Indian firms feel the heat of Nepal protests

NAYANIMA BASU MEENAKSHI VERMA AMBWANI New Delhi | Updated on January 22, 2018

Indian trucks stranded at the India-Nepal border

China may step in to provide the Himalayan nation with essential goods

Business and trade ties with Nepal have suffered a setback as protests across the India-Nepal border have resulted in blockades on key routes.

Apart from the small and medium firms that do business with Nepal, conglomerates such as Indian Oil Corporation (IOC) and Dabur have also faced disruption.

Traders are concerned whether India-Nepal trade will come back to normalcy any time soon. On the other hand, transport and logistics firms have started refusing shipments that are meant for Nepal, resulting in huge losses to Indian exporters.

“Nepal is now increasingly relying on China for the supply of its essentials.

“It is also taking the help of Bangladesh. China is waiting to grab any opportunity that comes its way to disrupt our ties with Nepal ... Losses can run into billions,” a top official told BusinessLine on condition of anonymity.

Two-way trade between India and Nepal stood at $5.19 billion in 2014-15 with exports reaching $4.55 billion and imports at $640 million, according to data by Ministry of Commerce and Industry.

“Chinese influence is growing rapidly in Nepal. And we can check that only by having cordial trading ties,” said Ajay Sahai, DG and CEO, Federation of Indian Export Organizations.

Bangladesh has already stated that China can use its airport in Syedpur and ports in Chittagong and Mongla as transit points to send supplies to Nepal.

“The Nepal crisis poses an immediate threat to sub-regional cooperation and this will impact Indo-Nepal ties in the long run. Trade should come back to normalcy, else the danger of a civil unrest is looming large,” said Prabir De, professor, RIS.

Moreover, trucks and containers carrying goods from India to Nepal are now refusing to carry shipments across the border for fear of getting attacked. These containers also do not enjoy any insurance coverage.

Ascendant China

Nepal had been importing all its crude oil needs from India for over 40 years now. However, as the problems between Nepali authorities and locals from the Terai region known as Madhesis reached its peak, the newly constituted Nepalese government signed a MoU with China’s National United Oil Corporation (PetroChina) in October.

Under the MoU, it has been decided that China will plug the short-term oil needs of the region that was caused due to the blockade in the main trading points of Birgunj-Raxaul, which handles over 60 per cent of the Indo-Nepalese trade.

China has also indicated that it will become a long-term oil supplier to Nepal, which could eat into India’s market share.

IOC supplies a little over one million tonne of petroleum products to Nepal annually. However, due to the blockades at Raxaul border, volumes have been impacted. In the last few months, the company’s supplies have been reduced by 60-65 per cent.

“Obviously there are some difficulties, not due to us but because of some blockages of routes. Raxaul border supplied more than 50 per cent of their requirements. At that border, there is a lot of choking. We are trying to feed them from the rest of locations in several States right from Uttar Pradesh to Bihar to West Bengal,” B Ashok, Chairman, IOC, had said at the time of announcing their second quarter results last month.

According to FMCG major Dabur, the company has suffered a loss of its sale of juices, which dipped by 10-15 per cent during the third quarter of this fiscal.

“We had already ramped up the production of juices in Sri Lanka and Newai, Rajasthan and have also engaged with third parties to cater to our demand requirement for the month of December and going forward,” Dabur said in its statement to BSE.

(With inputs from Debabrata Das)

Published on December 06, 2015

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