Kathmandu, July 1: Every year about 800 million metres cloth are imported
illegally from China and India into Nepal, which has had a multitude of
negative impacts on the domestic textile industry, employment and revenue,
according to a recent estimate of the Nepal Textile Association (NTA).
This is the 80 per cent of the total requirement of the country. The
country needs about 1billion metres of cloth for body wear and other commercial
purposes.
About 80 per cent is used to make clothes while the rest is used to
create commercial products like curtains, cushions, bags and other items.
Of the total cloth requirement, about 70 million metres are produced in
Nepal, and about 130 million metres are imported via various customs points. It
shows that only 200 million metres of cloth are legally produced or imported in
Nepal.
“Therefore, there is a huge disparity between the total need of cloth
and supply. It’s dis-heartening to see almost four-fifths of the fabrics being
traded illegally,” said Shailendra Lal Pradhan, president of the NTA.
A report prepared by the association mentions that the per capita cloth
demand per annum is about 30 metres. This estimate was made on the basis of an Indian
study conducted in 2012, which said that an average Indian needed about 25
metres of cloth per annum, and there was an increment by 5 per cent every year.
We have put the statistics at 30 metres per capita per year on the basis
of the Indian study since our environment, socio-cultural status and climatic
conditions match our southern neighbour, said Pradhan while interacting with
journalists in Lalitpur on Sunday.
The illegally imported cloth has snatched away thousands of jobs, a
large market share and billions of rupees inrevenue, said the association.
Economy suffers
“Not only are the manufacturers affected by the illegal trade in
textiles and clothes, the government is also losing an important share of
revenue. This manufacturing sector has a great potential to contribute to the
Gross Domestic Product (GDP) of the country, if the government curbed the
illegal import of cloth,” said vice president of the NTA, Jitendra Lohiya.
He urged the government to create a conducive environment and a better
tax regime for the textile sector.
According to him, though the textile industryhad repeatedly urged the
government to control the illegal trade, facilitate in technology transfer, and
reconsider the tax rates, including the Value Added Tax (VAT) rate, the
government has always turned a deaf ear to their demands.
India has only 5 per cent VAT on textile while we are paying 15 per cent
in Nepal, he said.
“The government does not have any statistics about textile production,
import and demand in Nepal. Therefore, it should establish a textile unit at
the Ministry of Industry, Commerce and Supplies and create a relevant database
of the industry,” reads the report prepared by the NTA.
The textile manufacturers have urged the government to review its
decision to annul the VAT return facility, which was made through the budget of
the coming fiscal year 2018/19.
Till now, the manufacturers were getting 70 per cent VAT refunds.
Recurrent problem
The problem faced by the textile manufacturing industry is not new, a
government report about a decade and a half ago had concluded that the textile
industry in Nepal faced severe market problems due to the unrestricted
availability of cheap smuggled fabrics.
According to a report submitted to the World Trade Organisation (WTO)
and prepared by the Ministry of Industry, commerce and Supplies, United Nations
Development Fund and United Nations Conference on Trade and Development
(UNCTAD) in 2002, the textile industry in Nepal faced problems due to cheap
smuggled fabrics mainly from Tibet/China.
“Due to the decreasing market share, 60 per cent of the textile mills
have closed down, and the remaining mills are operating at 30 per cent
capacity,” reads the report.
Production of textiles in FY 2000/2001 was 20 million metres, enough to
meet only 5.7 per cent of domestic demand, and the country imported about 47.6
million metres, 13.6 per cent of the demand.
“And it is assumed that the balance in the demand for textiles is
supplied by smuggling. If the same situation continues unabated, the survival
of the textile industry will be extremely difficult,” concludes the report.
Published in The Rising Nepal daily on 2 July 2018.
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