secretary-level meeting. “Nepal and India also finalised the draft of a mutual recognition agreement in the trade of agricultural goods,” he said, adding that after the agreement goes into effect, the two countries will recognise the quality certificates issued by each other.
The ministry has informed that officials also discussed on possible ways to address Nepal’s ballooning trade deficit with India and introduce and amend provisions in the trade treaty to ease bilateral trade.  Meanwhile, it has been agreed upon to include possible concerns raised by both Nepal and India in the revised treaty.
“India has agreed to address Nepal’s concerns related to simplifying trade with the southern neighbour by addressing both tariff and non-tariff barriers,” Yadav said, adding that he would, however, disclose the details of the agreement after the negotiating team submits its report to him. “The meeting also was positive on addressing Nepal’s agenda to drop the zero-tariff facility on Indian agricultural goods and some other primary products.”
Earlier, officials from both the nations had held two meetings on reviewing the bilateral trade treaty in New Delhi on August 9 last year and in Pokhara on February 7 and 8.
Likewise, the February 8 meeting in Pokhara had agreed to declare inland waterways as ‘trade route’ in Nepal-India Trade Treaty. India has principally agreed to allow landlocked Nepal to use three inland waterways, which will help expand Nepal’s transit options to the sea. “Nepal can even operate its own vessels on the Ganges River that runs parallel to the southern border.”
A draft of the letter of exchange on the inland waterways was finalised during the bilateral trade talks,” Dhakal informed.
Nepal and India had issued a joint statement on establishing new connectivity through inland waterways during Prime Minister KP Sharma Oli’s visit to New Delhi in April 2018. Earlier, India has also consented to grant access to the Kolkata-Kalughat, Raxaul; Kolkata-Sahebgunj, Biratnagar and Kolkata-Varanasi-Raxaul routes during the trade talks.
Last March, the two countries formed a joint technical team to study the possibility of operating waterway transportation over various routes. The technical team identified the three routes via Haldia port as the most viable routes for inland waterway transportation between the two countries.
India has developed a waterway on the Ganges River connecting Varanasi and the seaport of Haldia, Kolkata. Access to the Indian waterways will facilitate efficient movement of cargo imported from third countries to Nepal, though the idea seems too far fetched despite Prime Minister KP Sharma Oli’s dream of ferrying ship in Nepal.
The provision could get legitimacy, after it is signed at the next Inter-Governmental Committee meeting.
India currently grants duty-free access to Nepali products with at least 30 per cent value addition. “India has agreed in principle to implement policy considering Nepali products from the customs tariff headings to the customs tariff subheadings, ensuring flexibility in the goods imported from Nepal,” the ministry informed. “Revising duty-free access for agricultural goods, revising the agriculture reform fee imposed by Nepal on Indian farm products, and removing Indian quotas on four Nepali products were among the major items on the agenda.”
Nepal has been asking India to lift the quantitative restriction on the import of acrylic yarn, copper utensils, vegetable ghee and zinc oxide, which has been in place since 2002.

New cargo tracking system increased freight forwarders’ cost

Freight forwarders today complained that the electronic cargo tracking system has raised transportation costs by 25 per cent despite minimising documentation costs also due to reduction of transportation time, detention and demurrage charges for Nepali traders.
“Despite government’s assurances that the new system will make shipping cheaper due to reduction of transportation time to almost four times, the shipping companies at Indian ports have been imposing additional surcharges under different headings increasing the cost against the government’s claim, they complained.
The government has recently launched the electronic tracking that uses the Global Positioning System (GPS) – a satellite-based radio navigation system – and allows the shipper to keep track of consignments. Nepal has received transshipment privileges from Indian authorities – along with the system – under which goods imported from third countries undergo customs clearance directly at the customs points on the Nepal-India border.
The government has been implementing the electronic tracking and the transshipment on Nepal-bound cargo released from Kolkata, Haldiya and Visakhapatnam ports in India since mid-February. The system permits electronic documentation that has been claimed to make shipping cheaper apart from reducing time of transportation to five days from earlier 21 days, saving demurrage and detention charges.
The traders – to use the system – need to pay Rs 4,200 extra per container as fitting charge for electronic tracking device. However, the freight forwarders complained that they are forced to pay higher consignment charges. “Shipping companies hiked the cost of cargo handling by Rs 25,000 to Rs 125,000 from Rs 100,000 per container,” according to past president of Nepal Freight Forwarders Association (NFFA) Rajan Sharma. “Shipping lines give only a four-day concession period for empty containers to be returned from Birgunj to Kolkata after they are unloaded,” he said, adding that the companies charge an additional $100 per container per day, if there are delays. “The limited capacity of Sirsiya Dry Port in Birgunj to handle containers has pushed the costs up.”
Apart from congestion at Sirsiya Dry Port in Birgunj, the rising labour cost and the need to train manpower at the ports have also contributed to the hike in the price, according to the incumbent president of the association Prakash Singh Karki.
Karki also suspected intervention of customs agents behind the hike in freight charges. “When the system was launched in February, customs handling agents at Indian ports had disrupted the movement of Nepal-bound cargo,” he said, adding that they used to earn by using the manual system but upset by the loss of income, the agents protested by halting the movement of Nepal-bound cargo.
Currently, six shipping lines are providing services to Nepali traders. Among them, Maersk Line handles around 60 per cent of the cargo destined for Nepal. The small number of companies handling Nepal-bound cargo is also one of the reasons for increasing the cost due to the monopoly.
The association has suggested the government to use more shipping companies to check such malpractices.

Debt trap warnings over BRI projects motivated by bias: FM Gyawali

Foreign minister today dismissed the notion that Nepal could fall into a Chinese debt trap, if it chose to be part of the Belt and Road Initiatives (BRI).
The argument that Nepal could fall into a Chinese debt trap, if it chose to take loans under the BRI is motivated by bias," said foreign minister Pradeep Kumar Gyawali, addressing a press meet today.
There are some concerns from various quarters that BRI loans could possibly push Nepal into a serious debt trap like some of the countries in the world. "Nepal is aware what it should do and what it should not do in its national interests," he said, adding that Nepal is free to decide on its development initiatives. "Nepal will decide independently on Chinese loans and the selection of projects under BRI."
Arguing that Chinese debt was not behind the serious economic crises in many Latin American countries including in Argentina back in the 1990s and 2000s, he said that they were not under the Chinese debt trap. "Greece is still struggling with a serious economic crisis and many other countries have also fallen into debt traps,” he added.
He also explained that there is no rule that a country will fall into a debt trap through taking loans from any particular country and not fall into it when taking loans from another country. "The issue is whether Nepal selects a project on the basis of possible returns and what is the pay back plan," he added, though his government's selection of projects till date – since it came to the power with almost two-third majority – has not seen any suitable and economically viable projects.
Since Nepal is currently holding discussions with China on the projects to be incorporated into BRI, there are a couple of projects under consideration.
Gyawali also said that Nepal and China will sign the protocol of the Nepal-China Transit Transport Agreement during visit of President Bidya Devi Bhandari beginning from tomorrow. The protocol paves the way for the implementation of the agreement and allows Nepal third country transit facilities via Chinese ports. The first state level visit of a head of the state since the establishment of a federal republic is expected to connect Nepal's development endeavors with Chinese development success through the signing of protocol in the presence of the heads of the states.
Secretary at the Ministry of Industry, Commerce and Supplies Kedar Bahadur Adhikari will sign the protocol with his Chinese counterpart during the forum in the presence of President Bhandari. Though the protocol is said to allow more flexible terms for trade and transit – compared to India – and might be feasible for trading with South East Asian countries also, the cost of doing business through the new route is yet to be calculated.
The agreement allows open utilisation of either inland waterways or roads for transit and transport to sea ports for third country trade.
Nepal signed the Transit Transport Agreement with China in 2016 after trade blockade by India.
Likewise, President Bhandari is scheduled to take part in a roundtable to be hosted by her Chinese counterpart Xi Jinping and hold bilateral talks with Xi on April 29. Transport minister Raghubir Mahaseth will deliver a speech on 'Infrastructure and Connectivity' during the forum.

Nepal, China to sign transit trade pact protocol during president’s Beijing visit

Nepal and China are signing the Nepal-China Transit Transport Agreement (TTA) during President Bidhya Devi Bhandari’s visit to Beijing. The signing of the much-hyped and long-awaited protocol is expected to give Nepal alternative ports to the third country trade from the Indian ports.
The President is visiting Beijing to attend the second Belt and Road Forum for International Cooperation at the invitation of Chinese President Xi Jinping. President Bhandari is scheduled to leave for China on April 24. Bhandari will address the Belt and Road Forum on April 25. She is expected to return home on April 28.
The protocol – that will pave the way for the implementation of the TTA – is planned to be exchanged between secretary at the Ministry of Industry, Commerce and Supply Kedar Bahadur Adhikari and a Chinese vice-minister on behalf of their respective governments in the presence of Bhandari and Xi.
Nepal and China initialled the protocol of the agreement, which was signed in March 2016 during Prime Minister KP Sharma Oli’s China visit, in Kathmandu on September 7. After few revisions, both the governments have endorsed it for formal signing. The cabinet approved the protocol some two weeks ago and the Chinese government had also endorsed it.
At the time of the protocol’s finalisation in September, the two countries had agreed to formally sign the protocol during a high-level visit.
The protocol of the TTA will allow Nepal to use Shenzen, Lianyungang, Zhanjiang and Tianjin seaports, ending Nepal’s sole dependence on Indian ports for overseas trade. Nepal will also been allowed to use Lanzhou, Lhasa and Xigatse dry ports. According to the protocol, Nepali traders will also be allowed to use any mode of transport – rail or road – to access the seaports for third-country trade.
President's delegation will include Minister of Industry, Commerce and Supply Matrika Prasad Yadav, secretary Adhikari and Nepal’s ambassador to China Lilamani Poudyal.
During the Beijing visit, President Bhandari will meet President Xi and extend him a formal invitation to visit Nepal. Though, Xi has already visited South Asian countries, including India, Pakistan, Sri Lanka, Bangladesh and Maldives, he has yet to visit Nepal. Xi is expected to visit Nepal shortly after Bhandari’s visit to Beijing. 

India removes GST on supply of services for transit cargo

India has removed the goods and services tax on services provided by Indian service providers for transit cargo like transportation, insurance, shipment, container freight station and cargo handling charges.
Indian Finance Ministry – issuing a notification – informed about the GST waiver considering these services provided by the Indian service providers as ‘service export’.
Joint secretary at the Commerce Ministry Rabi Shanker Sainju confirmed that India has waived the GST on supply of services associated with transit cargo to Nepal and Bhutan – landlocked countries – through a recently published Gazette notice.
The new provision introduced by government of India had come into force from September 29. "Nepali traders making payments in Indian currency to procure aforesaid services will not have to pay GST now," he said, adding that Indian government had earlier levied GST since July 1.
Since the Indian government introduced the GST, services like transportation, cargo handling and container freight station had became costlier as the GST rule recognised and exempted GST only, if the service procurer made payment in convertible foreign currency. Though GST is not applicable on export of goods and services, it recognised service export only if the Indian supplier received payment in convertible foreign currency.
Nepal had requested the Indian government for GST waiver citing that services procured by Nepali traders in India should be taken as service export. Likewise, Nepali private sector – during the Prime Minister Sher Bahadur Deuba's India visit – had also requested the Indian authorities to waive the GST on Indian service providers for transit cargo like transportation, insurance, shipment, container freight station and cargo handling charges as it is against the Nepal-India Bilateral Trade and Transit Agreement. The Indian government officials, especially then Commerce Minister Nirmala Sitharaman – currently Defence Minister – had with Nepali private sector vowed to waive GST, if it is against the bilateral agreement.
The central bank encourages traders to make payments in Indian currency for transactions in India to prevent chances of embezzlement of convertible foreign currency like US dollar by Nepali traders.
Nepal has requested GST waiver for all services procured by Nepalis in India, like software, business process outsourcing, knowledge process outsourcing and other technical services as well, according to Sainju. "However, India has amended GST rules only for services related to transit cargo that includes road and rail transportation, shipping line charges, cargo handling charges."

Government told to start work for granting transit rights to India, China

Experts have proposed to the government start homework for granting transit rights to both the neighbors.
Presenting a paper entitled 'Toward a New Framework for Nepal's Trade and Industrial diversification' at the International Conference on Key Trends in China-Nepal-India Relations and New Development Strategy for Nepal,' jointly organised by South Asian Institute of Management (SAIM), Institute for Integrated Development Studies (IIDS) and Nanyang Technological University of Singapore, in Kathmandu today, former finance secretary Rameshwor Khanal said that the two neighbours – India and China – will, sooner or later, ask for transit rights. "Nepal should start homework right now to make sure that transit agreements would be in its favour,” he added.
He also proposed implementing connectivity infrastructure projects that support transit and trade diversification in the changed context of recent trade and transit blockade.
As the need of the hour is to diversify trade for a self-reliant economy, Khanal also proposed promoting energy-intensive industries, developing cross-border energy market and economic corridors along north-south transit routes, and promoting high value niche products and specialized services for trade diversification.
“Nepal has failed to diversify trade and transit even though each periodic plan – after the second periodic plan – has been emphasising on trade diversification, export promotion, foreign investment promotion,” Khanal said, adding that the country is still harping on trade diversification after six decades of the planned development practice.
Nepal started planned development practice from 1956 when over 95 per cent of its trade was with India. Trade with Tibetan Autonomous Region of China was confined to border region and most of it was bartering. Nepal had little to export to outside world then.
With foreign assistance, particularly from the then Soviet Union and China, critical manufacturing factories that aimed at import substitution were established in the decade following 1956. But following the calibrated reforms of 1985-86, policy reforms spanning all sectors of the economy were implemented between 1990 and 1992, he added. "The reforms led to trade diversification, growth of manufacturing sector, export growth, and some of the positive changes could also be seen lasting until 1998."
However, overall development policy did not support the trade and industrial policies started during the economic reforms of post-1990. Lack of continuity of reforms, weak institutions, and above all no infrastructure support held back the growth, Khanal said.
Commenting on his paper, chief executive of Investment Board Nepal (IBN) Radhesh Pant said that finance is not the problem for infrastructure development in Nepal. "Finance is the least of the problems," he said, giving examples of how foreign investors have been eager on putting money on Nepal's infrastructure development ranging from hydropower projects to cement factories.
Nepal needs huge investment in infrastructure development to meet the gap that can fuel economic growth, according to former member of the National Planning Commission (NPC) Swarnim Wagle. Hailing Chinese approach to development, Wagle said that quick delivery of aid without strings attached will help infrastructure development in Nepal.
In his paper on 'Asian Infrastructure Investment Bank (AIIB) and Infrastructure Construction in South Asian Countries', Prof Dai Yonghong, Director of Center for Myanmar Studies in Sichuan University and Deputy Director and Center for Nepal Studies in Sichuan University, highlighted benefits of Nepal as a transit economy. "It will help strengthening sub-regional cooperation between Sichuan-Tibet and SAARC, adjusting the area of cooperation, establishing Sino-Nepal FTA, and build Nepal overland trade route," he said, adding that it will also strengthen infrastructure development in border areas, apart from expansion of trade preferences and encourage investment, and expanding tourism cooperation, innovation and tourism business one-stop service mode.