Govt prepares to ask India for 2nd transit point

Govt prepares to ask India for 2nd transit point
eKantipur.com, 22-Aug-2007
BY MILAN MANI SHARMA

The government has initiated exercises for securing Mumbai, India's commercial capital, as Nepal's second transit point.

The exercises were started after India agreed in principle, but sought rationale, for allowing Nepal to use the Jawaharlal Nehru port in Mumbai for third country trade.

In the first among a series of exercises, the government has assigned the UN Trade Related Capacity Building Project to conduct a detailed study to ascertain the volume of export traffic, economic benefits and possible modalities for cargo movement, said Purushottam Ojha, acting secretary of the Ministry of Industry, Commerce and Supplies.

Talking to the Post, Javed Ashraff, economic counselor at the Indian Embassy in Kathmandu, said that India has already agreed to let Nepal to use Mumbai as Nepal's second transit point.

“We have sought a projection of cargo volume and other details from the Nepal government,” said he. Formal negotiations over the issue will begin once two sides exchange views on the proposal to be submitted by Nepal.

As of date, Nepal uses Kolkata as the only transit point to link its trade with third countries.

Nepal had first requested India to provide it with the second transit in 1995. A formal request to it was placed only in September 2004, when the then Prime Minister Sher Bahadur Deuba made an official trip to New Delhi.

According to officials, Nepal pushed for transit facility at JN port due mainly to its geographic location and efficiency.

An assessment done in 1995 had estimated that the use of JN port could reduce the transit/transportation cost of west-bound cargo by up to 40 percent and freight cost by US$ 200 per container compared to shipment from Kolkata.

However, the assessment had not calculated how it would impact cost of inland cargo movement. The distance of JN port from Birgunj is about 1,500 kilometers, whereas Birgunj is 700 km away from Kolkata.

Freight forwarders said that overall cost of doing trade with US and Europe would be cheaper from JN port than from Kolkata.

They mainly cited four reasons for it: i) cost of freight from JN port will be 40 percent cheaper than Kolkata, ii) days of shipment from JN port will go down by about 20 days, iii) cargo segregation for different destinations can be done in Mumbai, and iv) private sector-operated JN port is much more efficient than the trust-managed Kolkata port.

“If arrangements are made for ferrying cargoes on train from Birgunj, costs of transportation up to Mumbai will also not be that high,” said Namgyal Lama, president of Nepal Freight Forwarders Association.

Importers such as Akhil Chapagain said that real economic benefits can be ascertained only when costs are compared from Birgunj to destination ports. He cautioned that benefit would also depend on the modality of transit and cargo operations.