Kathmandu, April 16

The cost for third country trade could be slashed significantly by developing high-grade road infrastructure within the country. As the transportation cost has a major share (around 72 per cent) in total logistics cost of trade, apart from warehouse and clearing charges, the country has been spending unimaginably high cost while transporting goods from the gateway port (Kolkata) to Nepal and vice versa.

“The cost of transporting cargoes from Kolkata to various destinations of Nepal and vice versa stands at over 61 per cent of total transportation cost of third country trade,” said Shankar Sharma, former vice chairman of the National Planning Commission.

As it is, the transportation cost of freight is highest via road and lowest via water. Moreover, weak road infrastructure from Kolkata to destinations in Nepal, delay in movement of rail, high rail fare, syndicate of Indian transporters in road transportation have been adding to the transportation cost via road.

According to Purusottam Ojha, former commerce secretary, the cost of ocean transportation for Nepal is also high compared to other countries. Nepal has been paying high cost for transportation of cargoes via ocean because the cargoes need to be transhipped from the mother vessel to feeder vessel in Singapore while bringing the goods via Kolkata port.

The same case applies in export of cargoes that need to be transhipped from feeder vessel to large vessel in Singapore. This is because the Kolkata port is a riverine port and can only serve feeder vessels.

As per Ojha, the transportation cost from the gateway port to Nepal is unimaginably high, mostly due to weak condition of the roads. “More recently, the government of India has been upgrading the road network in the Indian territory, but Nepal has not been able to keep pace with the development.”

Former NPC vice chairman Sharma also laid emphasis on upgrading infrastructure to lower the transportation cost.

“As transportation cost from Kolkata to various destinations of Nepal has over 61 per cent share in total transportation cost in third country trade, country should focus on reducing cost within the country first,” said Sharma.

The cost of transportation is higher in Nepal mainly due to weak road infrastructure from Pathlaiya (Nepal) to Raxaul (India), Hetauda-Pathlaiya and Mugling-Narayangadh. As most imported industrial raw materials as well as export cargoes need to be ferried via these road sections, the cost of transport goes up.

The government’s effort to build better infrastructure to reduce the transportation cost of trade is dismal, as per Sharma. He also opined that cost of trade with India can be reduced through developing high-grade road connectivity as two-third of Nepal’s trade is with the southern neighbour.

While reducing the travel time of cargoes could reduce the transportation cost, the country has been facing challenges in timely delivery of cargoes via rail as well. The Container Corporation of India (CONCOR) — a subsidiary of Indian Railways — spends more than the required time in delivery of cargoes, as per Ojha.

To ensure timely delivery of Nepal-bound cargoes ferried via rail from Kolkata port, the Nepal Intermodal Transport Development Board (NITDB) — the agency which oversees Inland Clearance Depots — had proposed corridor monitoring plan. However, the plan was never implemented due to ‘resource constraints’.

At a time when the country is struggling to create a conducive business environment, the higher logistics cost of trade has also been identified as one of the reasons for higher production cost.