NEPAL-INDIA TRANSIT TREATY EXTENDED FOR SEVEN YEARS

C O N F I D E N T I A L KATHMANDU 000869 SIPDIS SIPDIS DEPT FOR SCA/INS NSC FOR RICHELSOPH E.O. 12958: DECL: 03/31/2016 TAGS: ECON ETRD EINV BEXP ELTN IN NP SUBJECT: NEPAL-INDIA TRANSIT TREATY EXTENDED FOR SEVEN YEARS REF: KATHMANDU 267 Classified By: Ambassador James F. Moriarty. Reasons 1.4 (b/d). NEPAL-INDIA TRANSIT TREATY EXTENDED FOR SEVEN YEARS -------------- -------------- ¶1. (C) India and Nepal extended on March 30 their bilateral transit treaty for seven years, until January 5, 2013. In early January 2006, Indian and Nepali delegations had failed to agree on treaty extension criteria and the treaty was extended only three months until April 6 (reftel). Thus, time had been running out. In a March 31 conversation with Emboff, Naindra Upadhyaya, Joint Secretary of the Ministry of Industry, Commerce, and Supplies, explained that the only new feature to the treaty was that the movement of sensitive goods would be limited to seven transit points on the Indo-Nepal border to prevent smuggling. Currently, shipments of sensitive bulk items from India, such as fertilizers, got siphoned off and were smuggled and sold in Nepal at a loss to the Indian exporter. The treaty will limit the movement of sensitive goods to the seven transit points that have the best security and customs facilities in an effort to eliminate smuggling. ¶2. (C) The Joint Secretary noted that the treaty provided for 15 transit points for all non-sensitive goods as the previous treaty had. In January, Government of India (GOI) negotiators had requested His Majesty's Government of Nepal's (HMGN) justification of the need for 15 transit points. Upadhyaya noted that as HMGN had not requested a change in the number of transit points, HMGN negotiators ultimately did not have to provide any rationalization for the use of the 15 transit points. Indian Deputy Chief of Mission V.P. Haran explained to A/DCM that Nepal had not disputed that only 9 of the 15 points were actually being used, but had asked that the number not be reduced as this would send an undesirable political signal. The GOI, Haran said, had agreed to this out of regards for HMGN "political sensitivities." Haran also explained to A/DCM that Nepal had agreed to GOI requests to allow shipment of goods from one point in India to another, via Nepal, in reciprocation for a similar long-standing provision allowing Nepal to do the same, and to incorporate an existing rail services agreement into the transit treaty, both minor sticking points that had been unresolved in the January negotiations. UNITED TELECOM BENEFITED FROM TRADE TREATY DELAY -------------- --- ¶3. (C) In January there were news reports that India delayed treaty renewal due to HMGN discrimination against the Indo-Nepal joint-venture United Telecom (UTL) and Indian desires for a change in Nepali employment regulations to allow Indians to work in Nepal without limits. Since the January 5 three-month extension, HMGN granted permission to UTL to provide cell-phone service in Nepal. An HMGN source said there was "tremendous pressure" from the GOI to grant UTL permission to provide cell-phone service and that it had been linked to the transit treaty. UTL representatives told Emboff that UTL had launched cell-phone service in Nepal on March 25, but had no comment on the HMGN approval that finally allowed UTL to become a legitimate competitor in Nepal's wireless telecommunication market. INCREASE IN BORDER GUARDS LIKELY NOT RELATED TO TREATY -------------- -------------- ¶4. (C) Haran confirmed news reports that India intended to more than double the number of special border guard units on its side of the Indo-Nepal border. While Haran provided no further details, he noted that pressure in the Indian parliament had been building for some time to increase security along the lengthy India-Nepal border. The increase is likely to guard against Indian Maoists/Naxalites from moving across the Nepal border or from perhaps preventing Nepali insurgents from seeking refuge in India. COMMENT -------------- ¶5. (C) The renewal of the transit treaty is a welcome development and, in Nepali minds at least, eliminates the GOI's ability to use failure to renew the treaty as a threat to shut down the Indo-Nepal border. The three-month renewal delay in itself, however, has already served as a reminder to HMGN of how much Nepal depends on India. MORIARTY