Number of L/Cs being opened plummets
Kathmandu, October 1
Issuance of letters of credit (L/Cs) has plummeted following a directive issued by the Consulate General of Nepal in Kolkata to reduce imports from third countries.
The Consulate General, last week, had requested the private sector organisations not to place fresh orders for consignments from third countries citing Nepal-bound cargoes have been stuck at the Kolkata port since long due to the obstruction in the movement of vehicles from India to Nepal.
The Consulate General had asked the Ministry of Commerce and Supplies (MoCS) to convey the message to the private sector organisations. The Consulate General had written to MoCS after the Indian Railways halted rail service from Kolkata to the only rail-linked Inland Clearance Depot (ICD) at Birgunj from September 23.
Orders for fresh consignments have significantly dropped since August along with the beginning of the protest in the Tarai, where the major trading routes of the country are located.
Only 410 letters of credit amounting to $81.06 million were opened in August, compared to 2,099 L/Cs that amounted to $434.85 million in the corresponding period of the previous fiscal, according to the Monitoring Unit under the Foreign Exchange Management Department of Nepal Rastra Bank.
L/C is a mode of payment and it is mandatory for traders to open L/C while purchasing goods and services worth more than $35,000 from a foreign country. “The number of L/Cs opened has substantially dropped in September as well,” said Sashin Joshi, CEO of Nabil Bank.
Trade financing covers 20 per cent of the total lending portfolio of commercial banks, which is worth Rs 1,100 billion, and it might decline this year due to low import volume. In addition, lack of import hits government revenue and lack of raw materials is also likely to hit industrial production.
The Consulate General Office has said there are 700 containers ready to be dispatched via road and 1,100 containers via rail. In addition, 46,000 tonnes of chemical fertilisers, 80,000 tonnes of coal and 20,000 tonnes of MS billet are stuck at Kolkata port.
“Despite the obstruction in the movement of goods that are ferried via road along with the beginning of the protest, cargo was being delivered by rail to the ICD Birgunj till the third week of September,” Chandra Ghimire, consul general of Kolkata, told The Himalayan Times over phone, adding, “Indian Railways halted service from September 23 and it is difficult to manage cargo containers at the port, which is why we’ve requested importers not to order fresh consignments until the situation normalises.”
Around seven to nine rakes (644 to 828 containers) are transported by rail in a week but at present the Indian Railways has imposed restriction from September 23 citing congestion at ICD Birgunj and has not resumed the service.