Textile, Spinning mills seek measures to protect their business

Kathmandu, July 24: Textile and spinning mills have warned that the industry, which they termed as ‘sick’, would slowly die if the government failed to implement measures to provide bigger protection to the business with tighter Value Added Tax (VAT) regime and curb illegal imports of textile.

In that case, more than Rs. 20 billion investment in the spinning and Rs. 7 billion in textile industries, and 250,000 employees in those sectors will be affected.

They said that they weren’t asking for exclusive protection of their business but a level playing field. Therefore, we have asked the government to hike the customs duty on textile and readymade garment imports and provide subsidy on technology transfer.

Nepal charges 15 per cent customs duty on textiles and 5 per cent on yarn imports, which, according to the entrepreneurs, should be raised to 35 per cent immediately.

A kilo of cloth is imported at US $1 to $1.25 from China and $1 - $1.5 from Bangladesh, with false declaration while Nepali products come at a much higher price.

President of Nepal Textile Association (NTA) Jitendra Lohia said that the knitted fabric costs about $4 per kilo and woven fabric $6 per kg.

 “In such a scenario, even if you impose a 15 per cent duty on such imports, it wouldn’t have significant impact on the business. Therefore, the government should check the wrong declaration, smuggling of cloth and implement the Value Added Tax (VAT) on finished goods with higher rigour,” said Pawan Golyan, president of Yarn Manufacturer’s Association (YMA).

The demanded customs duty and VAT combined would mean 50 per cent revenue to the government.

He said that Bangladesh had refused reciprocity in allowing Nepali yarn against its garment export to Nepal and urged the government to rethink about importing Bangladeshi products.

“If all cloth comes through a valid channel, that would be a major relief to the domestic yarn and textile industries,” said Golyan.

Textile value addition

Product	Value Addition
Yarn	40-50 %
Dye	60 %
Textile	80 %
Garment	200-300%
Overall	up to 500%

Source: YMA and NTA

The businessmen expressed discontent over the government measure to lump the manufacturing industries with the mobile and edible oil imports while annulling the VAT return facility.

“It was a bad decision on the part of the government, which has created more challenges to the labour-intensive industries. We were getting 70 per cent VAT back, and the country was earning 30 per cent of the VAT anyway,” said Lohia.

The spinning and textile mills can generate employment for 500,000 people in the next five years if there is a favourable environment, said Shashi Kanta Agrawal, executive member of Reliance Spinning Mill Limited, the largest yarn industry and the largest employer in the country.

He suggested that the government revise the valuation of textile import from kilo to metre.

Entrepreneurs demanded the government implement its directives to purchase domestic goods even if they are expensive by 10 per cent. The government made the decision to increase the consumption of domestic goods in 2013, but it has not been executed yet.

Revenue Secretary Sishir Kumar Dhungana said that the government was serious about the demands of the textile industries.

“A special team will be formed within a couple of days to analyse the status and challenges of the sector. The government will hold discussion with the business community and will devise effective measures to support them,” he said.

He also said that the government was positive to improve border management, and the security agencies have already been directed towards this end.

Published in The Rising Nepal daily on 25 July 2018.