Nepal and India concluded the Intergovernmental Committee (IGC) meeting headed by the commerce secretaries from both countries on Thursday, in New Delhi. The IGC is a mechanism constituted under Nepal-India Treaty of Trade to resolve issues of trade and transit between the two countries. The meeting focused on minimising technical barriers to trade, trade facilitation, trade infrastructure development and progress review of earlier IGC meeting that was held in December, 2013, in Kathmandu. Commerce Secretary Naindra Prasad Upadhyay, leader of the Nepali delegation, spoke to Pushpa Raj Acharya of The Himalayan Times on the developments of the recently held IGC meeting.

Nepal and India recently concluded the commerce secretary-level talks, also termed as Intergovernmental Committee (IGC) meeting. Was the meeting able to fulfil its objectives?

We held discussions on Nepal-India trade and transit issues and reached a conclusion to resolve them gradually to boost bilateral trade and investment. Overall, the meeting was a success. The meeting has proved that IGC is a very effective mechanism to resolve bilateral trade and transit issues where higher authorities of both sides spoke on technical and operational matters.

The meeting was scheduled for two days from June 28 to 29. Why was it extended for another day?

Issues had piled up as the IGC meeting had not been organised for a long time. We were having the meeting after a gap of two-and-a-half years. It used to be held on an annual basis earlier. We had an extensive discussion on the agendas presented by both sides. Though we did conclude the meeting on schedule we had to extend it for a day to finalise the minutes.

What are the major achievements of this meeting?

We held discussions on some critical areas that need to be addressed to expand trade volume between the two countries and both countries have made a commitment to enhance bilateral trade. In this regard, we have put forth some crucial issues like reduction in time and cost of trade, integration of Nepali products in Indian value chain process and trade related infrastructure development. This will help create an industrial base and address the supply side constraints, which is one of the major factors that has been hindering our export capacity. We also discussed on the increasing trade gap between India and Nepal. There is an asymmetry in export and import. Nepal’s imports from India stand at over Rs 500 billion against exports of around Rs 55 billion in a year. India has provided preferential market access to Nepal, which means there should be no tariff barrier to export to the southern neighbour. But the emerging technical barriers to trade (TBTs) have been hindering the export of potential products. In this regard, both countries have reached an agreement to sign memorandum of understanding (MoU) to harmonise standards. Nepal Bureau of Standards and Metrology and the Bureau of Indian Standards will sign an MoU soon to extend technical cooperation and collaboration for standard harmonisation of industrial goods. After completion of all the processes both parties will sign Mutual Recognition Agreement (MRA). The draft of the MoU has already been finalised and sent to the Cabinet for its approval. A similar MoU will be signed for standard harmonisation of food and agricultural products and the Department of Food Technology and Quality Control has been drafting the MoU with its Indian counterpart. We have sought further technical cooperation to enhance our laboratories as stringent quarantine measures are considered to be the major hurdles for export of agricultural goods and food items. In the meeting, we also requested for the establishment of laboratories at the border points because the exporters need to travel to Kolkata or Lucknow to get a lab-test certificate. Due to this exporters might face huge losses if the commodity perishes because there is no cold storage facility and sample testing facility at the border points. Similarly, we have also requested for the elimination of additional service charges that are imposed on warehousing, handling and transportation of Nepal-bound cargoes at Kolkata (Haldia) port. This ultimately puts pressure on inflation in Nepal as the cost of goods increases due to such additional charges. Nepal-bound cargoes are transit cargoes and they need to be forwarded through onward shipment to the destination port. Due to lack of that facility cost of trade is high. If the cost of trade is lowered, cost of production can also be reduced, which will support to expand our production base. In response, Indian government has pledged to instruct the concerned port to bring efficiency in service.

Private sector has long been complaining that TBTs and preference erosion are the major reasons hindering export to India. Were there any discussions held regarding these issues?

We held discussions on preference erosion, and non-tariff and para-tariff measures on export potential products, and inadequate trade facilitation measures that include lack of appropriate infrastructure. These are critical areas that will provide support in enhancing productivity, strengthening manufacturing base, integrating entire value chain and contributing in supply capacity or environment for easy market access, which will ultimately boost trade. We further discussed on removal of tariff rate quota imposed on four export items — vegetable ghee, zinc oxide, copper wire and acrylic yarn — since 2002. Tariff rate quota is provisioned in bilateral trade treaty that goes against the provision of South Asian Free Trade Agreement (SAFTA). And the Indian side has pledged to consider it. In addition, we talked on adjustment in value addition criteria.  We have put our opinion on adjustment of value addition criteria based on the multilateral trade arrangement. The member states of World Trade Organisation (WTO) have agreed to grant minimum value addition or 25 per cent to Least Developed Countries (LDCs) on export of goods to non-LDCs. As per the provision of existing treaty we have to meet 30 per cent value addition criteria to export goods to India.

 Nepal-India Treaty of Trade has a provision that the Indian government will extend preferential treatment for goods manufactured by small scale industries. The provision has not been implemented properly. Was there any progress on it?

Nepal-India Treaty of Trade has provisioned preferential treatment for products manufactured by small scale industries in the Indian market. For the implementation of this facility we have sought collaboration of Indian investors to integrate small and medium enterprises (SMEs) in value chain process of India because this approach could give necessary impetus to achieve post-2015 development agenda through inclusive and sustainable growth. This approach will also be instrumental in enhancing manufacturing base in the country and also create a favourable ground for Indian investment in Nepal.

Indian government is going to impose anti-dumping duty on jute and countervailing duty has been levied on some other products like readymade garments. Was there any development during the meeting regarding removal of such duties?

India has recently started internal discussions on imposing anti-dumping duty on Nepali jute being exported to India. Jute industry is one of the oldest industries in Nepal and has provided jobs to 20,000 individuals. The Nepali economy has been witnessing low growth and low employment generation due to the effects of the earthquakes and disruptions in supply lines last year. Hence, anti-dumping duty on major export items will be another obstacle for people who depend on such products for their livelihoods. This is why we have requested the Indian government to drop this measure. The Indian side has said that the process has already begun and has asked us to send concerned industrialists and exporters for public hearings going to be held in the near future to defend that jute exports from Nepal have not caused any problem to Indian industries. Similarly, we have also requested for removal of state tax that is being levied on export of medicinal herbs and aromatic plants. Likewise, Indian side has also been convinced to lower the additional charges like sales tax, educational tax and other taxes levied on readymade garments and other manufactured items that are making Nepali products less competitive in the Indian market.

What were the Indian side’s demands during the meeting?

The Indian side sought reduction on duty of non-alcoholic beverages. Import of non-alcoholic beverages is on the rise, which shows competitiveness of the product. Our tariff alone is not a barrier. We have said that if we reduced customs duty there will be chances of import surge from third countries that will ultimately hit Indian products. They have also requested us to remove leather from sensitive product list. And we have convinced them that the leather industry in our country is in an infant stage so we cannot remove it from the sensitive product list. Indian authorities have stressed on the control of unauthorised trade. More specifically they have shown concern on the unauthorised trade of beetle nuts, green tea leaves, gems and jewellery, cement and pharmaceuticals to Indian market. Protection of Intellectual Property Rights of Indian goods and problems faced by Indian companies to invest in Nepal were also raised. They have also requested for the ratification of Bilateral Investment Promotion and Protection Agreement (BIPPA) signed with India through the Parliament to promote Indian investment in Nepal.

You have also talked about cooperation on trade infrastructure development. Was there any specific agreement regarding it during IGC meeting?

We have urged for full fledged customs operation and border facilities at Panitanki, Rupaidiha and Banbasa. They have pledged to look into developing infrastructure at Panitanki border as the trade volume of Nepal with Bangladesh is going to increase as India has ensured seamless movement of vehicles through Phulbari-Banglabandha route. Further, as the Kolkata-Singhabad-Rohanpur route has also been opened for cargo movement, the Indian side has agreed to establish customs office at Singhabad in the near future. Another important issue that India agreed to is to provide appropriate road and rail connectivity to the Inland Clearance Depot that the Nepal government has been planning to develop at Dodhara Chadani in the far western region of the country. Similarly, India has agreed on Letter of Exchanges (LoEs) for third-country cargo movement through rail from Kolkata (Haldia) and Vizag to the rail heads in Jogbani, Nautanwa and Rupaidiha (Nepalgunj) in the near future. In addition, India has reviewed the technical problems at the integrated check post (ICP) on the Indian side and has pledged for early construction of ICP in Birgunj in Nepal.

Was there any discussion regarding amendments to Nepal-India trade treaty, which is going to expire in October this year?

The treaty will be renewed automatically and the necessary amendments will be made through letter of exchanges.