Kathmandu, June 4

Private sector players have suggested Prime Minister KP Sharma Oli to expand a dedicated railway line from the sea ports to the country rather than purchasing a ship, as the former could play a significant role in reducing cost of trade.

“The country’s trade logistics is high not because of ocean freight costs, but due to high transport costs in transit and within our own country,” said Rajan Sharma, chair of Transport and Transit Committee at Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

The government, in fiscal budget 2016-17, has included a programme to conduct study regarding operating a shipping company. But traders have said that prioritising a shipping company may not have much relevance in boosting the volume of trade.

The issue first came into the light when Prime Minister Oli talked about purchasing a ship while addressing a public programme here around a month back. Back then, many had taken the issue lightly. However, as the issue has been included in the fiscal budget of 2016-17, it has drawn the attention of private sector players.

It is quite a well-known fact that ocean freight cost is cheaper than rail and road transport costs. Hence, private sector players were quite surprised when the it was stated in the fiscal budget that ‘legal and institutional preparation for operating our own ships in the high sea will be done as per our past experiences and the rights of the landlocked countries’. Currently, the country has been using Indian transit and transport for third country trade.

Neighbouring India recently allowed Nepal to use Visakhapatnam Port for third country trade and the country has signed transit agreement with neighbouring China too. As Nepal is permitted to use two sea ports of India, traders have suggested the government to approach neighbouring India to develop a dedicated railway line from sea port to Nepal through which traders could ferry goods from and to Indian ports within a few days.

Currently, Container Corporation of India (CONCOR) — a subsidiary of Indian Railway — has been operating rail service to Nepal’s only rail-linked inland clearance depot (ICD) in Birgunj. “Nepal could operate rail service of its own for the sole purpose of ferrying cargoes, if the Indian government allowed us to develop a dedicated railway,” said Sharma.

He further said that the issue should be prioritised during commerce secretary-level talks, which is going to be held in the near future. “Nepal could seek the Indian government’s support to develop a dedicated railway line to Nepal or both the countries could make joint investment to develop it as a common infrastructure project.”

Such dedicated railway line for Nepal from Visakhapatnam Port could bring transformational changes in Nepal’s economic development, as per Sharma.

It is reported that ocean freight cost could be slashed substantially through utilisation of Visakhapatnam Port, which is a deep sea port. The country has been utilising Kolkata Port as the gateway for third country trade till date. Since it is a riverine port, bigger vessels cannot dock at Kolkata Port and cargoes need to be transferred in smaller vessels from Singapore, which has been raising the ocean freight cost for the country.

Moreover, it could be challenging to generate any significant returns from Nepal operating its own ship. For instance, neighbouring India has failed to generate profit from the Shipping Corporation of India, the government-owned shipping company.