The first-ever rail cargo service from Kolkata, India, to Biratnagar officially began on Friday, marking a major milestone in Nepal's transit and trade logistics by extending direct rail access beyond Birgunj for the first time.

Under the Nepal-India Transit Treaty, goods imported from third countries are transported through Indian territory to Nepal's border. In line with the treaty, which allows Nepal to use Indian road, rail and inland waterways for third-country imports and exports, rail cargo transportation from Kolkata to Biratnagar has now commenced.

On November 4 last year, India's Central Board of Indirect Taxes and Customs (CBIC), under the Department of Revenue, amended the Electronic Cargo Tracking System (ECTS) Regulations, expanding the scope of rail cargo movement from the ports of Kolkata, Haldia and Visakhapatnam.

"The amendment expanded the scope of rail cargo movement from the Indian ports of Kolkata, Haldia and Visakhapatnam, allowing cargo destined for Nepal to be transported by rail up to the Biratnagar Customs," according to a statement issued by the Consulate General of Nepal in Kolkata.

Nepal has approved a letter of exchange amending the protocol of the Nepal-India Transit Treaty 2023, which allows the import of all types of goods—both containerised and bulk cargo—by rail to the Biratnagar Integrated Check Post (ICP) and Nautanwa, near Bhairahawa.

Until now, the transit treaty permitted rail cargo movement only to the Birgunj ICP. The amended protocol allows all cargo trains to operate through Biratnagar ICP and Nautanwa. Previously, only four commodities—coal, clinker, cement and fertiliser—could be transported by rail from third countries.

The new arrangement is expected to significantly reduce logistics costs, as transporting goods by rail is cheaper than by road.

Trade experts say direct transportation of goods from Visakhapatnam to Biratnagar ICP will cut logistics costs by around 15 to 20 percent.

Currently, cargo arriving at Birgunj from Visakhapatnam is reloaded onto trucks for delivery to Biratnagar. Many traders also rely on road transport from Kolkata, which is costlier and more time-consuming.

India remains Nepal's largest trading partner. According to the Department of Customs, Nepal exported goods worth Rs224.68 billion to India in the previous fiscal year, while imports from India totalled Rs1.07 trillion, resulting in a trade deficit of Rs846.51 billion.

Kolkata remains Nepal's nearest seaport.

India and Nepal first signed the Treaty of Trade and Transit in 1960, which granted Nepal transit access through Indian territory. The treaty has since been renewed periodically and was most recently revised in June 2023 for seven years, with provision for an automatic renewal for another seven years.

India continues to provide transit facilities for almost all of Nepal's third-country trade. Nepal's overseas trade is primarily routed through the ports of Kolkata, Haldia and Visakhapatnam, while trade with Bhutan and Bangladesh also passes through Indian territory.

A letter of exchange operationalising Visakhapatnam Port was signed in February 2016 during the Nepal prime minister's visit to India. Corresponding amendments to the Railway Services Agreement enabled transit traffic between Visakhapatnam and Nepal's Inland Container Depot in Birgunj, making the port an important supplementary gateway for Nepal's overseas trade.

On February 26 this year, Nepal and India finalised the procedural framework for transporting cargo by rail from Kolkata and Haldia to the Nepal Customs Yard in Biratnagar via the Jogbani Customs Yard in India.

The inaugural rail cargo service from Kolkata Port to Biratnagar was formally flagged off on Friday by Nepal's Consul General in Kolkata Jhakka Prasad Acharya, along with officials from Kolkata Customs, Kolkata Port and the Container Corporation of India Limited (CONCOR).

The inaugural shipment, carried on a CONCOR rail rake, consists of 40 high-capacity 40-foot Maersk Line containers carrying crude canola grains imported from a third country for Swastik Oil Industries of Nepal. The containers are fitted with Electronic Cargo Tracking System devices.

With the service now operational through the Jogbani Integrated Check Post to Biratnagar, up to 45 forty-foot containers can be transported directly to Biratnagar by rail in a single trip.

According to the Consulate General, rail transport is safer, more reliable and less expensive than road transport, with cargo expected to reach Biratnagar in around 24 hours, improving the efficiency of imports.

The launch paves the way for regular commercial movement of both containerised and bulk cargo by rail to eastern Nepal. Officials say the new arrangement will reduce demurrage charges at ports, container detention fees and additional road transport costs, lowering overall logistics expenses and improving the competitiveness of Nepali industries.