The revision of the 17-year-old Railway Service Agreement on Wednesday has removed bottlenecks that Nepal has been facing for long, particularly in the import and export of goods through the Indian railway freight services.
According to the revised text of the Letter of Exchange, all authorised private container train operators (Indian as well as Nepali) will be able to utilise the Indian railway network to carry freight containers for Nepal’s imports or exports, ending the monopoly of the Indian government-owned Container Corporation of India (CONCOR).
“This liberalisation will allow market forces to come up in the rail container freight segment in Nepal, and is likely to reduce transportation costs in the medium term, benefiting the Nepali consumer,” a Nepali official who was involved in the negotiation process with India told the Post on condition of anonymity.
The new agreement will come into effect after the Cabinets of the two countries endorse it.
The agreement also allows India’s railways freight services to bring goods to and take goods from other border points besides Raxaul/Birgunj.
“The scope of the present limited cargo movement and facilities from various Indian ports to bordering Nepali industrial areas has been extended by this agreement,” said the officials.
As Nepal and India are planning to extend more cross-border railway networks, experts and officials said this agreement has opened new vistas of cooperation in Nepal-India trade and transit sectors.
After the revised agreement comes into effect, Nepal Railway Company-owned rail/wagons are also authorised to operate Nepal-bound freight (inbound and outbound) over the Indian Railways network as per Indian Railway standards and procedures. Earlier, this was only allowed for wagons owned by Indian Railways and CONCOR.
“The monopoly CONCOR has been enjoying since 2014 has ended with this revised agreement,” Chandra Ghimire, outgoing secretary at the Ministry of Commerce, Industry and Supplies, told the Post. “Since CONCOR was also operating for Indian companies, it paid less attention to our side.”
Nepali traders have long been complaining of difficulties in trading with third countries in the absence of timely evaluation and revision of the Rail Services Agreement with India.
Rajan Sharma, former president of Nepal Freight Forwarders Association, said breaking the monopoly of CONCOR in railway service is good for competitive service from railways.
“We had been raising the issue of breaking the monopoly of CONCOR for more than a decade and Indian private railway companies were also asking us to lobby for inviting competition in railway service for goods delivery to and from Nepal,” Sharma told the Post.
According to officials, in the absence of an updated agreement, other agreements that have been signed between the two countries could not be implemented effectively.
After the agreement comes into force, Indian private operators can transport Nepal-bound cargo from Visakhapatnam and Kolkata ports as well as more ports allowing Nepal to use Indian sea ports closer to major customs points of western and far-western Nepal for third-country trade as per the Transit Treaty between Nepal and India. At present rail cargo can be transported only on the Kolkata-Raxaul/Birgunj route.
“The present railway freight or cargo facility is only confined to Raxaul-Birgunj. We have to expand its scope to other dry ports and industrial corridors of Nepal like Nepalgunj, Bhairahawa, Biratnagar, Kakarvitta and other already established industrial areas and to set up industrial hubs,” said Ghimire. “If we can bring raw materials through the rail instead of trucks, we will have abundant raw materials that will help us achieve fast industrialisation.”
The new amendment has ensured competitiveness among the private players too.
“Several Indian private railways freight companies doing business within India had been offering far cheaper service than CONCOR,” the official said. “The end of monopoly and ensuring competitiveness is a major achievement.”
With the increase in trade with other countries, Nepal had been demanding there be an extension of railway services to all the trading points across the country.
“There is now diversification in our existing facilities,” a Nepali diplomat based in New Delhi told the Post over the phone. “The majority of our concerns have been addressed, now we have to scale up our capacity for full use of this revised agreement.”
The new agreement will be more important after the planned four more railway links between the two countries come into operation. These four cross links include Jogbani-Biratnagar, Rupaidiya-Kohalpur, New Jalpaiguri-Kakarbhitta and Nautanwa-Bhairawaha.
A feasibility study for bringing rail up to Kathmandu from Raxaul, India is also under consideration.
“We have to add rail service to our industrial hubs so that we can ferry raw materials from Indian ports to these industrial hubs which will cost cheaper than by trucks,” said Ghimire. “We need to address these issues in days to come for scaling up our industrial inputs.”
Another major takeaway of the revised Railway Service Agreement is all kinds of wagons that can carry freight on Indian Railways network within India can also carry freight to and from Nepal. Earlier this facility was limited to only certain kinds of wagons.
The liberalisation will particularly reduce transportation costs for automobiles which are carried over special wagons that were not listed in the Railways Service Agreement of 2004, as they did not exist back then, according to the official.
“Now we can easily operate our cross-border railway and add more business. We can do business via India too if we can compete with Indian firms,” said Balaram Mishra, former Director General at the Department of Railway. “The only thing we need is to develop more dry ports, industrial areas. Otherwise there is no use of these facilities,” said Mishra.
The private sector, however, has a word of caution.
“Nepali importers are unlikely to benefit directly from competitive prices as most Nepali importers rely on foreign exporters to book railway services and they charge freight cost in the cost of goods. Therefore, they will benefit from it more as they can get competitive prices,” Sharma, the freight forwarder, said. “Nepali importers can benefit only if they negotiate with railway companies for competitive prices or negotiate with exporters for reduction in freight charges.”
(Prithvi Man Shrestha contributed reporting.)
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