BIRGUNJ - Six months after completion, Nepal's brand new Inland Container Depot outside this border town wears a forlorn look as monsoon rains batter the empty $29 million facility. The "dry port" will slash transport costs for Nepal's overseas exports and imports by nearly half since Indian railway wagons will unload containers directly inside Nepal. This would also obviate the hassles of trucking goods through India's notorious Bihar and West Bengal states.

But the dry port is in limbo because Nepal and India cannot agree on operating Indian railway wagons in the 5.4 km stretch from Raxaul to the terminal. "We would like to have the trains coming in from tomorrow, and expecting this delay we had sent our proposal for rail operation in February 2000," a commerce ministry official told us.

It took India until April 2001 to respond with a counter-proposal. Nepali officials were still "reviewing" the document this week, and it will be brought up when a bilateral trade committee meets in Kathmandu early next month. Indian officials say a Nepali response would be the place to begin discussions on the rail deadlock.

This looks like a case of a three-way clash of babudom in Kathmandu, New Delhi and the bordering Indian state of Bihar-as well as India's railway bureaucracy. Besides the railway agreement, there are other matters on the terminal still pending:

l Nepal wants simplified customs procedures to avoid holding up wagons at the border for "one time lock" inspection. India is said to want to check the locks in Raxaul, Nepali officials don't see why that is necessary.

An agreement on exchange of information for freight monitoring between the seaport and the dry port.

Nepal's parliament needs to approve three new laws on "Multi-Modal Transport" and the government has to select terminal operators through competitive bidding.

Nepal would like the railway services agreement to cover a revenue sharing arrangement between the terminal operator and the Indian Railways which would get captive business.

The delay in agreement is costing Nepal dearly. There is the lost saving on cargo transport to and from the sea, and the private terminal operator selection has also been delayed because the railway services agreement is not through. Delays are also hurting contracts of consultants for installing the freight information and automated customs data systems.

The Birgunj container terminal is spread over 35 hectares and is largest of three new border transport facilities built with a World Bank loan. The terminal is initially expecting ten trains a month and up to 16 when it runs at full capacity. Officially the ICD project ends on December 31.

Businessmen are pessimistic. Said one: "At today's pace, it could take until year-end for the first train to come." He blames both sides: New Delhi for using delays as a bargaining chip on larger trade issues, and Kathmandu for dragging its feet on responding to the Indian proposal.