KATHMANDU: India and Nepal on Tuesday inked a new trade treaty that will lower the incidence of taxes on exports to the Himalayan nation and benefit Indian companies such as Dabur, Asian Paints and HLL that have manufacturing presence there.
A number of floriculture products, atta, bran, husk, bristles, herbs, stone aggregates, boulders, sand and gravel in addition to the existing ones can also be imported duty-free into India as per the new treaty. The treaty, which was finalised by the two sides, during Nepalese Prime Minister Madhav Kumar’s India visit in August, was signed by Indian commerce & industry minister Anand Sharma and his Nepalese counterpart Rajendra Mahto in Kathmandu.
This trade pact will not only make the export refund procedure simple but also lay down clearly that no discrimination will made on the basis of payment modality or currency of payment, a commerce department official, who did not wish to be quoted, told ET.
As per the old trade treaty signed 13 years ago, exporters to Nepal are not refunded excise duty unlike exports of goods in convertible currency. In the case of India-Nepal trade, Indian exporters get an exemption on customs duty to be paid on import of items equivalent to the excise duty paid by them, which is reimbursed to the Nepalese government by the Indian government.
For many products, the excise duty paid in India is much higher than the Customs duty exemption that the products get in Nepal and, therefore, Indian set ups are net losers, the government official explained. When the new dispensation sets in, exports to Nepal will be treated at par with exports that is carried out in convertible currency and, therefore, get all refund benefits.
"It will also allow Indian exports to avail benefit of export promotion schemes prevailing in India, making these products more competitive for sale or value addition in Nepal," Mr Sharma said. This change would be made effective from the date to be mutually agreed to and modalities will be developed for smooth transition from the existing to the new system.
Speaking to ET, an official from Dabur, who did not wish to be named, said that the move would certainly help Indian establishments in Nepal. "The procedure has been simplified. It will certainly lead to results," he said. The treaty also provides for an increase in the validity period of the agreement from five to seven years, with a provision of automatic extension for further periods of seven years at a time.
The treaty also paves the way for bilateral trade by air through international airports at Delhi, Mumbai, Kolkata and Chennai, commerce & industry minister Anand Sharma told reporters here.
The time-frame for bringing in the new dispensation and the way to go about it would be discussed at the inter-governmental council meeting on November 9-10 in Kathmandu, the official pointed out.
The 2009 trade treaty revises the treaty of 1996 between the two countries. The 1996 treaty pushed up growth of bilateral trade from Rs 28.1 billion in 1995-96 to Rs 204.8 billion in 2008-09. Nepalese exports to India increased from Rs 3.7 billion in 1995-96 to Rs 40.9 billion in 2008-09. Indian exports to Nepal increased from Rs 24.4 billion in 1995-96 to Rs 163.9 billion in 2008-09.
Source : The Economic Times