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Machhapuchre Bank

Export cash incentive should be increased

The government has started the cash incentive scheme for exports through the budget announcement from fiscal year 2010/11 in a bid to increase exports with a higher comparative advantage. This scheme was implemented since 2012. This incentive of 2 percent presently is continued with a value added percentage of at least 30 percent. FNCCI and Nepal Chamber of Commerce issue certificates of origin verifying the value addition.
Exporters are complaining that they have experienced hard time in receiving the government’s cash incentive due to the lengthy paper works. They want simplification on the procedure besides.
Due to low incentive, exporters have been lobbying for increasing the incentive to 5 percent. In the first year 2011/12 , 28 firms had received cash subsidies worth $ 1.6 million. In 2016/17, the government has allocated $ 3 million for incentive.
The exportable products need to be protected by giving more percent cash incentive in order to be more competitive in the international market. Incentive given to the exporters in Nepal is low compared to what India and China have been providing to the local exporters.
As almost all exporters receive payment by letter of credit, it would be better if they are paid cash incentive directly through the concerned bank. This would help to reduce the paperwork that traders need to fulfill to receive the money.
A cash incentive of at least 10 percent will enable Nepali exporters to be competitive in the overseas and neighboring markets. Such incentive should be more than 15 percent to cottage and small industries to ensure larger exports. It is suggested to provide such incentive to those who are producer cum exporter. The role of fully export based companies has weakened in Nepali context. The role of exporting companies is vital to strengthen sales in the foreign trade of the country.

(Dr. Regmi is the former deputy executive director of TEPC.)

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