Dilip Pandut, 35, a resident of Raxaul, Bihar was arrested along with four others, police here said.
Police have also seized 472 kg of raw materials and precursor chemical that are used in manufacturing Pseudoephedrine, a highly sophisticated narcotic drug that has a high demand in Asian markets including, India, China, Thailand and Malaysia.
These raw materials are sufficient to manufacture 71 kgs of Pseudoephedrine worth about USD 12 million, said Jaya Bahadur Chand, Deputy Inspector General of Police at the Narcotic Control Bureau of Nepal Police.
These drug-making raw materials were being trafficked in disguise of medicines. However, the police busted the racket on the basis of a tip-off.
The five arrestees have been taken into custody on five-day judicial remand from Kathmandu District Court for further investigation.