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    Why India is a more cost-effective trade option for Kathmandu

    Synopsis

    Proximity to Birgunj helps Haldia to cater to most of Kathmandu’s trade needs. Vishakhapatnam, on the other hand, is Nepal’s cargo gateway to China, Singapore, Southeast Asia, the US and Europe.

    Nepal is dependent on Indian ports for most of its trade. About 60% of its exports and imports are handled by Haldia and Vishakhapatnam ports. Proximity to Birgunj helps Haldia to cater to most of Kathmandu’s trade needs. Vishakhapatnam, on the other hand, is Nepal’s cargo gateway to China, Singapore, Southeast Asia, the US and Europe.

    China’s attempt is to reduce the dependency by providing Nepal access to another port through the Kathmandu-Rasuwadadhi highway. Dalip Singh takes a look at Nepal’s trade with India and China in the light of the recent skirmishes involving all three nations:

    Access points in India
    Landlocked Nepal shares a 1,868-km boundary with India, which has 20 entry and exit points for trade. India exports petroleum products, iron, steel, cement, machinery and pharmaceuticals and imports tea, black cardamom, juices and jute products

    Haldia port handles most of Nepal’s trade and is 848 km away from Birgunj dry port. However, the shallow port cannot accommodate huge vessels and goods have to be moved to bigger ships at Singapore or Colombo, increasing trade time and costs. Vishakhapatnam does not have this problem but is 1,422 km away from Birgunj.

    India has agreed to provide Nepal access to Dhamra port in Odisha and Mundra in Gujarat. Negotiations are on to facilitate trade through inland waterways from Haldia to Nepal through rivers Koshi and Gandak. India accounts for 64 percent of Nepal’s total volume of trade, according to data sourced from Economic Survey of 2018-19.

    Non-tariff trade
    Informal trade happens in the Terai region too for goods mainly produced in UP, Bihar and West Bengal to avoid high tariff and for other issues such as weak infrastructure and high transportation cost. Nepal gives goods produced in third countries in exchange.

    Nepal-China trade
    Nepal’s 1,415 km border with China in the north faces geographical challenges. The Nepal-China trade deal allows people living within 30 km on either side of the border to travel freely by merely providing residence proof to engage in barter trade.

    Tatopani-Zhangmu and Rasuwagadhi-Kerung are two major trade points between Nepal and China. Tatopani has been the closest trade point with China since 1960s but it was closed in 2015 after a severe earthquake and reopened only last year, impacting exports and imports. Bulk of Nepal’s exports to China is consumed in Tibet

    Transit deal
    To offer more avenues to Nepal, China signed a trade and transit agreement in 2016. The deal gave Nepal access to Tianjin, Shenzhen, Lianyungang and Zhanjiang ports and dry ports of Lanzhou, Lhasa and Shigatse for third country trade. China also invested in rail and road networks to boost bilateral trade. It has also offered duty free and quota free access to 8,030 Nepali goods but Kathmandu has not been able to take advantage of it. Since the start of 2019-20 fiscal year to mid-November, Nepal-China trade through the border points route has reached about 20 million U.S. dollars, which is up from around 4 million US dollars that was in mid-July of 2018-19 fiscal year.

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    The Economic Times