Business carrot for new Nepal regime on cards
Economic Times | 29 May 2008
Business carrot for new Nepal regime on cards
Ganapathy Subramaniam, TNN
NEW DELHI: Even as Nepal prepares to abolish monarchy and declare itself the world’s newest republic under a government led by Maoists, the Indian government is preparing a new wave of business diplomacy to establish cordial ties with the new regime. Quiet steps are being taken to secure the interests of Indian businesses in Nepal, led by Dabur, Manipal Medical College and Hospital and United Telecom, in which MTNL, VSNL and Telecom Consultants hold 26.66% stake each.
A comprehensive economic cooperation agreement is under consideration as this would benefit the Nepalese economy. Better connectivity, improved cooperation between the Customs departments of the two countries to check illegal trade, support for setting up a special economic zone at Birgunj, and facilitation of Nepalese exports to India are on cards, according to highly-placed government sources. A meeting of the India-Nepal Inter-Government Committee (IGC) has been scheduled for July 1 and the Indian side is preparing to address a host of requests from the Nepalese side to boost trade ties, they said.
Resolution of taxation issues and better protection for each other’s investments are other key issues under discussion. The commerce & industry ministry is coordinating India’s efforts that involve establishing new rail links across the border, improving border roads and providing fertiliser supplies to Nepal. Permission for Nepal-registered vehicles to ply on Indian roads is also under consideration. Another sop under discussion is to facilitate Nepalese imports through JNPT Mumbai.
The Indian side will urge the Nepal government to address the concerns of companies like Dabur, Manipal Medical College & Hospital, and UTL. The interests of businesses run by Indians would also be kept in mind.
It is felt that better economic cooperation would go hand in hand with diplomatic efforts by India to keep its strategic interests intact as Nepal abolishes monarchy and the reins are taken over by Maoist leaders.
One of the key problems faced by large Indian businesses in Nepal is lack of clarity on taxation and incentives. It is learnt that Dabur India, for example, is awaiting duty drawback of Rs 31 crore but the Nepalese authorities are unwilling to clear the claim. UTL, the other major Indian business in Nepal, is also facing difficulties since differences persist over royalty payments.
In the case of Manipal Medical College and Hospital, there are disputes related to taxes as well as incentives. The Indian side is also planning to urge Nepal to allow Indian companies to import product from India to a certain extent of their turnover instead of seeking approval for each import. Clearing payments due to Indian Oil Corporation from the state-owned Nepalese company is also under discussion.
The government is considering a request from Nepal to liberalise norms governing import of food articles. Export inspection certificates from the Nepalese side would be accepted on the basis of certain conditions, the sources said.
Indian expertise would be made available to Nepal for building an inland container depot near Kathmandu and setting up of a 500-hectare SEZ at Birgunj. Indian authorities would also help Nepal to build an international-quality accreditation system. A number of departments including external affairs, finance, commerce & industry, petroleum & natural gas, power, health, home affairs and road transport are co-ordinating an integrated strategy for this purpose.
