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India to grant Nepal access to two key ports in Gujarat & Odisha under trade, transit treaties

The move is expected to come into effect from 2023 as the two countries plan to upgrade their trade, transit ties, even as Nepal seeks greater access to Indian markets for tea, spices.

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New Delhi: Despite several challenges plaguing the bilateral relationship of late, India and Nepal are all set to upgrade their bilateral trade and transit ties under which Kathmandu will be given access to some of the key Indian ports along with enhanced reach for its agriculture produce, ThePrint has learnt.

Under its ‘Neighbourhood First’ policy the Narendra Modi government has decided that it will now allow Nepal to export and import goods from two of India’s strategic ports — Mundra Port in Gujarat and Dhamra Port in Odisha — under the yet to be revised transit treaty, negotiations for which are going on, diplomatic sources told ThePrint.

Such a move, according to sources, will not only give Nepal enhanced entry into the Indian markets but will also enable Kathmandu to use India as a gateway to access other markets in Southeast and Central Asian regions, said a source, who wished to not be identified.

This has been a long-pending demand by Nepal, which had been pushing India for such an upgradation in both the trade as well transit treaties that were signed decades ago.

The agreement was initially finalised as ‘The Treaty of Trade and Transit’ that was signed between the friendly neighbours in September, 1960. Thereafter, in 1978, the treaty was split into two — trade and transit.

Both these treaties get automatically renewed every seven years. The last time these two treaties were reviewed was in October 2016, without any changes.

The trade treaty allows Nepal unilateral duty-free access to the Indian market even as India remains Nepal’s largest trading partner. However, Nepal continues to complain that it has not been able to penetrate the Indian markets for its good due to various non-tariff barriers.

Since 2016, Nepal has been pushing India to make “significant” changes to the treaty even as it continues to bat for upgrading the 1950 treaty of peace and friendship that address all issues under the entire gamut of bilateral ties between New Delhi and Kathmandu, including upgradation of the trade and transit agreements.

In 2020, during the India-Nepal Inter-Governmental Committee (IGC) meeting — the highest bilateral mechanism for promotion of trade and investments between both countries — it was decided that the bilateral transit treaty will be amended.

At that time, it was also decided that the government-owned cargo railway services will be opened to private operators too and using Nepal railway for trade purposes will be allowed.

Ranjit Rae, former Indian envoy to Nepal, told ThePrint, “We should have an ‘open ports’ policy for not just Nepal but also for Bhutan, and not have a piecemeal approach. Just as the ‘open skies’ policy, we can have an ‘open ports’ policy too, so that some of our friendly neighbours can use whichever port they want to.”

Rae, author of Kathmandu Dilemma: Resetting India-Nepal Ties, also said that while some supporting infrastructure is definitely required to enable the neighbouring countries to use all the ports of India, it will also integrate them into the Indian economy which will be strategically beneficial for New Delhi.

Currently, Nepal is allowed to use only the ports of Kolkata and Visakhapatnam.

Constantino Xavier, fellow at the Centre for Social and Economic Progress (CSEP), said, “These initiatives reflect the growing maturity of the bilateral relationship focused on economic interdependence and connectivity.”

“In the past, especially until the 1990s, the revision of the agreement used to be a contentious process, with India often weaponising trade and transit to pursue its political and security interests in Nepal. But in recent years, it is India that has been either pushing or conceding to Nepali demands, which reflects Delhi’s growing interest in strategic connectivity,” he adds.

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Connectivity & market access

Nepal has also urged India to support its agricultural exports by way of reducing some of the non-technical barriers to trade such as an arduous documentation process, certification process and safeguarding the origins of its products.

According to sources, Nepal is upset that export of its tea, which enters the Indian markets in many variants, gets packaged and sold as Darjeeling Tea or Ceylon Tea thereby incurring heavy losses to its farmers.

Under the upcoming review of the trade treaty, Kathmandu has also sought enhanced connectivity with India so that more and more traders and businessmen can freely travel between India and Nepal.

“Our long-term approach should be developing this sub-region as a common market. We should have free flow of goods and services between Nepal, Bhutan and Bangladesh and also allow them to export to other countries using our territory. This will give it a more strategic dimension,” said Rae.

According to Xavier, “This connectivity angle to the relationship has progressed steadily, unaffected by the political tensions that affect the relationship every few years. As India emphasised during the 2020 Kalapani crisis, it will continue to deliver on its economic assistance and other commitments to connect both countries even when there are political tensions between both capitals.”

“With elections on the horizon in Nepal, India will likely again be dragged into political controversies by nationalist segments in Kathmandu, but these new connectivity initiatives will continue strengthening the relationship despite occasional irritants at the political and security level, including China’s growing influence in Nepal,” he added.

Ties between India and Nepal entered a period of turmoil in 2015 during the Madhesi agitation that led to a massive blockade on the border restricting the supplies of essential goods like food and fuel to Nepal.

Thereafter, in 2020, ties hit an all-time low when Nepal changed its political map by including the disputed territories of Limpiyadhura, Lipulekh and Kalapani within its borders, as a retaliation to New Delhi’s issuance of a new map of India in 2019.

Meanwhile, Nepal had been witnessing a series of political crises which were triggered by their former Prime Minister K.P. Sharma Oli of the Communist-UML party, which ultimately resulted in the coming back of the leader of opposition Nepali Congress Sher Bahadur Deuba as their PM for the fifth time.

However, political turmoil continues to destabilise the Himalayan country. It is headed for polls on 20 November where Oli will once again be running for the post of prime minister.

(Edited by Zinnia Ray Chaudhuri)

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