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Revised Trade And Transit Treaty With India
BY KTM Metro Reporter in Kathmandu
During the Prime Minister Madhav Nepal’s recent visit to India, Nepalese and Indian highest state civil officials called secretaries have signed the revised Trade And Transit Treaty of 1996; Nepalese and Indian commerce ministers will signed it off making the treaty between two nations effective in the near future.
Nepalis had anticipated positive impact on the Nepalese industries and trade sector when Nepal and India signed the Trade And Transit Treaty of 1996 but it has proved otherwise. The provision made in the treaty for Nepalese goods to have an easy access to the Indian market has remained in paper only causing a huge trade deficit of Nepal with India. India has restricted the import of goods from Nepal through non-tax barriers such as quarantine or quality certification and so on.
The data released by the state bank called Nepal Rastra Bank (NRB) show the Nepalese trade deficit with India has almost doubled to Rs. 116 billion during the last five years; and the export from Nepal continues to decreases every day while import from India increases.
The revised treaty has stated that it would ease the trade and transit between Nepal and India, and India has committed not to create problems of the Nepalese goods entering the Indian market. However, how Indian policy makers and bureaucrats would behave in the future whether they would not repeat the past mistakes or simply follow the treaty in words and deeds remains to be seen.
The private sector businesspersons have hoped that the revised treaty would help to boost the Nepalese exports to India consequently increasing the industrial activities in Nepal if both governments would be serious and sincerely enforce the clauses of the treaty. It would certainly help reduce the Nepalese trade deficit with India.
Following the revised treaty, the central government of India and/or any state government would not levy any VAT, additional duty and other taxes on the Nepalese goods entering India. However, in the past, the state governments had harassed Nepalese exporters; so, the impact of the revised treaty on the Nepalese export depends on how the state governments would enforce the Trade and Transit Treaty the central government has signed with the Nepalese government. In addition, the enforcement of such a treaty has depended on the bilateral relations between the two countries.
Following the revised treaty, India would provide Nepal with financial and technical assistance for setting up a laboratory of an international standard for quality certification; however it has not set deadline for setting it up. If the setting up of such lab takes years, then the Nepalese exporters would continue to face problems of exporting goods to India again. The treaty does not say anything about the export process until the lab is set up.
India does not recognize the Nepalese quality standard, so, Nepalese exporters have to rush to Calcutta for getting quality standard certificates even for exporting a small quantity of goods. The new revised treaty obviously would not relieve the Nepalese exporters from the need for getting such quality certificates from Calcutta until a high standard lab is set up in Nepal. (Source: The Rising Nepal of August 27, 2009)
