Nepal’s agenda for the two-day Nepal-India Inter-Governmental Sub-Committee (IGSC) on Trade, Transit, and Cooperation to Combat Unauthorised Trade, scheduled to begin on Thursday, will focus on removing the red tape hindering Nepal’s exports to India, officials privy to the matter said.

The Indian government's new rules regarding the Bureau of Indian Standards (BIS) certification for Nepali exports have been a significant cause for concern for many. Several Nepali companies have been awaiting certification from the Bureau of Indian Standards for several months to send shipments across the border.

“As Nepali manufacturers have been facing problems in exporting their finished products to India due to the BIS certificate issue, this will be high on the meeting agenda,” said an official at the industry ministry. “Nepal will seek to ease this issue through a mutual recognition agreement.”

Trade experts said that implementation of the decision agreed at the IGSC meeting has been nominal, and both countries need to take responsibility for it.

“The implementation of agreements after an IGSC meeting is missing,” said Posh Raj Pandey, chairman of the South Asia Watch of Economics, Environment and Trade, a trade think tank.

“Despite solving the problems that arise in trade and transit issues, there is a trend of both countries dismissing the issue saying ‘we took the note’ earlier’”.

Former commerce secretary Purushottam Ojha also said the concern is that the IGSC should reach a concrete decision, and the agreed decision is implemented.

Ojha said the monitoring mechanism and follow-up to implementation of the agreed decision must be robust. Making agreements and not implementing them raises credibility questions, he argues.

The total trade between Nepal and India remained at Rs1.09 trillion in the last fiscal year.

According to the Department of Customs, Nepal’s exports to India declined by 3.28 percent to Rs103.17 billion in 2023-24, compared to the previous fiscal year.

Imports to Nepal from India declined to Rs996.68 billion in the last fiscal year, compared to Rs1.02 trillion in the previous fiscal.

Experts said that Nepal should prominently raise the issue of export hurdles ranging from problems at the border to bureaucratic hassles.

Baburam Adhikari, spokesperson for the Ministry of Industry, Commerce and Supplies, said discussions would centre on the jurisdictions of three agreements between Nepal and India: the Trade Treaty 2009, the Transit Treaty 2023, and the Control Unauthorised Trade 2009.

According to the officials, detailed discussions on bilateral trade, transit, customs, quarantine, setting up food testing labs, and developing and upgrading trade-related infrastructure at the border is also on the agenda.

“The meeting this year will be crucial as India’s new requirement has terrorised exporters. India has not forwarded documents submitted by Nepali exporters to get BIS certificates. This has blocked the exports of many goods,” said Pandey.

He suggested that in terms of standards, a mutual recognition agreement is necessary.

“Sector-specific mutual recognition agreements can be reached between the countries on exportable and potentially exportable goods,” said Pandey.

In a mutual recognition agreement, the standard certified by Nepali authorities is recognised in India.

Pandey said that in addition to the BIS issue, Nepal should recommend reviewing the trade agreement, mainly asking India to allow for the imposition of duties on Indian agricultural products arriving in Nepal.

Nepali products cannot compete with Indian products as Indian agricultural products are heavily subsidised to protect domestic farmers.

He said that if Nepal pushes this agenda, it will be a huge relief for Nepali farmers.

Nepali farmers complain that cheaper rates for Indian products have hit them in every item, ranging from fisheries to cauliflower and tomatoes to chicken.

With the automatic renewal of the Nepal-India trade treaty in November last year, Nepal lost the opportunity to negotiate and amend a few Articles crucial for boosting bilateral trade.

The trade agreement between Nepal and India has not been reviewed since 2009.

Nepal and India are members of the WTO, which bans the tariff rate quota, a predetermined quantity of a product to be imported with duties lower than normally applicable to that product. However, India still imposes it. “It needs to be removed,” experts say.

Trade experts also suggest electronic data exchange to solve many trade issues. Such cooperation helps in the exchange of information such as letters of credit (LC) and containers’ movement.

Experts say that if India provided Nepal with a port on the West Coast, it would facilitate Nepal’s trade with third countries.

“It’s 8–10 years since the issue was first discussed, but there is no concrete result yet,” said Pandey. It would help Nepali products reach African and Middle Eastern countries within two weeks, which currently takes over a month and a half.

“Nepal should request [the Indian authorities] for the use of the West Coast,” said Pandey.

He added that both countries should have held IGSC meetings before the automatic renewal and amended a few Articles. “But now we must wait for seven years to amend the articles.”

“Nepal cannot import from India the goods it has imported from third countries as an authorised dealer for South Asia. Such goods illegally arrive in Nepal, and customers are forced to pay higher prices,” said Pandey.

This trade facility can be provided for specific goods that Nepal requires, helping Nepalis buy them at cheaper rates.

During last year’s meeting, the Nepali side raised the issue of India's recurring export ban on staples such as wheat, rice, sugar, and onion. These bans have been fuelling inflation and smuggling in Nepal.

The two sides agreed to strengthen mechanisms to combat the smuggling of goods from India to Nepal. However, traders said the illegal practice has not stopped.

“India is Nepal’s largest trading partner on both import and export, and the trade deficit is huge. The Nepal government should focus on minimising the trade deficit and finding ways to increase exports during trade negotiations,” said Ojha.

India has imposed many non-tariff barriers on Nepali products. Their removal is sought to help boost exports from Nepal.

Ojha said agricultural products are again being halted because India has not accredited Nepal's sanitary and phytosanitary (SPS) test certification. “This issue should be sorted out.”