Modnath Dhakal

Kathmandu, Dec. 16: Textile industries in the country complained that the new modality to obtain the concessional loans was complex due to lack of definition of 'new loan' and provision to get approval from the Inland Revenue Department (IRD) to obtain the facility.
The government has announced a concessional loan facility of Rs. 50 million at 5 per cent interest rate for the textile industries but the entrepreneurs are facing difficulty in defining what is 'new loan' as the previous loan is renewed every year which has created confusion in the part of banks and financial institutions (BFIs).
Nepal Textile Association (NTA) said that the complex procedure, including the approval from the tax administration, made the industries feel that if the government really wanted to provide the facility.
"I don't know why the government set the ceiling of concessional loan to Rs. 50 million? Sometimes a single machines cost that much money," Vice-President of NTA Jitendra Lohia said.
The government last year had scrapped the tax rebate facility to the garment industries and Finance Minister Dr. Yuba Raj Khatiwada had announced that programmes would be announced to help them to reduce the production cost. In the budget speech for the current fiscal year, he reduced the customs duty on dying chemicals and spare parts to 1 per cent from existing 5 per cent which has reduced 4-5 per cent production cost of synthetic cloth and 2 per cent of cotton cloth.
Textile industries had also asked the government to buy Nepali cloth for public offices and subsidy on electricity as well.
The industries were getting 9 per cent tax rebate.
According to Lohia, the industries are facing about 7 per cent high cost of production as their social security expenses have gone up to 20 per cent from previous 13 per cent.
"The social security cost before the policy announcement was about 13 per cent which has gone up to 20 per cent now. It seems that the government has not realised that labour intensive industries like us can significantly contribute to the society and economy," he said.
Another major concern of the Nepali producers is unabated smuggling of cloth to Nepal.
If one had to believe the statistics of the NTA, there is about Rs. 350 billion to Rs. 400 billion grey garment and textile markets in Nepal.
Nepali producers produce cloth of about Rs. 8 billion in a year and the country imported cloth worth Rs. 51 billion from the formal channel but the actual size of market is about Rs. 450 billion. A significant portion of cloth is also brought in by Nepalis while returning from foreign country as well.
But Ministry of Finance said that the loan facility was just a concession not compensation.
"Business community must not understand the concession as the compensation. The government has to give the facility to many other sectors as well," said Uttar Kumar Khatri, Spokesperson of the ministry.
He said that the smuggling of goods including cloth is in decreasing trend as the police and customs both had been applying various measures to check that.
"This is a continuous process which will deliver results gradually. The government is committed to support the business community," said Khatri.