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India, Nepal sign new trade pacts

India and Nepal on Tuesday signed a new trade treaty in Kathmandu, reviewing a 13-year-old pact to create a more stable framework for greater bilateral trade and investment.

world Updated: Oct 27, 2009 20:28 IST

India and Nepal on Tuesday signed a new trade treaty in Kathmandu, reviewing a 13-year-old pact to create a more stable framework for greater bilateral trade and investment.

Indian Minister of Commerce and Industry Anand Sharma and Nepal's Minister of Commerce and Supplies Rajendra Mahato signed the 2009 India-Nepal Treaty of Trade as well as an Agreement of Cooperation to Control Unauthorized Trade, giving a shelf life of seven years to the trade treaty instead of the earlier five and including a provision to have it automatically extended every seven years.

"A new trade treaty was needed keeping in mind the changes in Indo-Nepal bilateral relations, regional and international trade and the demands of the present times," Mahato said.

The new treaty revises the 1996 pact that Sharma called "rewarding" with rich benefits.

It had resulted in bilateral trade soaring from Rs.28.1 billion in 1995-96 to Rs.204.8 billion in 2008-09. Nepal's exports to India increased from Rs.3.7 billion in 1995-96 to Rs.40.9 billion in 2008-09 while Indian exports to Nepal increased from Rs.24.4 billion in 1995-96 to Rs.163.9 billion in 2008-09.

India remains Nepal's biggest trade partner accounting for over two-thirds of Nepal's foreign trade.

The new trade treaty will provide further access to Nepali products to India with the scrapping of discrimination in respect of tax, including central excise, rebate and other benefits.

This, Sharma said, will bring the bilateral trade conducted in Indian rupees at par with trade in convertible currency and will end the existing cumbersome mechanism of Duty Refund Procedure.

It will also allow Indian exports to avail benefit of export promotion schemes prevailing in India, making them more competitive for further sale or value addition in Nepal.

India will now open its port at Vishakhapatnam. Earlier, only the Kolkata Port was open to Nepali traders.

The time limit for temporary import of machinery and equipment for repair and maintenance has been raised from three to 10 years and new items of export interest to Nepal added to the list of primary products giving these items duty free access to India without any quantitative restrictions.

These include floriculture products, atta, bran, husk, bristles, herbs, stone aggregates, boulders, sand and gravel.

Four additional Land Customs Stations will be established to facilitate bilateral trade: at Maheshpur/Thutibari (Nawalparasi); Sikta-Bhiswabazar; Laukha-Thadi; and Guleria/Murtia, bringing the total number of such stations to 26.

Also, for the first time, bilateral trade will be allowed by air through international airports connected by direct flights between Nepal and India (Kathmandu/Delhi, Mumbai, Kolkata and Chennai).

The Indian side has agreed to review and simplify the existing administrative arrangements for operationalisation of fixed quota for acrylic yarn, copper products and zinc oxide.

India has agreed to assist Nepal to increase its capacity to trade through improvement in technical standards, quarantine and testing facilities and related human resource capacities.

The Agreement of Cooperation to Control Unauthorized Trade will allow export of goods imported by Nepal from India to the third countries without the necessity of carrying out any manufacturing activity in Nepal.

This will enhance exports from Nepal to third countries where it has a better market access as compared to India.

It will also allow export of the goods imported by India from Nepal to third countries, thus helping Nepali exporters to take advantage of the third country market access developed by the Indian export houses.