As the upcoming Nepal-India Commerce Secretary-level meeting approaches, experts are urging a review of several provisions within the bilateral trade and transit treaties between the two countries. Though the Inter-Governmental Committee (IGC) meeting is scheduled for November, the exact date has yet to be finalised, according to officials from the Ministry of Industry, Commerce, and Supplies.

The trade treaty was automatically renewed for seven years in October 2023, with the transit treaty receiving a similar extension in June 2023.

Speaking at an event hosted by the Nepal-India Chamber of Commerce and Industry on Monday, experts highlighted the need for Nepal to reassess the duty-free access provided to Indian agricultural products, as well as revisions to rules concerning the Certificate of Origin.

Dr. Poshraj Pandey, executive chairman of South Asia Watch on Trade, Economics, and Environment (SAWTEE), stressed the need to revise the provision that grants duty-free market access to Indian primary agricultural products. He proposed that the current arrangement—allowing reciprocal access for agricultural products, horticulture, flowers, forest products, rice, pulses, flour, wheat husk, livestock, poultry, fish, honey, dairy products, and eggs—should be re-examined.

A study by SAWTEE revealed that Nepali agricultural goods struggle to compete under the current duty-free access provided to Indian products. This has resulted in a steady rise in imports of Indian agricultural goods, while local produce faces significant market challenges.

Pandey also recommended that Nepal negotiate a reduction in the required value addition for zero-duty access to India. At present, a 30% value addition is required for exports to India, but he advocated lowering this to 20%.

Furthermore, he called for India to lift the quantitative restrictions currently in place on four products. Under the trade treaty, Nepal is restricted from exporting more than 100,000 metric tonnes of vegetable ghee to India. Similarly, exports of acrylic yarn are capped at 10,000 tonnes, copper products under HS Codes 74 and 85.44 are restricted to 10,000 tonnes, and zinc oxide exports are limited to 2,500 tonnes.

Pandey also suggested removing the requirement for the treaty to be renewed every seven years, allowing Nepal to appoint agents in India for the export of pharmaceuticals, and raising the issue of removing anti-dumping duties imposed by India on Nepali jute and other products during the upcoming talks.

Push for Access to Dhamra and Mundra Ports

Nepal should reconsider the duty-free import of cereals, fruits, honey, poultry, and livestock, and seek to reduce the value addition requirement for Nepali exports from 30% to 20%, experts advised. They also recommended that Nepal revise its transit treaty to secure access to additional Indian seaports. Nepal has long requested access to Dhamra Port in Odisha and Mundra Port in Gujarat. Indian media reported that India had decided in 2022 to grant Nepal access to these ports. However, when the transit treaty was renewed in 2023, India did not immediately grant access.

According to former Commerce Ministry Undersecretary Ravishankar Sainju, Nepal has requested that Dhamra Port be designated as a gateway for its transit needs and has urged swift action on Mundra Port.

“Since Dhamra Port can accommodate larger ships, importing goods through this port would lower costs for Nepali traders,” Sainju explained. He added that efficient cargo management, vast storage capacity, rapid loading systems, and strong railway connectivity make the port an ideal choice for Nepal.

Mundra Port, the largest privately operated port in India, also offers high-quality services, which would benefit Nepal if access were granted. "Gaining access to these two ports would enhance Nepal's trade competitiveness and diversify its transit routes," Sainju said.

However, he suspects that strong lobbying by Kolkata Port may be why India is reluctant to grant access to other ports. “When access to Visakhapatnam Port was granted in 2016, Kolkata Port authorities lobbied hard against it in both Nepal and India,” he said. "Around 20-25% of Kolkata Port's business comes from cargo bound for Nepal."

Kolkata Port only accommodates small vessels, and its services have been considered substandard, which is why Nepal has been pushing for access to more Indian ports.

At Monday's event, freight forwarder Rajan Sharma called for dedicated railway services to facilitate the transportation of goods to and from the ports. Commerce Ministry Joint Secretary Baburam Adhikari admitted that Nepal's previous presentations during discussions with India had been ineffective and emphasised the need for thorough preparation for future negotiations. He also stated that the government would hold further consultations with experts and stakeholders ahead of the IGC meeting.