The Hindu Business Line : Second round of trading at Nathu La — Will it set the cash register ringing?

THE VOLUME OF trade at Nathu La in the first phase showed a significant rise despite bottlenecks. But if the full potential is to be unleashed, the impediments must be removed.

On September 30, 2006, the first phase of trade through Nathu La,which began on July 6, 2006, was closed for the year. The initial euphoria surrounding the resumption of trade notwithstanding, it had produced mixed results and also exposed a number of loopholes and bottlenecks in the system.

Given the hype and the historic significance of the trading links with Tibet, the expectations were high. It was also a learning period for Sikkim's traders, some of whom were first timers into international trade, albeit on a small scale. In fact the District Collector's office at Gangtok had issued more than 500 trade permits through Nathu La last year.

The volume of trade at Nathu La in the first phase did show a small but significant rise at the end of the trading period despite the various bottlenecks and undue restrictions in the beginning. "In the last two weeks ending August 31, 2006, we registered a small rise in the volume of trading at Nathu La. And this is an encouraging trend," said Mr S. K. Sarda, President, Sikkim Chamber of Commerce.

Impediments Galore

This was a significant movement because no actual trading had taken place during the first month due to a number of impediments. The first hurdle was the Import-Export Code that was required for to be followed by the traders. When the trading began, it was stated that traders have to follow the Code. And for that one had to furnish one's personal account number (PAN), which is not issued to the Sikkimese as no Central direct taxes are imposed in the State. Consequently, with no Code, trading was stalled.

The Sikkim Chamber of Commerce (SCC) approached both the State and the Central Governments on the issue of Code clearance and after much persuasion the Centre decided to temporarily waive the Code requirement for trade through Nathu La; this took nearly a month. In fact, trade was stalled for 21 days over the Code issue.

But the traders were in for another shock. The Finance Ministry had initially imposed a restriction on trading of $500 (Rs 25,000) per trader per day. It soon became clear that this limit was too low. This proved to be another major constraint because trading through Nathu La is by no means cheap. Just the cost of daily transportation is significant. For small traders like Chimi R. Bhutia, a first-time trader, travelling to Nathu La daily, threw his budgetout of shape. In the absence of a daily transport service to Nathu La, traders were shelling out nearly Rs 2000 per day for hiring vehicles from Gangtok to Nathu La and from there to Renqinggang, the Chinese mart in the Tibet Autonomous Region (TAR). "Traders are allowed to take their vehicles to Renqinggang but the road leading to the Chinese mart is still under construction and can be negotiated only by a four-wheel drive. The logical option is to hire one of the vehicles pressed into service by the Chinese government to ferry Indian traders, which costs Rs 500 one way," says Mr Bhutia. The only solution to this problem would be a bus service to Nathu La by the State Government.

Nothing to trade

Anyway on reaching Renqinggang traders find hardly anything to buy or sell. That is because the current list of items for import-export is virtually redundant and based on trading that took place 44 years ago. "Yak skin and tail, sheep and horses were items traded more than four decades ago. They may have nostalgic value but do not make business sense today. There is no demand for most of the items listed for import," said a trader.

"There is an urgent need to review and amend the import-export list keeping in mind the needs of the present age and trade advantages," Mr Sarda said. The low volume of trade had prompted Beijing to ask New Delhi to review the list of items for import through Nathu La. While one report suggested that the trade through Nathu La is currently worth about $12,500 a week, Chinese traders did business worth only about $1,600 in the first two months.

Another major hurdle for traders is the limitation on the period of stay at the Chinese mart. Traders are allowed to enter TAR from Nathu La at 7-30 a.m.and are expected to return by 3-30 p.m. the same day. "It is impractical and certainly unrealistic to expect traders to wrap up business in just a few hours and return. Just to get to Renqinggang from Gangtok takes more than three hours. Also, the road condition during monsoon increases the travel time considerably. We have hardly two hours to interact with the traders and strike a deal," said Mr Bhutia.

The Renqinggang trade mart had excellent facilities for Indian traders including boarding facilities. But Indian traders have not been able to use them so far. It is imperative that the timing restriction be lifted and traders be allowed to stay at the Chinese mart for at least two days. Further, Indians holding valid visas are not allowed to enter Tibet directly as of now. One has to fly to Beijing from where a special permit has to be obtained to enter Tibet.

For trading with China, even through Nathu La, it becomes became imperative to meet and interact with traders from mainland China as well. The traders at Renqinggang are small operators from nearby villages who take orders for big traders and wholesalers outside the TAR.

An Indian trader would have a better understanding of ground realities on prices, demand and quality if he could directly interact with retailers and wholesalers in the TAR and mainland China. And it would bring down travel costs and time if the Indian traders are allowed to enter the TAR directly from Nathu La itself.

Given all these constraints, it is no surprise that the Chinese traders are not too happy with the slow pace of business. "Despite the large number of locals issued travel permits, hardly two make it to Renqinggang in a single day from Monday to Thursday. This had resulted in a low morale for the Chinese traders," said a trader.

Brisk Business

The good news is that Indian traders did brisk business to the tune of about Rs 2 lakh in February dealing in such items as non-Basmati rice, cigarettes, blankets, copper products, dry-fruits, canned and processed food products, spices and pickles. "The first 15 blankets taken by a trader got sold the moment he reached Renqinggang," says Mr Sarda. Also, there is good demand for Sikkim-grown rice, cleaned and packed in one-kg packets. The various Central Government Ministries have responded positively to the demands of the local traders in streamlining the trading operations. "After the Code waiver, the Reserve Bank of India increased the trade limit from $500 to $10,000. We hope the trading limit would be increased to Rs 1 lakh per day per trader," he adds.

Traders from other States have started showing keen interest in the Nathu La trade. Trade delegations from other States have been coming to hold meetings with the SCC on the possibility of setting up manufacturing units in Sikkim for raw materials like wool and silk. ."I am keen to import wool and silk but I can make a good profit only if there are manufacturing units for these raw materials in Sikkim itself. Also, if the products are manufactured here, it will add good brand value to Sikkim," says Mr Bhutia .

De-bottlenecking, the key

"The various restrictions have proved to be detrimental to small traders so far. For big traders to enter the field, these bottlenecks have to be removed. Only then will trading happen in significant volumes. There is also the issue of right pricing. Traders on both sides are yet to finalise a standard price formula for goods. Once all these are in place, we can expect real business through Nathu La," Mr Sarda opines.

The SCC has been trying to draw the attention of the Centre to the various impediments that have "weakened the Nathu La trade." Among the various issues placed before the Centre are the review of the import-export item list; permission for Indian traders to stay at Renqinggang for at least two days; issuance of the Import-Export Code for Sikkim traders without PAN; lifting the restriction on trade limit of Rs 25,000 per day per trader; issuance of dollars to traders for trade purposes and improvement in the road connectivity, especially the National Highway 31A.

"Nathu La trade has great prospects for not only Sikkim or the North-East but for the entire country as well. This will translate into actual trade volume only when these impediments are removed," hopes Mr Sarda. The second phase of trading is scheduled to start from June.

(The author is a freelance writer based in Gangtok.)