Unrecorded textile market worth Rs. 313b exists in country

Kathmandu, May 9: Textile industries have raised question over the government's indifference to the unrecorded import and trading of textile and garments of about Rs. 313 billion.

The Nepal Textile Association (NTA) on Wednesday claimed that the cloth business of that size – about 90 per cent of the total demand - was never recorded in government accounts.

According to the statistics of the Department of Customs, Nepal imported cloth worth Rs. 29.10 billion in 2017/18. With the customs duty and Value Added Tax (VAT) of about Rs. 8.60 billion the size of imports reaches Rs. 37.70 billion while the domestic production is worth Rs. 7 billion.

The government records show that the total consumption of cloth was of about Rs. 42.38 billion in 2018.

If the consumption is calculated with the population of the country, per capita cloth consumption is of Rs. 1,437 which is negligible against Indian use which stood at Rs. 8,103 in 2018.

"When we import cloth to Nepal, we have to bear about 35 per cent additional cost in customs charges, transportation and VAT payment which means Nepal's per capita cloth use should be Rs. 12,019 per annum," said Vice-President of NTA Jitendra Lohia while interacting with the journalists.

If the per capita consumption is of Rs. 12,019, the total use of cloth stands at Rs. 355 billion a year. So, the NTA has concluded that more than Rs. 313 billion's cloth is entering the country illegally or from the bordering markets across the Nepal-India border in the south.

"In such situation how can we run our industries? We are fighting with the illegally imported cheap cloth and low-price markets across the border," said Shailendra Lal Pradhan, President of the NTA.

The association has long been putting pressure on the government to check the illegal import of cloth, increase the monitoring at the border, and implement multi-VAT system.

Pradhan said that many small industries were closed as they couldn't fight with the illegally imported cheap cloth, and textile production has come down to 70 million metre a year from 120 million metres some years ago.

The NTA has asked the government to implement the multi-VAT system and announce additional facilities for them through the budget of the coming fiscal year 2019/20.

"A small support from the government can raise the size of Nepali textile industry so that it could meet 20 per cent of domestic demand in five years. Currently the domestic production is only 2-3 per cent," said Lohia.

He said that the current government tax policy has helped the Indian markets like Jogbani, Raxaul and Nautunawa since the Nepali products were expensive due to high tax rates.

"We are wondering why the government had made only the local industries liable of VAT," said Lohia.

Published in The Rising Nepal daily on 10 May 2019.