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Export incentive practice in Nepal: Lessons to learn from India

BY DR. SUMAN KUMAR REGMI
Export incentive is a vast subject covering as it has virtually limitless possibilities in the realms of financial and other assistance given to exporters. One way of gaining insight into some of the consequences of export incentives is to study some of the schemes already implemented which would illustrate some of the differences possible and often accounted for by different levels of development of the countries concerned. There are many export incentives schemes operated by different governments and countries which embody that could be termed as ‘intangible incentives’ and at the same time, some of these will be forwarded later if time demands, our main concentration will be on incentive of a tangible nature. We can take lessons from Indian experience in export sector.
The main export incentives in India are: special tax deduction for approved export promotion expenses, drawback of tariffs and excise taxes, preferential grant of import licenses, special foreign exchange allocations for raw materials and components, and tax credit certificates. The government allows approved expenses in promoting exports amounting to certain fixed percentages of such costs to be deducted from taxable income. Any company in India producing for export is eligible for a tariff and excise duty refund on all raw materials and components after the resulting products have been exported. The importers do not need pay the duty at all as long as it can be proved that the imported items will be used to make products for export. Companies with bonded facilities also enjoy the privilege of non-payment of tariffs and excises. Preferential grant of import licenses is available to registered exporters of selected items and the grant usually goes along with special foreign exchange allocations for import of capital goods and raw materials and components. Special foreign exchange allocations for import of capital goods are available to export oriented firms if they meet government obligations on a case by case basis in India. Tax credit certificates are granted for up-to certain percentage of the value of exports.
Looking at the export promotion measures followed by India, Nepalese stakeholders have to follow above those export promotion measures which are suitable to Nepal. In Nepal, Exporters’ Exchange Entitlement Scheme, Dual Exchange Rate system, Seven Points Export Promotion Programs, Cash Subsidy were implemented after 1960 till 1992. In 1992, economy liberalization including trade liberalization was started. As a result, Economic growth was possible during 1992 to 1997. Even though Nepal’s export sector has not been corrected. After mid-2000 decade, trade deficit has been mounted up unbearable for the country. After 2067/68 B.S., export incentive up-to 2 percent has been granted to those who have promoted export successfully. Such other export incentives should be brought quickly to correct the trade deficit of the country. New Trade policy of 2072 B.S. and NTIS 2073 B.S. will correct the direction of foreign trade.
[The writer is the former deputy executive director of the Trade and Export Promotion Centre.]

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