Nepal-India Trade Treaty to be renewed without any change

Published On: October 6, 2016 01:30 AM NPT By: Rudra Pangeni  | @rudrapang

KATHMANDU, Oct 6: Nepal imported 5.4 times more from India than it exported to the southern neighbor in 2009 when the country signed a trade treaty with India hoping to reduce trade imbalance. 

Though Nepal is not gaining anything from the Nepal-India Trade Treaty, the seven-year treaty will be automatically renewed on October 27 without any amendment.

Nepal's import from India has skyrocketed over 12 times in the last seven years compared to its exports. Nepal imported goods worth Rs 214 billion from India in 2009/10, while its export to the southern neighbor was Rs 39 billion. Now, import from India has surged to Rs 477 billion while import has remained stagnant at Rs 39 billion in 2015/16.
Though import from India is growing with each passing year, Nepal has now communicated with India for renewal of the treaty without any change. Government officials simply say that they don't have sufficient time. They further added that the environment is not conducive for amendment as Nepal-India relations are yet to improve fully after last year's blockade. 

Nepal's government officials and private sector had hailed the treaty in 2009, saying that it would narrow down trade deficit and improve country's trade with the South Asian giant.

Talking to media persons after signing the treaty in 2009, the then Minister for Commerce Rajendra Mahato had said that the treaty would enable to address trade deficit as well as address problems related to trade between the countries. "The treaty of 2002 was not favorable for Nepal, but this treaty is beneficial for Nepal," Mahato had claimed at that time.

Likewise, erstwhile FNCCI President Kush Kumar Joshi had said that almost all of their agendas had been incorporated in the treaty to increase export from Nepal. “This treaty would solve several problems in bilateral trade and investments," Joshi had said at that time.

Rabi Shankar Sainju, joint secretary of Ministry of Commerce, told Republica that the process to renewing the treaty was underway. Sainju also said that his ministry recently sent a proposal to this effect to India through Ministry of Commerce. 

For amendment, either party of the treaty has to send proposals three months prior to the expiry date. But neither has send amendment proposals yet.

"We have some agendas to narrow down the yawning trade deficit with India. But the first priority at the moment is now to renew the treaty before it expires on October 27," Sainju said, adding that they will table those agendas in the Intergovernmental Committee in the days to come. 

Commerce Secretaries of both the countries co-chair the IGC meeting which is to expect to be held in Kathmandu later this year.

Private sector organizations, led by Federation of Nepalese Chambers of Commerce and Industry (FNCCI), had submitted their agendas at the Ministry of Commerce for amendment to the treaty. “It's unfortunate that the treat is being renewed without any amendment,” FNCCI President Pashupati Murarka said, adding: "We had sought permission to import third countries goods from India and railway cargo containers through all custom points in addition to the Raxaul and Inland Container Depot." Murarka further added that it can not only save billions of rupees in trading cost but also decrease cost of raw materials thereby increasing competitiveness of Nepali products.

Omitting tariff and non-tariff barriers, zero duty on Nepali goods by Indian states, and recognize of quality certification of Nepal are some of the key features of the treaty. In the treaty, India has agreed that its central government and state governments would not impose excise tax or any other taxes on Nepali goods. 

But Nepali traders have been facing recurring trade barriers, including quarantine, quality certifications. Hurdles in export of agricultural goods have not been removed yet. As India often refuses to recognize Nepali quality certification, traders are compelled to go to Kolkata for such tests. 

India briefly barred import of Nepali ginger in August citing pesticide residue in the Nepali cash crop.

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