India, Nepal said in dispute over payments for arms
Arun Sen
Feb. 15, 2006

The relationship between the two countries going south fast.

According to media reports, India is refusing to release about 2bn rupees in duty refund procedures (DRP) dues "citing Nepal's failure to clear its arms purchase dues".

A high-level government official, on condition of anonymity, revealed that Indian officials dropped hints during the last visit to India by a Nepali delegation that it may not release the DPR refund unless Nepal clears its arms purchase dues. During unofficial conversations, Indian officials also told the delegation that Indian military hardware manufacturers have been pressing the Indian government to arrange earlier settlement of outstanding dues. India has not released any DRP refund since last July. Till July the refunds came every month. India hasn''t given any reasons officially. When contacted, Jawed Ashraf, commerce counsellor at the Indian embassy in Kathmandu, said "it is under process" but declined to comment further. Outstanding DRP dues from excise duty slapped by the Indian government on goods exported to Nepal are about 2bn rupees, according to sources. The Indian side has claimed that Nepal owes 1.7bn rupees for the supply of weapons and military equipment. But Finance Ministry officials dispute the Indian claim and say the amount owed to India is not more than 500m rupees. India supplied arms, ammunition and military equipment worth over 7.2bn rupees to Nepal between 2003 and 2005. As per a bilateral understanding, Nepal pays only 30 per cent of value for the military supplies, the remaining 70 per cent being in the form of grant.

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