India refuses re-export provision Nepal may not sign treaty

KATHMANDU, Aug 17: Nepal could defer signing of the Treaty to Control Unauthorized Trade, which was scheduled during the Nepal's Prime Minister´s upcoming visit to India, after New Delhi declined Nepal´s request to recognize re-export of third country goods through the authorized agents in Nepal.

A high-level government source said if the two countries fail to iron out the differences over the treaty, it would adversely affect the renewal of the Nepal-India Trade Treaty.

Nepal has already agreed with India to allow the entry of third country goods imported from international agents based in India. "We want the provision in the renewed treaty to be reciprocal. We are still busy in negotiations through diplomatic channels," said the source in Nepal, but added that there was stiff resistance from India in this regard.

Previously, the two sides had agreed that the provision would be reciprocal. However, the problem surfaced after New Delhi pointed out the possibility of trans-shipment of goods to its territory from Nepal even if there were no official agents in Nepal.

Despite the latest problem, India has agreed to Nepal´s request to allow temporary re-export of machinery tools to India for repair and maintenance. This facility was absent in the previous bilateral treaties.

Bilateral trade treaty, which the two governments will update during the prime minister´s upcoming visit, is widely expected to boost Nepal´s export to India as it categorically binds India not to impose state duty and non-tariff barriers on Nepali goods. The proposed revised treaty will remain valid for the next seven years.

Imposition of non-tariff and extra-customs duties, which debilitated Nepal´s competitiveness, has badly been affecting Nepal on the exports front. Sharp rise in consumption, on the other hand, has caused its trade deficit to widen to more than Rs 108 billion.