The country has been utilising two gateway ports: Kolkata - Haldia and Vishakhapatnam ports of India until now. The Indian government has allowed Nepal the use of Visakhapatnam port since February 2016 for the movement of container goods to Birgunj and Biratnagar dry ports, however the volume of trade has been nominal.
Nepal has also sought transit facility from its northern neighbour China and the framework agreement was signed during the visit of Prime Minister KP Sharma Oli in March 2016 under his first premiership, however the protocol required to bring the agreement into effect is yet to be developed and exchanged between the two countries.
Nepalese and Chinese authorities have met multiple times to finalise the details. Nepal seeks access to seaport in China for third country trade via China however the nearest sea port in China is 3,500 kms away from Kathmandu. Experts have said that trade will not be economical through utilisation of the Chinese seaport. “It could provide ventilation when there is a choke like during the border blockade in 2015-16,” said former Commerce Secretary Purushottam Ojha. The Transit and Transport Agreement with China was signed in the aftermath of the trade disruption by India in September 2015 to February 2016. Transit and Transport Agreement with China was a strategic approach to end unilateral dependence for transit facility with Nepal’s southern neighbour.
Traders have been facing numerous hassles in Indian transit starting from the port as original documents need to be submitted for customs transit declaration at Kolkata/Haldia port. Then the Container Corporation (CONCOR), a subsidiary of Indian Railways authorised to ferry Nepal bound cargo to inland clearance depot Birgunj often cause delays to Nepal bound cargo resulting in pile up at the port for extended periods. Also congestion at the Kolkata port has been adversely affecting Nepali traders resulting in high detention and demurrage charges. The port authority provides parking facility for containers for two weeks for cargo ferried via rail and one week for cargo ferried via road. Almost 40% of the third country cargo is ferried via road. Indian truckers raise fares frequently making transportation costs high. Cargoes are then needed to be parked in private container freight stations at high charges if railways do not provide service on time. Similarly, shipping line containers also start slapping detention and demurrage charges if the containers are detained. Normally, shipping liners provide 21 days turnaround time (from Kolkata to Birgunj to Kolkata) to return shipping line container after unloading cargo at Birgunj dry port. Containers can be loaded and unloaded to and from rail and trucks only between 8pm and 4am as per the new rule because movement of rail and trucks to the port has been prohibited in the day time which has further created backlog in timely delivery of Nepal-bound cargo.
Sometimes it takes over a month to dock the ship ferrying bulk cargo due to low water draft levels. As a result the supply of crucial commodities like chemical fertilizers can get affected.
Studies reveal that Nepal can substantially narrow down cost and time of foreign trade. The recent report of the UN agency, International Trade Centre has said that the Nepali traders have been paying the cost of inefficiency of Kolkata/Haldia port.
Though Nepal is a major client of the Kolkata/Haldia port, there is no provision of allotment of railway wagons on priority basis for loading and transportation of Nepal’s transit cargo at its port. It is not only lack of high-speed railways and roadways for transit transportation, importers are also facing problems because of insufficient and delayed supply of wagons. Similarly, warehouse space available for Nepal at the two ports is insufficient and there are no separate yards for containers.
The report further reveals that due to shortage of wagons and racks, importers have to transport consignments in parts particularly in the case of bulk cargo. The report has mentioned that Nepali importers in such cases have to pay penalty not only for delaying a portion of the cargo but on the entire cargo.
The study also reveals that Nepali traders are paying almost $69 million annually in demurrage charges per year at Kolkata port. It has also highlighted that the delays in clearing result in high warehouse charges and increase the risk of goods being damaged, especially if the goods are seasonal or perishable.
Minor discrepancies in documentation (tonnes, pieces, value and date) that do not tally with the letters of credit (LCs) also lead to delays in clearance and demurrage charges at the port. Due to lack of offices of shipping liners in Nepal, traders have to rely on Kolkata port agents and booking agents for export of cargo containers that is not convenient.
Nepal bound cargo imported from third countries is ferried via both road and rail. Around 40% of the cargo volume is ferried via road. In transit between Kolkata to Birgunj, there are two road corridors. In the Kolkata-Jasidhi-Barauni-Raxaul, the road at Kiul is very narrow, making the journey slow and difficult. Likewise, in the second corridor, Kodama Ghati that passes through hilly terrain is difficult for long-truck trailers. Congestion and lack of adequate parking spots at border points in Raxaul and Panitanki cause difficulties, highlighted the ITC report. “Similarly, cargoes from Kolkata port need to travel mainly through three Indian states — Bihar, Uttar Pradesh and Bengal — and traders have repeatedly complained about additional costs and inconvenience.
Swarnim Wagle, former Vice Chairperson of National Planning Commission has said that Nepal’s production is 20% more expensive than costal countries as transport logistics is costlier than other neighbouring countries. The high cost of transportation and lack of predictable supply of industrial raw materials has killed the prospect of industrialisation, according to him.
The share of transport logistics in production is 9% in China and around 16% in India, here it is more than 20%. To be competitive in production Nepal must bring down transport logistics in trade and ensure predictable delivery of Nepal bound cargo in an efficient and effective manner from the Indian ports to Nepal.
The government has urged traders to look into the option of using Visakhapatnam port as a strategic gateway for third country import and export to get rid of the unforeseen costs and numerous hassles being faced by traders at Kolkata port. Chandra Kumar Ghimire, Secretary of the Ministry of Industry, Commerce and Supplies (MoICS) has said that the Kolkata port will not be able to cater effective service to Nepal in the coming years as the volume of Nepal’s trade has been expanding every year.
The cost of transporting cargo by road from Kolkata to Birgunj and transporting cargo by train from Visakhapatnam also known as Vizag to Birgunj is more or less similar, according to RB Rauniyar, Director of Himalayan Terminal Pvt Ltd, a Nepal-India joint venture for terminal management in ICD Birgunj.
Currently, around 40% of third country imports are transported via road from Kolkata to Nepal. On the other hand, unforeseen cost of trade like detention and demurrage charge is high in Kolkata. Government has said that the Vizag port could be a better option for traders as it will be more predictable.
Some shipping firms have been providing multimodal bill of lading (which is also known as combined bill of lading) facility to traders, which means the company takes full responsibility of the cargo from the port of origin to the destination port (Birgunj). So, traders do not need to deal with the transit port i.e, Vizag port. Vizag port lies in Andra Pradesh of India and is 1,436 kilometres from Birgunj, whereas Kolkata in West Bengal is at a distance of 704 kilometres from Birgunj.
The MoICS has said that trade through Vizag could be easier as the efficiency of the port is high and reduction in ocean freight cost and predictability of the cargo delivery might meet the difference of transporting cargo via rail from Kolkata to Birgunj.
Ocean freight cost to bring cargo is quite high because cargo needs to be transhipped from the mother vessel to feeder vessel in Singapore while bringing the goods via Kolkata port. The same case applies in export. This is because the Kolkata port is a riverine port and can only serve feeder vessels. However, traders have said that the Vizag port can serve mother vessels and it will be more feasible for bulk cargo imports like iron ore, hot rolled coils, clinker and coal, among others, but the government of India does not allow movement of bulk cargo from Vizag port. It is allowed only for the containerized cargoes. According to Secretary Ghimire the government has been corresponding with the government of India to allow bulk cargo movement from Vizag citing congestion at the Kolkata port.
The government has initiated process to amend the provision of transit treaty. Under the revision of treaty, Nepal has sought facility to ferry Nepal bound cargo to the nearest railheads of the major customs point namely, Biratnagar (Bathnaha, Jogbani), Bhairahawa (Nautanawa) and Nepalgunj (Rupedhia), which will minimise the cost of transportation as traders have no alternatives of ferrying cargo via road until now as there is only one rail-based ICD – Birgunj dry port. Likewise, amending the railway service agreement, the Government of India has agreed to open up private railways as well to ferry Nepal bound cargo. When this happens, the monopoly of the CONCOR will end. Likewise, the ground works are underway to implement transshipment modality for delivery of Nepal bound cargo, under which the Nepal bound cargo can be directly ferried to the designated dry port of Nepal, according to Secretary Ghimire.
