October 18: Stakeholders have expressed concerns that the transportation cost of Nepal's foreign trade is increasing significantly due to high dependence on foreign shipping firms.
Although transportation cost is a major factor in foreign trade, the private sector is worried that trade competitiveness is declining due to inability to reduce these shipping costs.
Ashok Kumar Temani, coordinator of FNCCI’s Transport and Transit Committee of Province 2, states that there is monopoly of foreign companies in shipping as the government has been unable to promote private sector in transit service.
"Transit is not only the foundation of foreign trade, but also of the economy. However, the government has so far taken it lightly. Indifference to the expansion of infrastructure related to transit services has led to high transportation cost," said Temani.
According to entrepreneurs, India, which is Nepal's largest trading partner, has reduced its transportation cost to fifteen percent and plans to bring it down to 10 percent in the next few years. Compared to this, Nepal’s transportation cost for foreign trade is more than thirty percent. Entrepreneur Pradip Kumar Kedia says that the cost has not come down though the government has sought alternatives to Indian seaport, made procedural improvements, and expanded infrastructure at the border points.
Importers have been experiencing higher transportation costs despite the improvements in infrastructure and required procedures. “Infrastructure and procedural improvements alone are not enough. Domestic companies should be mobilized in its operation," opined Kedia who is also the former president of FNCCI Birgunj chapter.
The volume of Nepal's foreign trade is increasing every year. However, foreign companies dominate the transportation and transit service. "Transit services that take place via third countries through sea, rail and land routes are all offered by international companies. Until now no domestic company has been established to offer cargo services. We are lagging behind in terms of policy," said Temani.
Temani suggests the private sector of the country should be promoted to reduce the transportation cost by increasing competition in transit services. Entrepreneur Rajendra Gupta argues that the government has instead discouraged domestic companies through unstable policy. "Without a stable policy, infrastructure of transit services cannot be consolidated. Without any reasonable basis, the government sometimes imposes and removes VAT on transportation services. Such practice creates confusion in trade," shares Gupta.
Importer Navneet Agrawal says that despite some infrastructural and procedural improvements related to transit services in the last few years, the domestic importers have not been able to experience any reform.