India and Nepal would discuss the broad contours of a comprehensive economic partnership agreement (CEPA) next month covering wide range of sectors including tapping resources of sub-Himalayan water bodies to address hydropower woes of both the countries.
The proposed CEPA would be much larger in scope than the existing 12-year old trade treaty that governs movement of goods between the two-countries.
Indo-Nepal bilateral trade in 2006-07 stood at over Rs 1,200 crore with the trade deficit heavily loaded in favour of India. During the year India’s exports were valued at Rs 928.49 crore, while imports from Nepal was Rs 305.97 crore.
Trade negotiators of both the countries will meet in New Delhi in the first week of July to discuss the proposed CEPA and possible amendments in the trade treaty. A commerce ministry official, who did not wish to be identified, said the Nepal a CEPA would go much beyond a mere trade of goods and cover issues such as investment and trade in services.
"It is important to raise supply capability and exports of Nepalese products through alliances with Indian manufacturing companies. Such issues cannot be addressed under the existing trade agreement," the official said.
Government sources said many Indian entities including ITC, Ashok Leyland, Tata Motors, GMR, and National Mission on Bamboo Applications have shown interest in investing in Nepal in diverse areas such as automobiles, infrastructure and hydro-power.
According to an Indian Council of Research in International Economic Relations (ICRIER), India accounted for about 40 per cent of the total foreign direct investment (FDI) in Nepal
Though India has been exploring hydropower projects in Nepal, which also has immense hydropower potential, none of the big projects have taken off so far primarily due to political instability.
"India," according to the official, "is keen on Nepal developing its hydropower potential as the experience with Bhutan has shown," the official said.
India is currently importing power from 1,020 MW Tala Hydroelectric Power Project in Bhutan as part of the pact between India and the Druk kingdom.