Exporters to get cash incentive of up to 2%

KATHMANDU, April 28:

Responding to growing complaints about complicated process in distribution of exports incentives, the government has introduced flat cash incentive rates of one percent and two percent of the export volume, depending on the level of value addition.

A panel led by Deependra Bahadur Kshetry, the then vice-chairman of the National Planning Commission, had prepared the cash incentive guideline recommending flat rates, in an effort to simplify the incentive distribution process and introduce fair distribution practice.

After getting endorsement from the cabinet, the Ministry of Industry (MoI) has forwarded the guideline to the Ministry of Commerce and Supplies (MoCS), Nepal Rastra Bank (NRB) and the Department of Industry (DoI) for implementation. The DoI is the designated focal agency to determine cash incentives for traders.

In an effort to boost exports on the back of growing trade deficit, the government had earlier started extending cash incentive ranging from two percent to four percent of the total export value to exporters.

However, the process was complicated and created hassles for exporters.

The newly formulated cash incentive guideline, recently approved by the cabinet, will once again entitle exporters to rebates.

"The cabinet has recently endorsed the guideline and it will come into effect soon," Khatiwada, an MoI joint secretary, told Republica on Saturday, adding, the new guideline has made cash incentive distribution process more scientific.

In the current budget, the government had allocated Rs 300 million for distribution of export incentives in cash to exporters.

As per the newly amended guideline, exporters of goods with value-addition of up to 30 percent will get a flat one percent rebate and those exporting goods with value-addition of more than 30 percent will get cash incentive equivalent to 2 percent of the total export volume.

However, only exporters of goods to third countries that do not deal with Indian currency will be eligible for cash incentives. "But incentives will be given to both processed and non-processed goods," said Khatiwada.

According to the guideline, seeds, flower, fruits, medicinal herbs and black cardamoms, among others, are eligible for cash incentives. "Even non-processed goods can get one percent incentive," Khatiwada added.

Under the previous scheme, most of those receiving cash incentives were exporters of lentils, noodles, carpets, Nepali handmade papers, feeds, coffee, leather goods, synthetic yarns, and polyester fiber, among others.

As per this provision, traders exporting goods with value-addition of 30-50 percent used to get cash incentive equivalent to 2 percent of the total export value, 3 percent for 50-80 percent value-addition and 4 percent for those over 80 percent value-addition.

However, incentive given to traders exporting lentil was most disputed as many exporters were found exporting lentil imported directly from India and without adding any value to the product. By resorting to this technique, lentil exporters received up to 4 percent of the total export value as cash incentive.

"The new guideline will discourage the practice of appeasing DoI officials to make products eligible for cash incentives," said senior NRB officials.

NRB, the central bank, has been overseeing distribution of cash incentives through commercial banks. NRB officials were also not satisfied with selection of products for cash incentives in the past and frequently raised question about fairness of the distribution process.

Source: Republica