Nepal asks India for trade treaty with longer shelf life

Kathmandu (IANS): India and Nepal are seeking to update their nearly 60-year-old trade treaty with the new draft expected to be ready before India goes to staggered polls from April 16.

The draft will be signed into a fresh agreement by the new federal government that comes into being in India in June, officials said.

At the end of the two-day bilateral talks in Kathmandu to review the 1950 treaty that has to be renewed in 2012, Nepal is seeking to increase its time span.

"Currently, the Treaty of Trade has to be renewed every five years," Surya Prasad Silwal, joint secretary at Nepal's commerce ministry who headed the Nepali delegations during the talks, told IANS.

"It was last renewed in 2007 and will continue for five years.

"However, Nepali investors feel five years is too short to gauge the investment climate and set up a venture, which takes nearly four years.

"Nepal is asking for the treaty to be extended to 10 years from now on."

The proposal will now be discussed by the commerce secretaries of both countries.

The talks that ended Friday have come up with other major agreements that are expected to boost Nepal's bilateral trade with India, reduce its ballooning deficit and curb the rampant smuggling due to the open border that causes both sides to lose billions of rupees in revenue every year.

The Agreement of Cooperation between India and Nepal signed in 1972 to control unauthorised trade is now poised for a sea change.

Till now, the pact prevented each from re-exporting third country goods imported from each other. But now, except for forbidden items, the curb will be lifted.

India and Nepal have also agreed to open new trade routes. Now India will throw open four air routes via airports at New Delhi, Mumbai, Chennai and Kolkata. In addition, two more land routes via Brahmadandi and Tanakpur in the west are also in the pipeline.

Nepal has won a significant victory with India agreeing to simplify the cumbersome duty refund procedure.

Now Nepal, which trades with India using mostly the Indian and Nepali rupee, will get the same benefits that India gets from its dollar trade with other countries, including zero excise duty and tax rebate.

India has also agreed to review its quota for three Nepali export items. In the past, these included vegetable ghee, acrylic yarn, copper and zinc oxide.

The changes started with vegetable ghee. Earlier, India's State Trading Corporation was fixed as the canalising agency that determined which Indian states would receive how much of the over 100,000 metric tonne of vegetable ghee that Nepal is allowed to export annually.

Now however, the canalising agent's place has been taken by a Nepal government body and exporters are free to choose the Indian states they want. A similar review of the other three products is also to begin.

The next meeting between the commerce secretaries of both countries will be held in Kathmandu, which will finalise the new draft of the revised treaty and forward it for the final assent to the commerce ministers.

India is land-locked Nepal's dominant trading partner, accounting for over 65 percent of Nepal's outside trade. But while the Himalayan republic exports goods worth about NRS 43-44 billion to India, the imports exceed NRS 100 billion.