Export cash incentive scheme fails to deliver

February 21, 2018 11:25 AM Republica

KATHMANDU, Feb 21: ​Export incentive program, which was introduced by the government in FY2011/12 to ramp up exports, has failed to achieve desired results, an analysis of country's export and incentive distribution shows.

Country's export income has remained stable or increased slightly after the introduction of the scheme. However, distribution of cash incentives has increased over the years. 
According to the Nepal Rastra Bank (NRB), the government distributed a total of Rs 290 in export subsidy in FY2016/17. During the year, the country's export income was Rs 73 billion - lower than Rs 74 billion recorded in FY2011/12. Export income had climbed to as high as Rs 91 billion in FY2013/14.

Commodities like seeds, flowers, fruits, medicinal herbs, black cardamoms, and woolen carpets, among others, are eligible for cash incentive scheme. Exporters get cash subsidy of up to 5 percent of total value of exports. 

Government officials believe that distribution of cash incentive could have gone higher. “Many eligible exporters are not applying for the cash incentives as they have found the procedures difficult,” said Rabi Shankar Sainju, spokesperson of the Ministry of Commerce.
He further said: “We are now analyzing use of cash incentives and is working to improve procedures for providing more incentives to encourage exports.”

However, experts say export promotion through cash incentives alone cannot help the country to achieve progress. It should be linked to employment generation, they added.

Officials of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) say the government should review the incentives and its impact on export. “It is high time the government reviewed the incentive and its impact,” said Shekhar Golchha, senior vice president of the Federation of Nepalese Chamber of Commerce and Industry (FNCCI). “As cash incentives can make our products competitive in the market, the government should increase cash incentives. But only the priority commodities should quality for the incentives.”

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