THE COST OF ECTS FOR NEPAL'S TRADE

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THE COST OF ECTS FOR NEPAL'S TRADE

The introduction of the new transhipment system was supposed tobring down the cost of Nepal’s third country trade. Instead, the reality is just the opposite.

--BY OM PRAKASH KHANAL

It has been a year since the ‘Transhipment Model’ was introduced for Nepal’s third country trade.  The new system was expected to streamline the procedures and reduce the costs associated with transit and transportation of container cargoes. However, while the procedures have been streamlined, the costs have unexpectedly gone up.

The Direct Transhipment Model (DTM) was meant to alleviate the hassles, clearance procedures and hidden costs that Nepali traders faced while bringing goods from Indian ports. Nepali importers had hoped that this mechanism would be more efficient than the previous Customs Transit Declaration (CTD) and would save time and resources when bringing goods from Kolkata Port to Birgunj. But instead, the mechanism, put into practice from February 3, 2019, has increased the cost of transporting a single cargo container by up to 50 percent.

According to Ashok Kumar Temani, coordinator of Transportation Committee of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), this increase in costs in the transit and transportation of goods is because of the vested interests of a few shipping companies and the business syndication by them. “The transportation costs cannot be lowered without creating an environment of competition between the shipping companies,” he says adding, “The government has not been able to bring the shipping companies under a regulatory purview. In fact, till date, no laws have been formulated to make it mandatory for registration of shipping companies in Nepal.”

However, the government stands by the benefits of DTM and is planning to implement it in the transit and transport of goods via roadways too. Ek Narayan Aryal, consul general of Nepal in Kolkata states, “The burdensome procedures for Nepali importers in the Kolkata Port have ended in the first phase.” But he acknowledges the need for more competition among the shipping service providers, “We need to move strategically to create competition between shipping companies.”

Currently, only five shipping companies – CMACGM, Maersk Line, APL, ZIM and MSC offer direct transhipment services from Kolkata Port to Nepal and importers point to this limited number as the reason for high prices.

Aryal states that the Office of the Consulate General in Kolkata is working with shipping companies to make fares cheaper and to push them to make their rates public. But, he says that the onus is on the importers as well. “They need to be aware about choosing the shipping company offering the best rates to make the transit and transport of goods cost-effective,” he suggests.

Under the DTM, the Electronic Cargo Tracking System (ECTS) was implemented as a pilot project by the government with support from the Asian Development Bank (ADB). It hoped to reduce the costs of transhipment of goods to Nepal by decreasing the clearance procedures at Kolkata port meaning that the importers would not have to assign separate agents for customs clearance purposes. But the system has failed to meet its objective because the shipping companies are now charging higher prices for transhipments than the customs clearance agents previously did.

How ECTS Works
Under ECTS, Nepal-bound containers arriving at Kolkata port from third countries are fitted with a Radio Frequency Identification Device (RFID). This device helps the port authority as well as custom officials of both Nepal and India track the movements of the containers. The customs clearance processes for such containers are carried out at the Nepal-India border.

As this is a web-based system, the importers can also theoretically track their shipments. But importers complain that they have not been given access to the tracking facility even after paying the required charges.

How transportation costs have increased
Ganesh Prasad Lath, executive member of FNCCI, says that ECTS, which reducing the clearance procedures, haven’t really benefitted Nepali importers. “We had expected that the new mechanism to make the transit and transport of goods cheaper. But instead, they have risen by up to Rs 50, 000,” he mentions.

Under the CTD system, importers were forced to pay detention charges as they were unable to bring the containers to Nepal due to lengthy clearance process. Also, an illegitimate collusion between customs clearance agents and other middlemen would develop at times and would increase the costs of the transit and transportation of goods. ECTS was meant to eliminate all of that to make the process smoother and cost-effective. So, it is an irony that the system introduced to bring down the costs has in fact pushed it higher.

With the implementation of DTM, the shipping companies become responsible for transhipping the goods from their origin point to the destination, making transit and transport smoother for importers. “However, the companies have now hiked their fares to include potential delays and fines at the port and on the way,” states importer Pradeep Kedia, “This has increased our overall costs.” Nepal receives around 100,000 containers from third countries every year, 50 percent of which passes through the Kolkata Port. “All of this combined will increase the overall transport and transit costs by billions of rupees,” Kedia says. In addition to the shipping costs, the companies have also increased their sea travel fares by USD 200, he informs.

The importers complain that the shipping companies charge exorbitant amounts for sea and railway transport, terminal holding charge, and ETCS. CONCOR has fixed the same raiway charge of all companies transporting containers to Nepal. But the cutom house agents at Kolkata claim that companies still charge amounts much higher than the fixed charge.

CONCOR has fixed a railway fare of Rs 63,575 per container for every 20 feet container carrying a cargo of 10 metric tons from Kolkata Port to Birgunj Dry Port. But Maersk Line charges Rs 93,752 for it. Similarly, for 40 feet containers carrying a cargo of 20 metric tonnes, the CONCOR rate is Rs 1,12,615 but Maersk charges Rs 1,58,658. Among all the companies, the agents inform that Good Rich charges the most.

But the companies claim that this extra amount is for the inland haulage charge.

Agents now claim that they were unfairly targeted under the CTD system. “People used to say that the agents were increasing the transit costs by making undue profits,” an agent says, “But now, the cost has increased even more than before.” Meanwhile, Consul General Aryal states that the government will bring the shipping companies under the legal purview soon enough.  “We eliminated the middlemen and the agents and now, we will also regulate the shipping companies,” he says.

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