India and Nepal step up efforts to ease cross-border trade stress

India and Nepal are stepping up efforts to streamline the flow of goods across the border into the Himalayan nation that has been till now marred by restrictive routes and logistical hurdles.

The solutions being considered are India-funded integrated checkposts and even new rail routes to beat the kilometre-long lines of trucks at the India-Nepal border. The need for better access will grow with the Nepalese government recently announcing a forward-looking vision to phase out the sale of petrol/diesel-run vehicles by 2030.

India’s advantage

It’s not that India alone will drive this transition, China’s BYD and Korea’s Kia are also vying for a chunk of the Nepalese market. But, Nepal’s geographical location gives New Delhi an advantage, as all entry points for goods targeted to the Nepal are along the Indian border.

Even goods from China, the only other country that shares a border with Nepal, have to pass through India due to the absence of other navigable routes. While goods targeted to Nepal enjoy a tax and customs exemption in India, the monetary gain is nullified by the logistic nightmare.

A Nepal-focussed exporter says that transportation of these vehicles is a problem. “The route to Nepal from India is rather restrictive and there are very few truckers that ply the route. There is considerable delay at the check-points that leads to cost overruns.”

According to official estimates, nearly two-third of Nepal’s imports come through the Raxaul (India)-Birgunj (Nepal) border crossing. This puts immense pressure on the infrastructure and till April this year, a 20-km-long queue of trucks from India seeking to cross over to Nepal was no surprise.

Stress at checkpost

The stress at the crossing relaxed in April this year after Prime Minister Narendra Modi and his Nepalese counterpart KP Sharma Oli inaugurated an Integrated Check-Post (ICP) at the Raxaul-Birgunj border, the first of four Integrated Check-Posts being developed to ease the pressure. These projects are funded by the Indian government on both sides of the border.

An Indian government official overseeing the development of these projects told BusinessLine , “The next ICP to be operational will be at the Jogbani, Bihar (in India)-Biratnagar (Nepal) border crossing. We are hoping to inaugurate this project in three to four months. The aim is to operate these ICPs similar to the ones in the European Union. We hope to bring down the time taken from the moment a truck enters the terminal to its exit to around 7-8 minutes.”

“The other two ICPs will be at the Sunauli (India)-Bhairahawa (Nepal) and Nepalgunj Road (India)-Nepalgunj (Nepal) borders. The process of land acquisition for these projects will be completed within the next 12 to 18 months,” the official added.

India and Nepal are also seeking to complete a stretch of broad gauge flat terrain railway lines from Jogbani (Bihar) to Biratnagar (Nepal) and from Jayanagar (Bihar) to Janakpur (Nepal).

“We expect an improvement of nearly 70 per cent to 80 per cent at the India-Nepal border checkpoints once these railway lines are operational. The railway links are entirely funded by the Indian government and will be operational within the next 6 to 7 months,” the official said.

The ease of transportation will also bring down the cost of the electric vehicles. For example, the Mahindra e2o P8, the top model of the vehicle, is priced at Nepalese rupee (NPR) 29 lakh (or ₹18.11 lakh in Indian currency) when retailing in Nepal. The same vehicle was sold closer to half the price at ₹11.97 lakh in a New Delhi showroom.

Despite the cost, these cars make sense for the mountain country that reels under a nearly NPR 15,000 crore (₹9,366 crore) fuel import bill in the last financial year (June 15, 2017 to June 15, 2018) and soon hopes to be energy surplus from hydropower generation.

Prohibitive costs

Once in Nepal, the trucks take another 2 days to reach Kathmandu, covering a distance less than 300 km. Nepalese importers also say that there are more factors that drive up prices.

“The cost of electric vehicles in Nepal is higher because of overhead costs due to import procedures, customs clearance and a 20 per cent profit margin charged by the dealers. The tax is just 28 per cent but other costs make the vehicles more expensive,” a car dealer said.

Mahindra’s vehicles in Nepal are distributed by Agni Incorporated Pvt Ltd through its network of 45 dealers and showrooms. According to Agni Incorporated's customs filing for the Mahindra e2o P8, the declared price of the vehicle stood at NPR 19.4 lakh (approximately equal to the ₹11.97 lakh price tag in Delhi).

At Customs, the Nepalese government charges a 10 per cent import duty, then there is an additional 13 per cent Value Added Tax. Another 3.5 per cent tax is imposed as road maintenance tax.

At the end of the process, the importer effectively pays around 28 per cent as tax and import tariffs. The cost to the importer on one unit of the Mahindra e2o P8 now reaches NPR 24.8 lakh (₹15.55 lakh).

The importer also pays an undisclosed amount to the customs clearing agent and the Nepali law allows businesses to earn a gross profit up to 20 per cent of the cost price of the product.

(The story is part of a series on e-mobility in Nepal and India produced under a grant from Clean Energy Wire, or CLEW, Germany