Nepal’s logistics infrastructure is unreliable; problems compound due to the rugged, mountainous terrain. Movement through road or air network should be carefully planned particularly during the monsoon. In the World Bank’s 2018 Logistics performance index, Nepal with LPI score of 2.51 ranked 114 among 167 countries. The score is the fourth lowest among South Asian countries. LPI 2018 ranks countries on six core dimensions of trade – customs performance, infrastructure quality, ease of arranging shipments, logistics services quality, tracking and tracing ability and timeliness of shipments. Nepal falls lower to 123rd position with LPI score of 2.19 on indicator that assess countries performance on quality of trade and transport related infrastructure. Nepal being the landlocked country, the infrastructure within country (internal infrastructure) and along the corridors (international infrastructure) is pivotal.
(Source: LPI International Scorecard: Nepal)
Nepal has two railway lines in the country: the Raxaul–Sirsiya and the Jainagar–Janakpur. The former is operational; however, the latter is not operational currently.
Roads deteriorate in quality further away from the main arterial highways. Bad driving, frequent traffic jams, road blockages caused by landslides or bridge collapses, broken down vehicles, and fuel shortages mean that logistics plans must allow a wide margin of error.
Nepal’s Strategic Road Network (SRN), the main network of roads ensuring country-wide physical connectivity has consistently expanded over the years, adding an additional 1,987 kilometres of roads in the last 15 years, to stand at 6,979 km in total in 2017/18. The total proportion of lower-quality earthen roads also reduced over this period, most significantly among the mid-hill roads connecting once-isolated districts to the rest of the country. 6979 km is blacktopped, 2277 km is gravelled, and 4191 kms is earthen. SRN, featuring eight major north-south and three east-west corridors, assumes central role in reducing cost of logistics (including cost of imports and exports). Mahendra Highway, Postal highway and Pushpa Lal Highway traverse east to west of the country and Tribhuvan Highway, Araniko Highway, Mechi highway, Koshi Highway, Mahakali Highway, Prithivi Highway, Sagarmatha highway, Siddartha highway are the major highways from south to north. Besides being major mode of access for passengers and goods, it provides critical connection to India, the country’s largest trading partner and principal conduit for third-country trade, and China. Similarly, total length of Local Road Network (LRN) under the jurisdiction of local government is 50,943 km of which 1575 km is blacktopped, 14601 km are gravelled, and 34766 km are earthen. They provide rural access into the municipalities and wards.
(Source: Sector Overview: Road and Transport)
Domestic airports have an important role to connect people across the country and are heavily used in rural areas in times of distress when road connectivity is limited. Presently, the country has 26 domestic airports in operation, with the least number of airports (3) in Province 2 while Province 1 has the most at 12. Domestic cargo movement was estimated to be 3693 MT in 2018. The terrain and high altitude of some deliveries mean specialist advice is always necessary, particularly during the monsoon from June to September.
Most airports outside Kathmandu have no material handling equipment, re-fueling facilities, adequate firefighting capacity, and limited or no storage capacity.
Nepal has several purposely built warehouses (called “go-downs”) that are owned by government entities, such as Food Management and Trading Company (FMTC) and Salt Trading Corporation (STC). There’s a lack of third-party logistics support, and an inadequate number of storage facilities, especially in sub-national and sub-metropolitan areas.
Located between China in the north and India in the east, west and the south, Nepal’s trade competitiveness suffers from delays when passing through sea-ports in neighbouring countries, inefficiencies at land border crossings, and limitations on routes for transit cargo. Lack of efficient transit increases the costs of transportation and logistics, pushing up the prices of imported, essential, and nonessential consumer goods, as well as the prices of inputs.
Nepal shares 1,800 km long border and 22 border points with India, placing India as most important trading partner as well as transit for third country trade. Visakhapatnam Port in Andhra Pradesh and Port of Kolkata in Kolkata are the two seaports from where Nepal brings in or sends goods to third countries. India accounts for over two-third of Nepal’s merchandise trade and almost 100% of petroleum supplies among others.
The sea port of Kolkota* is the main entry point for international cargo imported to Nepal. The Kolkata Port Trust (KoPT) manages two separate dock agglomerations: Kolkata Dock System (KDS) in the centre of Kolkota and Haldia Dock Complex (HDC) located 80 km South of KDS on the Haldia river, closer to the Bay of Bengal. The main cargo handled at HDC is petroleum, chemicals, coal, iron ore and steel, while KDS is the main port for containers, coal and fly ash. Birgunj Inland Container Depot (ICD) at Sirsiya is 924 kms away from KDS port; 2-3 days by cargo vehicle. Containers can be transported by Indian Railways which must wait until a full train of 90 container wagons is collected before dispatch, which takes three days to reach Birgunj. During dry season November to February, access to Port of Kolkata is limited due to low draft in the access river, leading to increased waiting times at the port.
Visakhapatnam port in Andhra Pradesh, one of 12 major ports in India, is located 1,436 kms away from Nepal. The port is expected to facilitate Nepal’s third-country trade, as a deep-water port, where deep-water cargo vessels can be docked. Visakhapatnam with its bigger capacity could reduce shipping cost by sea by avoiding this step, but it adds transport costs and time overland to Nepal due to its longer distance to Nepal. Transport by rail from Visakhapatnam port to Birgunj takes approximately 10 days, while transport by truck will take around 12 days.
Trade with China through border points in the North has increased but still is significantly lower compared to trade with India. The Araniko Highway which is part of Asian Highway (AH42) is only road link between China and Nepal. Nepal signed the Transit Transport Agreement (TTA) with China to boost trade through northern Border. (Source: Project Information Document, Asian Development Bank) As part of the TTA Nepal was granted access to four Chinese seaports at Tianjin, Shenzhen, Lianyungang and Zhanjiang and three dry ports at Lanzhou, Lhasa, and Xigatse. (Source: Ports Open for Nepal) However, since the closest Chinese port is 4,250 km overland distance from Kathmandu, this is not recommended as alternative to importing sea cargo via Kolkota, India.