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India-Nepal Rail Services Agreement (RSA)


Rail Transportation between India & Nepal got a major boost as authorization to all cargo train operators to utilize the Indian railway network to carry all containers bound for Nepal came into force with the signing of a Letter of Exchange (LoE) to the India-Nepal Rail Services Agreement (RSA) 2004.


GS-II: International Relations (India’s Neighbors, Foreign policies and Agreements affecting India’s Relations)

Dimensions of the Article:

  1. About the Rail Services Agreement (RSA), 2004
  2. About the 2021 Letter of Exchange (LoE) on RSA
  3. India – Nepal relations
  4. Tensions in India-Nepal relations

About the Rail Services Agreement (RSA), 2004

  • The Rail Services Agreement was executed in 2004 between the Ministry of Railways, Government of India and the Ministry of Commerce, the Govt. of Nepal for introduction of freight train services between these two countries to and from Birgunj (Nepal) via Raxaul (India).
  • The Agreement shall be reviewed every five years and may be modified (through Letters of Exchange) by the Contracting Parties by mutual consent.
  • LoE’s in the past: Second LoE was signed in 2008 at the time of introduction of bilateral cargo between the two countries which required introduction of new customs procedures.
  • Third LoE was signed in 2016 enabling rail transit traffic to/from Visakhapatnam Port in addition to existing provision of rail transportation through Kolkata/Haldia Port.

About the 2021 Letter of Exchange (LoE) on RSA

  • The latest LoE will allow all authorized cargo train operators to utilize the Indian railway network to carry Nepal’s container and other freight – both bilateral between Indian and Nepal or third country from Indian ports to Nepal.
  • The authorized cargo train operators include public and private container trains Operators, automobile freight train operators, special freight train operators or any other operator authorized by Indian Railways.
  • This liberalization will allow market forces (such as consumers and buyers) to come up in the rail freight segment in Nepal, and is likely to increase efficiency and cost- competitiveness, eventually benefiting the Nepalese consumer.
  • The liberalisation will particularly reduce transportation costs for automobiles and certain other products whose carriage takes place in special wagons and will boost rail cargo movement between the two countries.

India – Nepal relations

  • Nepal is an important neighbour of India and occupies special significance in its foreign policy because of the geographic, historical, cultural and economic linkages/ties that span centuries.
  • Both countries initiated their relationship with the 1950 Indo-Nepal Treaty of Peace and Friendship and accompanying secret letters that defined security relations between the two countries, and an agreement governing both bilateral trade and trade transiting Indian territory.
  • India and Nepal share similar ties in terms of Hinduism and Buddhism with Buddha’s birthplace Lumbini located in present day Nepal.
  • The two countries not only share an open border and unhindered movement of people, but they also have close bonds through marriages and familial ties, popularly known as Roti-Beti ka Rishta.

Tensions in India-Nepal relations

  • India’s Neighbourhood First Policy in connection with Nepal started with a highly successful visit to Nepal in August 2014. But the relationship turned sour in 2015 when India first got blamed for interfering in the Constitution-drafting in Nepal and then for an “unofficial blockade” that generated widespread resentment against the country.
  • India has ignored the changing political narrative in Nepal for far too long.
  • India remained content that its interests were safeguarded by quiet diplomacy even when Nepali leaders publicly adopted anti-Indian postures. This has also led to distortions in Nepali history textbooks and led to long-term negative consequences.
  • In 2017, Nepal signed up to China’s Belt and Road Initiative (BRI), which sought to create highways, airports and other infrastructure in the country. BRI was rejected by India and this move of Nepal was seen as an inclination towards China.
  • Recently, India and Nepal had border disputes over Kalapani – Limpiyadhura – Lipulekh trijunction between India-Nepal and China and Susta area (West Champaran district, Bihar).

-Source: The Hindu

February 2024