India and Nepal on Tuesday signed a “historic” new treaty to control unauthorised trade across the border and redefine their trade and commercial relations, putting an end to uncertainty over the issue.

The revised “India-Nepal treaty of Trade and Agreement of Cooperation to Control Unauthorised Trade” was signed by Commerce and Industry Minister Anand Sharma and Nepalese Minister for Commerce and Supplies Rajinder Mahto here. The groundwork for singing of the treaty was done during the visit of Prime Minister Madhav Nepal to New Delhi in September.

The treaty aims at providing a stabler framework, enhancing access for Nepalese primary and manufactured products to India, promoting investments, facilitating trade through simplification of procedures, mutual recognition of certificates and development of border infrastructure, and assisting Nepal in developing its capacity to trade.

More customs stations

The treaty will lead to opening four additional land customs stations, allow trade by the air route, and help to set up an additional trade port for Nepal at Visakhapatnam. Talks are already on for opening a trade route by rail. The significant points include extension of the treaty from five to seven years, along with a provision of automatic extension for further periods of seven years at a time. This will provide a stabler framework for bilateral trade and promote investments in Nepal based on preferential access for Nepalese products.

No discrimination will be made in respect of tax, including central excise, rebate and other benefits against exports merely on the basis of payment modality and currency of trade. This will bring the bilateral trade conducted in Indian rupee at par with trade in convertible currency and end the existing mechanism of Duty Refund Procedure (DRP), which is cumbersome. It will provide Nepal direct control over customs duty revenues on import of manufactured goods. The time limit for temporary import of machinery and equipment for repairs and maintenance has been raised from three to 10 years.

Turning point

The 1996 Treaty has been a turning point in the trade relations between the two countries. It resulted in a phenomenal growth of bilateral trade from Rs. 28.1 billion in 1995-96 to Rs. 204.8 billion in 2008-09.

During this period, Nepalese exports increased from Rs. 3.7 billion to Rs. 40.9 billion and Indian exports from Rs. 24.4 billion to Rs. 163.9 billion.

The 2009 treaty allows export of goods imported by Nepal from India to third countries without the necessity for any manufacturing activity in the country. This will enhance exports from Nepal to third countries where it has a better market access than India.

Similarly, it will allow export of goods imported by India to third countries.

Keywords: Illegal tradeborder

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