Nepal-India intergovernmental meeting begins today: focus on trade treaty revisions

KATHMANDU: The Nepal-India Intergovernmental Committee (IGC) meeting at the commerce secretary level begins today, aiming to discuss revisions to the bilateral trade treaty. This is the first such meeting since 2020.

Nepal’s delegation will be led by Commerce Secretary Govinda Bahadur Karki, while India’s team will be headed by Commerce Secretary Sunil Barthwal. According to Ministry of Commerce Joint Secretary and spokesperson Baburam Adhikari, the meeting’s agenda revolves around three key treaties and agreements regulating trade and transit between the two nations.

Key topics include the review of the Nepal-India Trade Treaty 2009, discussions on certain agreements under the Nepal-India Transit Treaty 2023, and issues related to the 2009 agreement on unauthorized trade. The meeting, which alternates between the two countries, is being held in Nepal this time, following the last meeting in New Delhi. Though the IGC is supposed to convene every six months, this session is happening after a prolonged delay and will continue for two days.

Trade Treaty Revisions: The Primary Focus

In January 2024, the Intergovernmental Sub-Committee (IGSC) meeting held in Kathmandu agreed to restart the process of amending the Nepal-India Trade Treaty. This IGC meeting will focus primarily on that agenda, according to the Ministry of Commerce.

In April 2018, both countries had agreed in principle to amend the treaty following a comprehensive review of trade relations. However, disagreements on various points led to the treaty’s automatic renewal in October 2023. The January IGSC meeting subsequently agreed to resume technical committee discussions to finalize the treaty renewal process.

The existing trade treaty allows duty-free access to primary goods, particularly agricultural products, in both markets. However, Nepal argues that the lower production cost of Indian agricultural goods has undercut its domestic market, making Nepal a net importer of staples like rice, wheat, potatoes, and onions.

Nepal has proposed amending Article 4 of the treaty to allow non-reciprocal access for its agricultural goods while seeking the ability to impose customs duties on Indian imports to protect its domestic industry.

“Reciprocal treatment in primary goods has not been sustainable for us. To protect Nepalese agricultural products, we need to impose customs duties on Indian imports, and we will formally request this during the meeting,” spokesperson Adhikari stated.

Proposal for Industrial Goods: Reducing Value-Addition Threshold

Nepal has also proposed reducing the value-addition threshold for duty-free industrial goods from 30% to 20%. India currently allows duty-free access for industrial goods with 30% value addition in Nepal, but most least-developed countries (LDCs) enjoy this benefit at a 25% threshold. Nepal argues for parity with other LDCs, citing the significant impact of the higher threshold on its industrial exports.

Other Key Proposals

1. Re-export Provisions:
   Nepal has proposed allowing the re-export of select goods produced in third countries through Nepal and India. Items like industrial raw materials, machinery, coal, and life-saving drugs would benefit from this amendment, addressing cost concerns raised by the private sector.
2. Quality Standards:
   Nepal aims to establish mutual recognition of quality certifications issued by both countries’ regulatory bodies. Indian standards have often been cited as barriers to Nepalese exports. The IGSC had previously agreed to form a joint mechanism between India’s Food Safety and Standards Authority and Nepal’s Department of Food Technology and Quality Control to address these issues.
3. Transit Treaty Implementation:
   Discussions will also cover the implementation of agreements under the Nepal-India Transit Treaty 2023, with additional correspondence and agreements required for full execution. Nepal plans to push for unrestricted cargo transit via the Biratnagar railway, which is currently limited to specific types of cargo.

The meeting will also address other longstanding trade and transit issues, such as improving bilateral export-import processes and addressing the imbalance in market access.

The outcomes of this IGC meeting are expected to set the course for enhanced trade relations and operational efficiency between Nepal and India.

Discussions will also cover the implementation of agreements under the Nepal-India Transit Treaty 2023, with additional correspondence and agreements required for full execution. Nepal plans to push for unrestricted cargo transit via the Biratnagar railway, which is currently limited to specific types of cargo.

The meeting will also address other longstanding trade and transit issues, such as improving bilateral export-import processes and addressing the imbalance in market access.

The outcomes of this IGC meeting are expected to set the course for enhanced trade relations and operational efficiency between Nepal and India.