Nepal and India on Thursday traded a letter of exchange that will facilitate and boost railway trade connectivity between them.

The letter was signed during the visit of Anil Kumar Sinha, the minister for industry, commerce and supplies, to New Delhi, India. Sinha also held talks with his Indian counterpart, Piyush Goyal.

“Both countries interchanged Letter of Exchange amending the Protocol to the Treaty of Transit between India and Nepal. This signing will facilitate the movement of rail-based freight between Jogbani (India) and Biratnagar (Nepal) including bulk cargo under an expanded definition,” reads a statement issued by India’s Ministry of Commerce and Supply.

The Nepali side, at the end of July, had approved a letter of exchange amending the protocol to the Nepal-India Transit Treaty 2023, allowing the import of all types of goods—both container and bulk cargo—via rail to the Biratnagar Integrated Check Post (ICP) and Nautanawa, Sunauli near Bhairahawa.

It was finalised by the previous government and to be exchanged during Prime Minister KP Sharma Oli's scheduled India visit, which did not happen due to the political changes in Kathmandu.

Until now, the existing transit treaty only permitted cargo rail access to the Birgunj ICP.

The amended protocol allows all cargo trains to operate through Biratnagar ICP and Nautanwa. Previously, the treaty allowed only four types of goods—coal, clinker, cement, and fertiliser—to be transported by rail from third countries.

This liberalisation extends to key transit corridors—Kolkata-Jogbani, Kolkata-Nautanwa (Sunauli), and Visakhapatnam-Nautanwa (Sunauli)— thereby strengthening multimodal trade connectivity between the two countries and Nepal’s trade with third countries, the statement added.

The amendment now enables the import of goods—both in containers and bulk cargo—by rail.

The definition of bulk cargo has also been expanded in the updated protocol.

Currently, all cargo rail services are concentrated at Birgunj ICP. With the new amendment, rail cargo can also be routed through Biratnagar and Nautanwa, easing the pressure on Birgunj and reducing congestion.

“The aforementioned Letter of Exchange (LoE) enables direct rail connectivity along the Jogbani-Biratnagar rail link for both containerised and bulk cargo, facilitating transport from the ports of Kolkata and Visakhapatnam to the Nepal Customs Yard cargo station located in Morang District, near Biratnagar in Nepal. This rail link, constructed with grant assistance from the government of India, was jointly inaugurated by the prime ministers of India and Nepal on June 1, 2023,” stated the Indian release.

Although a railway line is yet to be built up to Bhairahawa ICP, the proximity of Nautanawa, Sunauli—just 7 km from Bhairahawa—means western Nepal can also benefit from it.

Transporting goods by rail is cheaper than by trucks, making this a cost-effective alternative for traders and manufacturers in the region.

The meeting between Sinha and Goyal also welcomed ongoing bilateral initiatives to enhance cross-border connectivity and trade facilitation, including the development of integrated check posts and other infrastructure.

India remains Nepal’s largest trade and investment partner, accounting for a significant share of its external trade.

According to the Department of Customs, Nepal exported goods worth Rs224.68 billion to India last fiscal year. At the same time, imports from India amounted to Rs1.07 trillion—resulting in a trade deficit of Rs846.51 billion.

These new measures are expected to further consolidate economic and commercial linkages between the two countries and beyond, said the statement.

India and Nepal first signed a Treaty of Trade and Transit in 1960, providing Nepal with transit access. The treaty is periodically renewed.

India continues to provide transit facilities for almost all of Nepal’s third-country trade. The two countries have a bilateral treaty of transit that guarantees transit rights through each other’s territories via mutually agreed routes and procedures. The treaty was most recently revised in June 2023 for seven years, with an automatic renewal for another seven years thereafter.

Nepal’s third-country transit trade is primarily routed through Kolkata/Haldia and Visakhapatnam ports. Nepal’s trade with Bhutan and Bangladesh also passes through Indian territory.

Long awaited signing of Letter of Exchange on allowing movement of containerised and bulk cargo from gateway port of India to Biratnagar railway yard has been signed and exchanged today in New Delhi, Rabi Sainju, an expert of trade and transit writes in Facebook, “it will decrease transportation time and cost of raw materials and other product movement to Eastern Nepal from third country”.

It will also facilitate third country exports. For Bhairahawa, Nepal should request to amend ECTS Regulations, he added.