Flat rate or commodity-based rate recommended for export incentives
KATHMANDU, Nov 11: In its latest exercise to enhance effectiveness of cash-incentive scheme put in place to promote third-country exports, Ministry of Commerce and Supplies (MoCS) has suggested the government to provide at least 2 percent cash incentives to all the exporters spinning convertible currency for the country.
“We have given two options to the government - either provide 2 percent cash incentive at a flat rate to all third country exporters or fix specific incentive rate for different products, setting 2 percent as minimum offer for any third country export items,” said a senior official at the MoCS.
The MoCS had come up with the two options after holding meetings with officials of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Nepal Chamber of Commerce (NCC) and Confederation of Nepalese Industries (CNI).
“We have already forwarded this proposal to the high-level committee formed to effectively implement the cash incentive scheme,” said the source. The committee is headed by the Vice Chairman of National Planning Commission, Deependra Bahadur Kshetry.
The MoCS mooted the fresh changes after exporters continued to lodge complaints over complicated process followed to distribute the export incentive. They have been pushing the government to simplify the process and make its implementation predictable so that exporters could remain assured of receiving their share of due incentive.
Under the incentive package, the government has promised cash incentive in a range of 2 to 4 percent (of total export earning) for all third country exports depending on their value addition. But complicated procedures devised to prove the level of value addition and red tapism has largely affected its implementation.
“The need to prove value addition and other procedural hassles will significantly go away if the government choses to give 2 percent cash incentive at a flat rate to all the exporters. Hence, our push to the government is to go for it,” said Uday Raj Pandey, central member of the FNCCI, who is also a member of the team that drafted the new proposal sent to the government.
He disclosed to Republica that the MoCS-private sector team that drafted the new proposal has also recommended the government to pledge cash incentive to the trading firms also if they export goods produced by other local companies.
“This has been proposed mainly considering that a large volume of third country exports are carried out by the trading firms, and not the producers themselves,” said Pandey.
So far, such trading firms are left out from the scheme.
MoCS officials believe that adoption of any of its two proposals would ease the process of distribution of cash incentive. So far, the government has already distributed over Rs 650 million worth of cash incentive to exporters.
But a major chunk of that has been received by the big business firms, whereas small and medium enterprises - the targeted beneficiaries - have been finding their claims for incentive largely unattended.
The government had put the cash incentive scheme in place two years ago in an attempt to boost exports to bring down the ballooning trade deficit.
Govt may end cash incentives on agro-based food commodities
The government is mulling to end the cash incentive to the exporters of agriculture food commodities amid food deficit and difficulties in calculation of value addition on those products.
A high level source said exporters of the products such as rice, edible oil, pulses and refined flour might not get the facility if the government implements the idea.
“Those commodities are essential within the country and their export promotion is not beneficial to the country. So, the government is contemplating to end the incentives for such products to ease supplies in domestic market,” the source added.