Modern supply chain does not merely include the inter-modal transfer of goods but also extends to buying of raw material, packaging, warehousing, operating transport fleets, repairing things, collecting payments and so on.

depot It was the midday of July 16, 2004, people from around Sirsiya and business persons from Birgunj thronged in the premises of the inland clearance depot in Birgunj to welcome the arrival of the first cargo train in the only rail connected Inland Container Depot (ICD) in Nepal . It was a long awaited day in the Nepali trade history, as there were a lot of speculations and suspicion raised from different quarters on the development of such facilities without certainties of the proper rail movement arrangement with the Indian Railways. However, it was made possible with a long and strenuous effort of bilateral negotiation and constant persuasion of concluding rail service agreement (RSA) between the two countries. The conclusion of the RSA also reflected the resolve of Nepal and India to promote bilateral economic cooperation through developing complementarities in trade and investment.

The development and operation of ICD is a step forward in the direction of globalising trade and benefit out of it. All countries around the world are in the process of making their export competitive and the import less expensive by drastically reducing the inventory cost. Efficiency in logistics management is a prerequisite in synchronising the world of commerce as it has gone beyond the limits of simply delivering the traded goods. Firms are outsourcing their operation to subcontractors, moving production and services to the lower cost countries, using information and communication technology, modern fleet and upgraded vehicles in transport operation in course of improving the logistics in transport and delivery of traded goods and services. The task of logistics is thus becoming more complex over time as it involves the coordination and streamlining of transport by road, rail, sea and the air and use of information technology in such operations. The complexity of logistics has given rise to the concept of supply chain management which intends to bring efficiency in overall trade transaction by adopting a proper strategy and re-engineering the process of doing trade.

The scope of supply chains is becoming more inclusive as time passes. Modern supply chain does not merely include the inter-modal transfer of goods but also extends to buying of raw material, packaging, warehousing, operating transport fleets, repairing things, collecting payments and so on. Moreover, this has taken the shape of extended business with a wider coverage of services with meaningful value addition to the use of existing facilities. Today, an ICD operator does not satisfy himself only by collecting the container handling and warehousing charges but also seeks the opportunities of providing full logistics services such as purchase of raw material for the industries, packaging and repackaging, labeling, cleaning and fumigation of empty containers, and even manufacturing of products in small scale. A good supply chain contributes to maintaining a lean inventory by the production units so that cost of production are cut and the firms become more competitive in the international markets.

Nepal as a land locked country is facing the inherent disadvantage of high cost economy associated with the transit transportation cost. A survey has shown that Nepali goods are higher in prices by 10 to 15 per cent in comparison to other South Asian countries due to the costs associated with transit transport. The transit cost adds to the handling and warehousing charges in the port, slow and inefficient land transportation, complex documents and procedures associated with customs clearances at gateway port and land customs stations. This corroborates the need of an efficient supply chain along with the reduction in the transit transport cost in order to promote the competitive edge of Nepali products in the international markets. The strategic plan of product specific supply chain would be required in promoting the export sector which may need investment in basic infrastructures and re-engineering of the processes to achieve competitive advantage and become more responsive to the customer demand.

The ICD or the dry port has remained a common user facility in providing services to various commodities of export and import. Simply the development and operation of such a facility does not bring any substantial benefit unless it is connected with the supply chain of commodities. To achieve this, the first effort has to make Nepal a source country for supplying important parts or the intermediary products of high value manufactures located elsewhere in the region, secondly the installation of production units of selected export products need to be bought near the dry port area. Thirdly there is need of developing adequate infrastructures like road, railways inside the country with a view to modernise the fleet of transport, and fourthly, the institutional and legal base has to be created for promoting the use of containerised traffic.

We see that the container shipping industry is booming as the boxes are found to be the most efficient way of transferring the goods from one place to another. Giant container ports are being developed in various coastal countries along with the provision of rapid loading equipments like reach stackers, rail mounted gantries and rubber tyre gantries with automation of terminal operation. Container ships are being made bigger to carry more boxes in a single journey. This has resulted in tremendous improvement in the world container throughput, reaching 400 million in 2005 from 100 million TEU in 1990. Trucking business is also being consolidated for more integrated and specialised services. Fast track railway lines are being developed in order to meet the just-in-time delivery of the traded goods. Freight forwarders are being organised to provide the complete logistics services. Application of information technology is widely proliferating in handling the cargo business at customs points, ports and with the related entities of cargo transfer namely; exporters, importers, bankers, insurers, transporter, freight forwarders and the shipping lines.

While talking about the cargo business in Nepal , we should not lose sight of the deficiency in the legal regime in course of integrating the logistics business with the international cargo movement. Currently, there is no liability regime for the truckers and railways as a carrier for moving cargo from one place to another and the provision on the insurance act are not adequate to cover the liability created for cross border movement of goods. Multimodalism in transport is becoming popular in the international cargo transfer business as the multi-modal operators are entitled to take up the liability of cargo under single liability cover of the multi-modal transport document. The absence of requisite legal bases is hindering the Nepali cargo businesses to grow in a healthy way and become multimodal transport operators.

There is need of enhancing the capacity of freight forwarders in Nepal in order for them to be able to compete in the international freight forwarding business and get a share in logistics operation. This would require an increased technical and financial capacity to manage the business and properly take up the liability of door to door transfer of goods and services in trade. The freight forwarders would need to be better organised with consolidation and merger to achieve the economies of scale and take up the full responsibilities of the international movement of cargo.

Increasing value added services in the existing dry port in Nepal is another challenge for bringing efficiency in trade. The facility created with huge investment should not be merely confined to warehousing and cargo stripping and handling. Rather a number of additional services may be provided by using the existing facilities. This may, among others, include packaging and labelling of goods, import of raw material for carpet and garment manufacturing, extension of the cargo handling facility to accommodate liquid cargo, container cleaning and the setting up of small manufacturing units for high value items like jewelry and ornaments. Creation of manufacturing base like special economic zone for specific product in the vicinity of the dry port would benefit the export sector of Nepal to a greater extent. The rail connected dry port may be developed as an export facilitation centre in the true sense where manufacturing units may find added advantage by moving closer to it. Birgunj may be developed as the logistics city with the development of allied services of trade and transport.

(Ojha is Joint Secretary in the Office of Prime Minister and the Council of Ministers)

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