The bilateral framework for trade and transit is provided by the India and Nepal treaties of Trade of Transit, and Agreement for cooperation to control unauthorized trade 1991. The trade treaty valid for five years was renewed through an exchange of letters on December 3rd 1996 and March 5th 2002 and automatically renewed for another five years in March 2007.
Under the Treaty of Trade, India provides, on a non reciprocal basis, duty free access to the India market for all Nepalese manufactured articles barring a short negative list cigarettes, alcohol and cosmetics subject to the conditions, since march 2002, that the exports meet the domestic value addition requirement of 30% and change in its classification at four-digit level in the course of manufacture or processing in Nepal.
After the March 2002 revision, annual quotas have been prescribed for duty free exports to India for four sensitive items vegetable fats 100,000 tonnes, acrylic yarn 10,000 tonnes, copper products 10,000 tonnes and zinc oxide 2,500 tonnes.
Bilateral trade takes place generally in Indian rupees, but Nepal’s Central Bank maintains a list of items that can be imported from India in us dollars.
The India and Nepal Treaty of Transit, renewed every seven years, provides for port facilities to Nepal at Kolkata and specifies 15 transit routes between Kolkata and the India and Nepal border for bilateral trade, 22 entry/exit points are provided along the Indo and Nepal border. The transit treaty was last renewed in March 2006. The agreement for cooperation between India and Nepal to control unauthorized trade was automatically renewed for five years in March 2007.
The two governments are negotiating a bilateral investment protection and promotion agreement.
India and Nepal signed a rail service agreement in May 2004 to extend cargo train service to the inland container depot at Birgunj in Nepal. ICD has been constructed with world bank assistance of USD 17 million, while India has constructed the rail tracks which link the ICD with the Raxaul railway station in India. The ICD became operational on July 16th 2004. A container corporation of India led joint venture Himalayan Terminals Private LTD. is operating the ICD.
A motor vehicle agreement for passenger vehicles, initialed on February 23rd 2004 awaits formal signature. The agreement envisages bus services between India and Nepal on 14 routes through 5 borders on reciprocal basis.53 buses will operate under this agreement everyday. Individuals traveling to either country in their personal vehicles would also be able to cross over into the other country without payment of any charge for the first five days.
Source : telegraphnepal.com