India Slips on Trade Data Sharing Deal With Nepal

Kathmandu, May 25 – At the 21st Nepal-India Customs Administration Directors-General level meeting held in Kathmandu on April 11, India committed to implementing the ‘pre-information system’ for exports and imports within one month. However, as of now, there has been no noticeable advancement regarding this commitment.

As stated by Mahesh Bhattarai, who serves as the director general of the Department of Customs in Nepal, the country has already finalized all necessary preparations for signing the Memorandum of Understanding (MoU). They are currently awaiting action from their counterparts in India.

Bhattarai stated that Nepal’s proposal distinctly presents the structure for implementation, awaiting only India’s endorsement.

Bhattarai from Nepal and Abhai Kumar Srivastav, who serves as the director general of the Directorate of Revenue Intelligence from the Indian side, headed the two-day bilateral customs conference.

Bhattarai highlighted that upon implementing the pre-information exchange system, precision in pricing for both exports and imports will improve significantly. This improvement will decrease opportunities for price manipulations such as overpricing or underpricing and assist in averting the abuse of foreign currency.

The system is anticipated to offer improved understanding of import revenue as well.

Once the MoU is reached, software will be installed at customs offices to enable real-time data on exchange of export and import goods, including detailed cargo descriptions.

Bhattarai mentioned that the customs systems between Nepal and India will be merged, with India serving as a platform for sharing information to facilitate smoother transactions.

He anticipates that the complete integration of the systems will require between two to four months after the signing of the Memorandum of Understanding.

The sharing of preliminary information will similarly be crucial in reducing illicit trafficking between these nations.

Rajan Sharma, an expert in trade and logistics, stated that this system has the potential to considerably decrease corruption within customs processes.

He criticized the Nepalese government for postponing its pledge to provide prior information exchange, implying that the hesitation could be due to an intention to alter trade statistics.

Sharma states that India has consistently advocated for these types of data sharing systems.

Sharma emphasized the practical advantages of advance information, noting that it enables officials and merchants to understand the kind of products involved in trade, determine the appropriate storage facilities, identify the transportation vehicles required, and make the essential logistics plans.

He observed that although the government frequently recognizes the private sector’s contribution to economic growth, it usually excludes them from significant discussions where their insights could be beneficial.

Sharma additionally highlighted that the government had the ability to obtain preliminary information via Letters of Credit issued by Nepal Rastra Bank, bypassing the need for official data sharing.

He noted that the World Trade Organization already offers advanced rulings and pre-clearance mechanisms. Participating in this information-sharing program might assist Nepal in conforming to global standards.

These systems enable merchandise to be exchanged via an expedited customs process, like green or grey lanes, thus easing trade procedures.

Even though Nepal has adopted an electronic cargo tracking system, Sharma pointed out that it merely offers transportation information and does not include detailed data about the shipment’s contents. He emphasized again that establishing a strong pre-info system could aid in decreasing customs-related corruption.

However, some insiders have expressed reservations about the need for government involvement in trade data exchanges, contending that these transactions predominantly occur between individual buyers and sellers.

They think the government should concentrate on wider initiatives to facilitate trade. This includes guaranteeing the seamless and prompt transportation of products, tackling cargo pilferage en route, and formulating transparent regulations concerning taxes when merchandise does not arrive at its designated location.

Aside from the preliminary information accord, India consented during the meeting in April to acknowledge certificates of origin that are processed via Nepal’s National Single Window system.

It is anticipated that this step will streamline trade paperwork and facilitate the movement of products.

India has reinforced its dedication to constructing essential infrastructure in border regions with the aim of boosting mutual commerce.

Discussions during the meeting also touched on Nepal’s concerns on the weight restrictions on cargo trucks along the Kakarbhitta-Phulbari-Banglabandha corridor.

Bhattarai verified that India consented to handle Nepalese cargo in the same manner as Indian cargo within this route, anticipated to address several longstanding logistics challenges.

Both parties concurred on carrying out collaborative inspections aimed at curbing illicit cross-border commerce, underscoring their mutual desire to enhance enforcement measures.

The annual director general-level meetings between the Nepal-India Customs Administrations commenced in 1995, with each country hosting the event alternately.

These gatherings act as a forum for addressing operational issues within customs processes, encompassing the movement of Nepal’s goods imported from or exported to third countries via Indian soil. Consequently, they are crucial for strengthening trade and transit relationships between both countries.

Nepal’s biggest trading partner and main source of foreign investment remains India. Additionally, India facilitates transit for almost all of Nepal’s trade with countries other than India itself.

As per the commercial section of the Indian Embassy in Kathmandu, India holds about two-thirds of Nepal’s merchandise trade, one-third of its service sector transactions, approximately half of its foreign direct investments, virtually all of its oil imports, and a significant share of incoming remittances.

Last fiscal year, two-way trade between Nepal and India amounted to Rs1.09 trillion. Even with this significant figure, Nepal’s shipments to India fell by 3.28 percent year-over-year to Rs103.17 billion during the fiscal year 2023-24.

As per the Department of Customs data, imports from India saw a decline as well, dropping to Rs 996.68 billion from Rs 1.02 trillion in the previous year.