Exports to India dwindle despite Trade Treaty renewal


The delay in the effective implementation of understandings reached during the final negotiations for amending the 1996 Nepal-India Trade Treaty has virtually halted the exports of major Nepali items to India.

The trade treaty, which was renewed on March 5 after months of negotiations, was expected to sort out most of the outstanding complexities such as the imposition of Anti Dumping Duties, Special Additional Tax and Luxury Taxes, and the increase in the number of Quarantine Check Points.

However, even after the passage of over two and half months of the signing the treaty, India has not yet taken concrete steps in removing the obstacles as promised during the final negotiations. As a result, the export of major Nepali items has declined remarkably lately.

Rabi Bhakta Shrestha, President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said that India should be cooperative at a time when the Nepali economy is facing difficulties. Nevertheless, discussions, he said, are on with the concerned Indian officials to sort out the current Nepali problems.

And it is not just the business community that is burdened by the Indian indifference. Even officials are concerned over the Indian stance. "We are aware of the problems in Nepali exports to India. We have initiated necessary steps to sort them out. And, we are hopeful that the Indian side will soon respond positively," said Bhanu Prasad Acharya, Secretary at the Ministry of Industry, Commerce and Supplies.

The dilly-dallying in the implementation of the renewed Trade Treaty has put at risk some of the vibrant Nepali industries that had grown in the span of past five years.

The export of agricultural exports has been badly hit by the inadequate quarantine check facilities in the bordering Indian cities thereby squeezing agro-exports to India. As of now, the quarantine checking facility is available only at Panitanki, adjoining the far eastern bordering town of Kakarvitta.

Nepal has long been demanding to establish at least 10 such quarantine checkpoints to smoothen agro-exports to India. The Indian Agricultural Minister Ajit Singh had recently even reaffirmed to open two more such points in Birgunj and Nepalgunj soon, though it is yet to be officially communicated to the government.

In addition, the luxury taxes imposed by the bordering Indian states has eroded the competitiveness of the Nepali products vis-ŕ-vis the local Indian products. And the hardest hit is the Nepali tea industry, whose demand has slumped considerably in India.

Likewise, Nepali entrepreneurs were of the impression that the long lasting haggles over the export of the surge items would end once the quota system is imposed. However, the ‘canalisation’ of export of vegetable ghee, one of the prominent Nepali exportable items, through the Central Warehouse Corporation (CWC) has created more complexities.

And the root cause is the CWC demand for 5 per cent commission of the total export amount as service charge, whereas Nepali ghee entrepreneurs have offered Rs 160 per ton. Concerned experts said that the CWC would get Rs 160 million if it accepts the Nepali offer.

Other items facing uncertainty are Acrylic yarn and Zinc Oxide on which the Indian government imposed anti-dumping duties some seven months ago. Since then, the export of these items has come to a stand-still, forcing the closure of tens of industries. Though the period of such duty has already expired, the Indian government is yet to direct its removal to its bordering customs offices, due to which the duty continues to be imposed.

Since the renewal of the treaty, the export of copper products has also been badly affected, which, however, is due to internal haggling over quota allocation. Despite several attempts, the ongoing differences amongst domestic copper producers over the allocation of export quota have caused exports to freeze.