Eight months after the renewal of the Nepal-India Trade Treaty, Nepali manufacturers say that although they still face hassles the bigger problem is to fulfil new annual quotas for exports.

While renewing the 1996 treaty, India slapped a quota on four Nepali products: vegetable ghiu, acrylic yarn, copper products and zinc oxide saying exporters were using the treaty to dump these products on the Indian market and this was adversely affecting India's domestic market.

"Though the export of vegetable ghiu has resumed, we are still worried that we may not be able to hit the quota allocated for us this year," said Atmaram Murarka, President of the Nepal Vegetable Ghee and Oil Industries Association. Because of cross-border bureaucratic hassles with quarantine laws and new taxes, it has taken time for exports to return to optimum levels. Nepali manufacturers have so far exported only one-fourth of the allocated quota of the ghiu, which is 100,000 tonnes for this year. And there is only four months to go.

The secretary level talks of the Inter-Governmental Committee (IGC) held in New Delhi in August had reached agreement on addressing procedural hassles while implementing the treaty. "We had reached understanding on 22 different agenda items during the IGC meeting," said Purushottam Ojha, joint secretary at the Ministry of Industry, Commerce and Supplies. "There has been progress."

During the IGC meeting, the Nepali side had requested the Indians to reconsider some clauses that they said were negatively affecting Nepali traders: quarantine checking for Nepal's agri-exports, quota restrictions for certain items, an anti-dumping duty, and a four percent Special Additional Duty (SAD) in this year's Indian budget.

In addition, the West Bengal state government imposed a 20 percent "luxury tax" on Nepali tea and vegetable ghiu. Likewise, a 40 percent anti-dumping duty was imposed on acrylic yarn and zinc oxide exported from Nepal. "The 1996 Trade Treaty between Nepal and India was a preferential one giving lots of facilities for Nepalese exporters," says Krishna Hari Banskota, director general at the Department of Commerce. Nepali traders have been lobbying with both governments to have some of the new conditions removed.

Indian officials at the IGC meeting considered these concerns positively, according to Nagma Mallick, first secretary for commerce at the Indian Embassy in Kathmandu. She added: "India has already addressed a number of issues raised by the Nepali side in the last two months." New Delhi has promised to set up three more quarantine check posts at Sunauli, Jogbani and Banbasa by November in addition to the three others already set up at Rupaidiha, Raxaul and Panitanki so that Nepali agricultural exports would not encounter delays. Nepal currently exports up to Rs 5 billion worth of agricultural products to India every year.

India has also agreed in principle to waive SAD, anti-dumping and luxury taxes as well as to raise the quota ceiling for copper products by 2,500 tons. "We have full commitment to give support to Nepal," Indian Commerce Secretary, Deepak Chatterjee, told us this week.

It's not just the Nepalis who have gripes. India has raised concerns that Nepal is not offering equal treatment for Indian car imports. "While Nepal accepts self certification from Japanese and Korean automobile manufacturers, Indian cars need agency certification even if they are Euro II," Mallick told us.

Rajendra Khetan of FNCCI is convinced there are no major problems left. The only thing still in need of resolution, he says, is the much-delayed railway container port at Birganj which was completed two years ago and is still not operational. "India should consider Nepal's request to expedite the Birganj port as soon as possible, and we must also consider their concern about Indian car imports in good faith," Khetan said.