The customs office has collected a total of NPR 40.6 billion in revenue so far since the start of current fiscal year 2021/22 on August 16.

The revenue collection is 20.5 percent of the revenue target of NPR 198.1 billion set for the fiscal year, said customs officer Harihar Poudel.

During the review period, the Nepali Government imported various goods including, petroleum products, cooking gas, vehicles parts, food products, readymade clothing and raw materials for industries, through the Birgunj transit.

On a daily basis, the transit sees imports around 800 trucks laden with goods and exports around 100 trucks loaded with goods.

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The Himalayan government has saved NPR 3 billion in fuel transport costs in the span of 2 years after the construction of its first fuel pipeline.

The first cross-border fuel pipeline in South Asia connects Motihari of India to Amlekhgunj of Nepal.

The Nepal-India fuel pipeline, which became operational in September 2019, can transport petroleum products at the rate of 294 Klph.

According to the Nepal Oil Corporation (NOC), around 3,500 Kl of diesel is being imported from India daily through the pipeline.

In fiscal years 2019/20 and 2020/21, Nepal imported 1.61 billion liters of diesel by using the pipeline. In just 2 months of the current FY 2021/22, the country imported a total of 124.41 million liters of diesel through the pipeline.

“It costs an average of NPR 45,000 to transport the fuel from the Barauni depot of India to Amlekhgunj of Nepal,” said Pradip Kumar Yadav, chief of Amlekhgunj depot of NOC. “The pipeline has helped cut the costs of fuel tankers apart from reducing technical losses.”

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The DoI proposed the amount based on the goods exported by the mentioned industries in the FY 2020/21.

In FY 2020/21, the Himalayan nation exported goods worth NPR 141.12 billion. Edible oil is the most exported product, observing exports worth NPR 55.5 billion. It is followed by tea and coffee, with exports worth NPR 11.76 billion. Textile, woolen carpets, and ready-made garments are in the next positions.

Nepal Rastra Bank will provide the incentives as per the DoI recommendations, on par with the working guideline on cash incentives on exports.

The cash incentives provided by the Nepali Government are as follows:

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Business activities in the country fell drastically as the pandemic hindered operations, reduced footfall in shops, and led to a decline in demand.

This, in turn, led to the fall in the nation’s import expenditure.

According to the Department of Customs, Nepal’s import expenditure dropped by 19.6% in the first month of the current FY 2020/21.

Nepal imported goods worth NPR 85.80 billion during mid-July and mid-August in the current fiscal, compared to NPR 106.72 billion worth import in the same period last fiscal.

Some of the top imports include:

• Petroleum products – NPR 8.84 billion
• Electric goods – NPR 8.29 billion
• Cereals – NPR 6.62 billion
• Iron and steel – NPR 6.54 billion

On the other hand, Nepal’s export value stood at NPR 9.62 billion during the review period in the current fiscal, up by 8.86% from last fiscal.

ALSO READ | Nepal Federal Budget 2020/21: Highlights and Key Announcements

Some of the top exports include:

• Fat and oil – NPR 2.30 billion
• Tea and coffee – NPR 1.36 billion
• Woolen carpets – NPR 723.5 million
• Yarn – NPR 564.8 million

The significant fall in imports and the rise in exports have led to the dramatic fall of 22% in the trade deficit.

The trade deficit stood at NPR 76.18 billion in the first month of the current fiscal, against NPR 97.88 billion in the last fiscal.

Likewise, the ratio of import to export declined to 8.92 from 12.08.

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49,000 traders were registered in the VCTS for cargo trucks and containers until October 2019. Furthermore, Department officials have shared that the system has brought in a total of 1.1 million cargo vehicles.

“The department held goods worth Rs 10 million which the traders were delivering not abiding the law,” said a department official on condition of anonymity.

The Department also said that it increased its vigilance to draw more traders into the system after the end of the first quarter.

“We have increased number of check points to track the traders flouting the government rules,” said Rajiv Pokharel, Department.

Pokharel says that the Department has started educating traders on the usage of the tracking system. He adds that they even got contravening traders to provide their details on spot at checkpoints.

The government is also planning to integrate the VCTS with the ASYCUDA World – the global computerized customs management system, which is being used by major customs offices at Birgunj, Bhairahawa, Mechi and Tribhuvan International Airport (TIA).

The DoRI explains that the collaboration of the two systems will help importers track customs clearance procedures at various trading points and clear documentation related work on the consignment tracking system from one platform.

The Nepal Government launched the VCTS to track the location of a consignment carrying containers since July 2019. Since then, the DoRI has probed 81 tax fraud cases and filed cases against 238 individuals for tax evasion.

It has managed to recover NPR 18.32 billion in fines and the perpetrators have been received up to three years of imprisonment.

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This comes as good news for Nepal trade promotion!

As per the latest reports, Nepal has successfully tested its long-awaited Electronic Cargo Tracking System (ECTS) of goods transshipped from India’s Visakhapatnam Port to Birgunj in Nepal!

Now, the port will start ferrying Nepal-bound goods formally from February 15, 2019.

As a result of the GPS-based tracking tool installed last summer, the turnaround time that transshipment incurred by Nepali importers has come down to two weeks from the current two-three months, thus saving time and resources for Nepali traders.

Besides, the new system has also addressed the tampering concerns as the containers will be sealed electronically.

The new development has its roots in June 2017, the period when Nepal and India signed a memorandum to have a tracking system in place to facilitate cargo movement between the two countries, by road and rail from Kolkata to four major customs points of Nepal.

This includes Kolkata-Bhairahawa via Sunauli, Kolkata-Birgunj via Raxaul, Kolkata-Biratnagar via Jogbani and Kolkata-Sirsiya inland container depot via Raxaul.

According to Director of the Department of Commerce, Supply and Consumer Protection Purusottam Subedi, the goods that arrive in Nepal through Visakhapatnam Port will now be handed over to the rightful owner through the automatic system without the need for paper procedures.

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Senior officials from Nepal and India met at Pokhara to review the 2009 Trade Treaty signed by both countries.

The two-day meeting is the second Nepal-India Joint Secretary-level meeting since 2009, where India will respond to Nepal’s proposal of updating the treaty submitted in the first meeting in August 2018.

As part of the meeting, Nepal and India discussed various of interest pertaining to trade, business and connectivity.

The Indian delegation was headed by Department of Commerce Joint Secretary (South Asia) Bhupinder Singh Bhalla, while the Nepali delegation is represented by Ministry of Industry, Commerce and Supplies Joint Secretary Ravi Shankar Saiju.

Request for Access to Additional Indian Ports

Nepal has requested Indian side to give it access to two additional Indian ports for shipment of its goods.

While the Himalayan nation already has access to Visakhapatnam and Kolkata ports, they have made proposal seeking access to Mundra Port of Gujarat and Dhamra Port of Odisha.

“Nepal has presented a proposal to have access to two additional ports, namely the Mundra port in Gujarat and Dhamara port in Odisha. The Indian side has given a positive reaction over the proposal but a concrete agreement is yet to be made,” said an official from Nepal’s Ministry of Industry, Commerce and Supplies.

Amendments to the India-Nepal Treaty 1990 was one of the key agendas of this Joint Secretary level meeting held in Pokhara.

Other Trade-related Matters Raised

Nepal also sought India’s help in reducing its rising trade deficit through free access of Nepali products in the Indian market.

“Nepal’s trade deficit, especially with India, is constantly widening while our products are finding it difficult in finding proper space in the Indian market. We plan to discuss in detail on how to address these issues through the bilateral trade treaty,” informed Ravi Shankar Saiju, joint secretary at MoICS.

During the two-day trade treaty review meeting, Nepal also raised about giving the Nepali side preference for export of agricultural products and integration of Nepali manufacturing units to its value chain.

Additionally, the Himalayan nation also sought India to review the preference erosion and reciprocity in import & export of agricultural goods and some manufacturing products listed in the treaty.

Despite the treaty’s zero-tariff export facility on different Nepali products, Indian authorities have been imposing various additional taxes on Nepali goods. The Nepali side will also bring this up for discussion at the two-day meeting.

The meeting discussed various options to address different non-tariff barriers in Nepal-India trade and enhancement of Nepal-India connectivity through railway, waterway and roadway.

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Addressing at the event, Oli urged the Nepal Intermodal Transport Development Board (NITDB) to ensure that the project implementation will be a sustainable and reliable solution for the country’s trade movement.

“Since this project is of great importance, regular inspection and evaluation of the project will be conducted. With optimum effort on the government’s side, I hope this project will be an exemplary one,” says Oli.

Speaking on the occasion, Finance Minister Yuba Raj Khatiwada and Commerce & Supplies Matrika Prasad Yadav expressed hope that dry ports and related infrastructure will facilitate businesses and transportation business of the country.

The dry port is expected to bring in a relief for easy movement of goods and services in and out of the Kathmandu Valley, upon the implementation of the Kathmandu-Tarai Expressway to be completed in 19 months.

The port is being built in around 11.77 hectares of land and is getting USD 22 million fund assistance from the World Bank.

The new dry port is part of the Nepal-India Regional Trade and Transport Project.

The complete port setup includes fully-equipped warehouses, administrative buildings for customs, quarantine, parking lots, bank and other facilities required for customs clearance, along with the office of NITDB.

The port holds capacity to accommodate 626 20-feet containers and 205 trucks in its parking lots, loading and unloading facilities and 6 warehouses.

Considering the current trade scenario, the new depot has been designed to fulfil the traffic flow until 2039.

NITDB is also ready with a master plan for the development of the International Exhibition Venue along with ICD in 1,054 ropani of land owned by the Ministry of Industry, Commerce and Supplies in Chobhar.

Hope the new developments will add to the government’s plans to boost Nepal’s trade while addressing the existing concerns.

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As the latest reports say, the country’s trade deficit widened 40.3 percent in the first four months of the current fiscal year, majorly attributed to the rise of imports by the agriculture and fuel goods.

According to Nepal Trade Export Promotion Council, the trade deficit was measured at NPR 454.47 billion as of mid-November 2018, with exports of tariff-targeted goods balancing the trade.

While the import bill is soaring at NPR 483.75 billion, showing a 38.1 percent rise over the previous record, the export earnings showed a little rise of 10.6 percent up to NPR 29.28 billion.

Overall, the export-to-import earning ratio shows exports standing at NPR 1 /- against import expenses of NPR 16.5/-.

Over dependence on imported goods, as a result of challenges in production and supply, resulted in this widening trade deficit, says Suyash Khanal, Deputy Executive Director, TEPC.

“Although exports of yarn, carpet, iron products, tea and textile are getting better, they are not enough to balance the ever-increasing trade deficit,” Suyash adds.

Fuel, the Biggest Contributor to Deficit
Fuel stands out to be the biggest contributor the trade deficit. Nepal’s petroleum product imports in the first four months of the current fiscal amounted to NPR 69.07 billion in revenues, showing a rise over 68.2 percent, year-on-year.

Iron & related products are second in the list accounting to NPR 58.2 billion worth imports during the four-month period, up 62 percent Y-o-Y, majorly due to high infrastructure & reconstruction activity across the nation, adds Khanal.

Nepal’s agricultural imports are next in the list growing in costlier. According to TEPC, the share of agro & petroleum imports was 30 percent of the total import bill during the review period of the current fiscal.

Export Earnings
Yarn exports witnessed a new high of 19 percent to NPR 2.93 billion during the first four months of the fiscal year, with around 13 percent contribution to the export basket. Woolen carpet exports also increased 17.9 percent to result in NPR 2.76 billion earnings.

Readymade garment is another area that contributed to export earnings with 12.1 percent rise to NPR 2.40 billion in revenue.

Import aside, iron & related products also contributed to exports by showing a 47 percent rise to NPR 2.21 billion.

According to Khanal, Nepal needs to make strategies for promotion of its products in the international market for good incomes and balanced trade. He reports positive signs in promoting tariff-targeted goods.

“We must diversify our export basket, particularly handmade goods which are in high demand in the overseas market, so that our export shipments increase rapidly,” adds Khanal.

Meanwhile, Posh Raj Pandey, Executive Chairman of the South Asia Watch on Trade, Economics and Environment, noted that the country should start exploring niche markets to expand their export earnings.

“Nepal needs to sign bilateral agreements to promote export of specific goods to the countries where their demand is growing,” Pandey adds.

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The international body stated this in view of the rising credit in Nepal banking sector provisions pertaining to loan classification, loan-loss provisioning and risk management.

“Rapid credit growth underscores the need to accelerate banking sector reforms. Loan classification, provisioning, and banks’ risk management practices should be upgraded,” says IMF’s latest South Asia Regional Update.

Nepal’s Deteriorating Credit Scenario
Nepal’s loose monetary policy and mandatory central bank requirement of four-fold rise in paid-up capital of commercial banks has triggered rapid credit expansion. Besides this, the private sector’s low lending growth at an average 22 percent in the last two years has resulted in this scenario.

A big chunk of credit continues to enter these sectors despite the central bank’s attempts to curb the flow of credit to unproductive sectors through revision of loan-to-value ratio on car and real estate loans.

IMF suggested that credit expansion take place in a sustainable manner. However, this could hit the country’s economic growth.

Nepal’s Economic Performance
In the last two years, Nepali economy has made rapid progress with the growth rate standing at eight percent in FY 2016-17 and 6.3 percent in FY 2017-18.

“Above-trend growth has been supported by two successive favorable monsoon seasons, accommodative fiscal and monetary policy, a pickup in [post-earthquake] reconstruction activity, and markedly improved electricity supply,” reports IMF.

However, expansions policies that triggered growth have also fueled imports. This has resulted in a current account deficit of 8.2 percent of GDP in 2017-18. 

The deficit further caused the central bank foreign exchanges to shrink to USD 9.7 billion in September 2018 from USD 10.1 million in July, 2018.

Furthermore, the growing current account deficit also burdens the budgetary operations of the government with a fiscal deficit of more than six percent GDP in 2017-18.

This deficit further widened with large transfers to local governments and rise in capital spending. Following this, public debt rose to a manageable 29.7 percent of GDP.

“The fiscal deficit could widen further in 2018-19 with the ongoing implementation of fiscal decentralization, unless the government continues the strong revenue collection effort seen in the first two months of this fiscal year when revenues rose by 36 per cent year-on-year,” states the IMF report.

The Way Forward
According to IMF, Nepal’s near-term challenges include:

• Maintaining the recent growth momentum
• Creating conditions for sustained high and inclusive growth

“Efforts should focus on strengthening key institutions and administrative capacity to boost private investment and growth,” reports IMF.

“Fiscal policy should focus on higher and better-quality public investment and prudent implementation of fiscal decentralization through sustainable intergovernmental fiscal arrangements and the need to build public financial management capacity at the sub-national level,” it adds.

IMF warns that hasty implementation of fiscal decentralization could strain government finances and weaken fiscal policy’s stabilization function.

“At the same time, with the fiscal stance having become more expansionary than in previous years, monetary policy needs to be tightened to keep inflation and balance of payments pressures in check,” says the IMF report.

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