Figure 23. Extent that high cost of transportation hinders business growth in the three provinces

5.1 High cost of transportation

The high cost of transportation was most felt by respondents in Karnali followed by Lumbini. It was also among the top constraints faced by women.

Figure 23. Extent that high cost of transportation hinders business growth in the three provinces

This barrier was attributed to the following factors:

● Inadequate transport facilities and infrastructure. Owing to its challenging topography, transport infrastructure in Karnali is limited both in terms of coverage and quantity. People in remote areas rely on mule tracks and trails to transport goods. Consequently, transportation cost in Karnali is very expensive. Lumbini has also inadequate transportation facilities and roads especially in remote areas.

Province 2 has relatively better transport infrastructure compared to other provinces. It has functional air, rail, and road transportation facilities which cater to passenger and freight transport within the province and neighbouring Bagmati and Karnali as well as to India via the southern border. There is also an ongoing bilateral negotiation with India, which may soon enable Province 2 via the Koshi River to access Indian waterways at Sahibgunj (Jharkhanda) ultimately connecting

Haldia seaport in Kolkata (PPPC 2020). The planned water transport can significantly decrease the cost of freight transport, which will benefit the import and export of raw materials, intermediates, and finished products which are extensively consumed and produced in Province 2 (PPPC 2020). ● Monopoly of the cargo service by a few of truck operators. The cartel sets the price and does not allow new operators to enter the market. Government has initiated actions to dismantle the cartel but it seems that during the recent months the truck operators have banded together and unilaterally increased the fares. ● No cargo consolidation services. Indian seaports do not have less than container load shipment services. ● Poor operationalization of the direct trans-shipment system. The Direct Transhipment Model (DTM) was meant to alleviate the hassles, clearance procedures and hidden costs that Nepali traders faced while bringing goods from Indian ports. Nepali importers had hoped that this mechanism would be more efficient than the previous Customs Transit Declaration (CTD) and would save time and resources when bringing goods from Kolkata Port to Birgunj. But instead, the mechanism, put into practice from 3 February 2019, has increased the cost of transporting a single cargo container by up to 50 percent. It is alleged that increase in costs in the transit and transportation of goods is because of the vested interests of a few shipping companies and the business syndication by them (Khanal 2020).