India to settle DRP dues by March 2013

A month after terminating long-practiced duty-refund procedures (DRP), Nepal and India have agreed to close down all accounts and settle outstanding dues related with DRP by March 2013.
During the bilateral talk, which was led by Director General of Customs Department of the two countries, the two sides have decided to form a technical committee to ascertain and quantify the amount (of unpaid excise duty in bilateral trade) that India needs to refund to Nepal.
The talks were held earlier this week in Kathmandu on formally closing the DRP. Laxman Aryal, deputy director general of the Department of Customs (DoC) told Republica that the technical committee will be formed after having a letter of exchange between two countries.
"Its primary responsibility will be to calculate out the total outstanding duty amount that Nepal is yet to get from India," said Aryal, adding that the committee was being formed mainly to avoid any mismatch of refundable amount.
The committee will have representatives from Customs Department and Ministry of Finance from both the countries. "However, we have not yet finalized who exactly will be in the committee," said Aryal.
Nepal and India had put DRP mechanism in place in 1961 to facilitate import of excisable items from India. Under this mechanism, Nepali customs allowed Indian goods without charging any excise duty, and later claimed the due duty from the Indian government. The volume of claim depended on the basis of import volume and valuation.
But the two sides had agreed to scrap the mechanism while singing bilateral trade treaty in 2009 and terminated it on March 1 this year. The new arrangement has enabled Nepali importers to acquire the goods without paying any duty to the Indian government. It has also empowered the local customs to collect excise duty on all applicable Indian goods at import point.
Officials at DoC said India has not made any DRP refund to Nepal over the last two years. Given that the government used to get some Rs 3 billion in duty refund from India every year, they estimated that the outstanding DRP amount stands at well over Rs 6 billion.

Two importers get supply against IC

After nine-day deadlock, when imports of excisable goods from India came to a grinding halt, some of the Indian traders have started exporting goods to Nepal against Indian Currency (IC).

Two Nepali importers, including United Spirits, finally received their respective consignments, one from Bhairawaha and another from Biratnagar customs, on Friday, said Pashupati Murarka, vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

However, he said the Indian exporters dispatched consignments only after the importers pledged collateral (of additional payment). “They have promised to refund the collateral as soon as the confusion is cleared,” said Murarka.

FNCCI officials said they have no clue as to what led the two companies to supply goods against IC payment. “But we hope other exporters will resume normal exports against IC soon,” said Murarka, adding that most of the factories, which depend on imported raw materials from India are on the verge of closure due to shortage of necessary materials.

The import of excisable items have come to a halt particularly after Indian exporters laid new condition of payment since March 1, when duty-refund procedure (DRP) was scrapped.

Scrapping of DRP paved the way for Nepali traders to receive goods at ex-factory rate (devoid of excise duty) and government to collect excise duty at customs points, but Indian exporters said Nepali importers should make payment in US Dollar if they are to get supply on ex-factory rates.

“If paid in IC, our (Indian) government considers the supply as local sales, and seeks us to pay excise,” they had argued.

Importers could not oblige though as Nepal Rastra Bank has opened USD payment facility for about 250 items only. If they accepted exporters´ condition (while paying in IC), they were required to pay excise twice -- in India as well as in Nepal.

The confusion, meanwhile, has brought imports of industrial raw materials and other goods on which excise duty is applicable like cement, clinker, textiles and vehicles, among others, to a grinding halt.

Talking to Republica, he disclosed that a delegation of FNCCI had recently approached the Indian Embassy in Kathmandu to settle their problem. “The Indian officials conveyed us that India has neither changed payment terms nor should we deal in USD,” said Murarka.

An official of the Embassy said, Indian Ambassador to Nepal Jayant Prasad too has communicated to the Indian Ministry of Finance conveying concerns of Nepali importers. But he did not disclose how the ministry responded.

Ministry of Commerce and Supplies (MoCS) on Wednesday formally approached his Indian counterpart to clarify why Indian exporters have not been trading against IC. However, the Indian ministry is yet to respond.