Ganesh Lath is a prominent businessman in Birgunj, Nepal, with interests in food processing, textiles, and export-import.
The border town (adjoining the town of Raxaul in Bihar) is the gateway to 70 per cent of Nepal’s nearly $7-billion foreign trade (mostly imports). It is also the country’s largest industrial hub, with 3,000 units, including some Indian outfits like Dabur and Patanjali, accounting for over two-thirds of the national tax revenue. Till August 16, when the Madhesi parties began agitating against the new Constitution that ignored their long-standing demands, Lath had little time to spare for the family. But not any more.
With his containers — carrying Chinese pumps for farm use — stranded at the Indian side of the gate and production units shut either due to lack of raw materials, fuel or strikes, Lath now spends most of his time watching television at home. “For the last three months my business is zero,” he says. And, he has stopped counting his losses because they go up every day. Till the materials reach the destination, truckers will levy detention charges. And with the agricultural season over, money remains blocked creating, among other problems, serious liquidity pressure.
Many of his friends in Birgunj who import food items have been the worst affected. The items are no more usable. The 90-day transit insurance has expired. There is little hope of getting the money back as insurance doesn’t cover blockades. They are staring at bankruptcy. Critical of Kathmandu for its inept handling of issues, Lath is hoping for some relief. “We are sandwiched from all sides. Unless a resolution comes fast, the damages will be irreparable,” he says.
$1 billion lost Lath is not alone. Shiv Shankar Agarwal, president of the industries association at Biratnagar, the only other manufacturing hub in the country, also voices similar concern.
Though life at Biratnagar hasn’t come to a grinding halt, Agarwal says most of the businesses are losing heavily due to uncertainty in raw material sourcing, market access and sporadic strikes.
The only exception, he says, are the rice and dal (pulses) mills which source raw materials locally. They are operating at full steam as even the strikers don’t want to go hungry. And their products are selling at a premium as imports are in short supply.
Agarwal’s Saraswati group, which imports raw materials from India, Saudi Arabia, Vietnam and other destinations for manufacturing export-oriented plastic products, recently refused to take an order from an Indian buyer.
“My factory is running at 30 per cent capacity. I don’t know when my raw material will arrive and what will be the final cost after paying the detention charges. Moreover, there is no surety I can meet the delivery timetable,” he says.
Rajendra K Khetan, among the top entrepreneurs in Kathmandu, and who runs a financial services empire, says the apex chamber of Nepal (FNCCI) has pegged the national loss so far at $1 billion — a bit too much for a small country that faced a devastating earthquake this April.
Nearly 10 per cent of Khetan’s Laxmi Bank’s corporate accounts are affected. They haven’t turned a liability, as the Nepalese central bank announced a moratorium on interest payments, but the cash flow of the bank has been impacted.
India affected too The ripple effect of the Nepal crisis is being felt in India too. According to the Observatory of Economic Complexity (OEC), in 2013, 58 per cent ($3.75 billion) of Nepal’s total imports worth $6.4 billion was spent on Indian-origin products.
The import from India includes the entire fuel requirement amounting to $1.1 billion (2014-15). Considering fuel supplies are 70-80 per cent below normal, State-owned Indian Oil Corp should have lost revenues over the last three months.
Also, scores of small and medium industries from UP and Delhi that were doing well in the less competitive Nepal market should be hit.
According to SP Singh, coordinator of the Indian Foundation for Transport Research and Training (IFTRT), normally 500-600 trucks ply from the National Capital Region to Nepal every day.
Bilateral trade apart, Nepal sources almost a third of its imports through Kolkata port via Birgunj.
Container Corporation of India (Concor), which manages rail transport of the cargo from the port to the joint venture-operated inland container depot (ICD) at Birgunj, should feel the pinch too.
A prominent clearing agent in Kolkata port, who didn’t want to be named, said with Nepalese buyers failing to take deliveries, there is congestion at warehouses. His clients include the Nepali outfit of a large Delhi-based company.