Saturday, 29 January, 2022

Cash margin in LC affects import


By Our Correspondent
Bhairahawa, Jan. 14: Imports from Rupandehi's Belahiya checkpoint have declined by about 60 per cent. According to the Bhairahawa Customs Office (BCO), the decline in imports is due to the new provisions introduced by the Nepal Rastra Bank.
The NRB had issued a circular stating that 100 per cent cash margin should be maintained while opening a Letter of Credit (LC) for the import of 18 luxury items, and 50 per cent cash margin for two items.

This provision has resulted in the decline of import of luxury items, said Tirtha Raj Paswan, Information Officer of BCO. "Before the issuance of the NRB circular, 600-700 cargo vehicles used to pass the check point at Bhairahawa customs daily, but since the third week of December last year, the number has come down to 250 on an average," he said.

The NRB has issued a circular to the commercial and development banks to collect the prescribed margin percentage while opening LCs of goods under 20 different harmonic codes with effect from January 20. After that, imports from India and the third countries have decreased at all customs offices across the country, including Bhairahawa.
The BCO had set a daily target of Rs. 304.2 million revenue for mid-December 2021 to mid-January 2022 but current collection is around Rs. 60 million a day. Paswan said that prior to the introduction of new provision, the customs office had been collecting revenue up to Rs. 800 million daily.

As per the new provision set by the NRB, importers should maintain 100 per cent cash margin while opening LC for spices, chocolates, beverages, tobacco products, cosmetics, wood and furniture, footwear, slippers, hats, helmets, tiles, marble, granite, glassware, artificial jewelry and watches. Likewise, 50 per cent cash margin should be maintained for LC on motorcycles and scooters.
According to the BCO, import of electric cars, jeeps and vans has dropped by 97 per cent, chocolate by 80 per cent, wooden plank by 80 per cent, earthenware by 93 per cent, cement blocks by 95 per cent, photo frames by 100 per cent and jeep cars by 43 per cent in the last 15 days.

Entrepreneurs, on the other hand, have said that the current system has affected small entrepreneurs. They maintained that this system would block the capital by trapping money in advance as they are importing and selling goods from India and sending money after some time.
Anil Gyawali, president of the National Chamber of Commerce and Industry, Rupendehi, said that small entrepreneurs are more affected by the provision.

Earlier, the traders and industrialists had been importing goods by opening LCs with bank guarantee, telegraphic transfer (TT) advance payment and loans. Due to the current arrangement, those who work through loans and LCs have withdrawn from the business as they have already deposited 100 per cent of the required amount in the bank.
However, Madhu Panthi, president of Bhairahawa Customs Agents Association, said that the new provision brought to reduce the import of luxury goods was good. "This will help reduce the import of luxury goods and encourages domestic production," he said.

He said that this would affect the revenue collection of the government and the set target would be difficult to achieve.
Jeevan Prakash Pandey, Acting Director of the NRB, Siddharthnagar Regional Office, said that the new arrangement has been made to open an LC only by depositing cash in advance in the bank to keep the foreign exchange reserves in the country in balance.

This provision applies only to luxury items not to the essential goods. Pandey said that the circular has been issued with the objective of preventing serious problems in future as the consumption of imported goods is on the rise.