Kathmandu, July 17:

Nepal Chamber of Commerce (NCC) has termed the budget for the fiscal year 2006-07 as an ‘obligatory document’, announced during a transitional phase after a decade long conflict.

In a post budget reaction, NCC has said that the government’s pledge for infrastructure development, creation of conducive investment atmosphere and implementation of pro-poor and inclusive economic activities are plus points of the budget.

However, the revenue target of Rs 85.37 billion during a post-conflict period is very ambitious, which will directly affect the business community and common people.

NCC has criticised the government’s announcement to increase customs duty on over 40 items which is against the spirit of the World Trade Organisation (WTO) and other regional free trade agreements, according to which Nepal has to gradually decrease its tariff lines. In actual terms, the prices of about 100 items will increase due to customs tariff hike and excise duty adjustment.

Contrary to government’s policy for making value added tax (VAT) as the main source of revenue mobilisation, the budget has laid emphasis on excise duty, adds the release. The increment in customs duty on cotton clothes is impractical.

The budget remains silent on export promotion, which is one of the largest foreign exchange earners and employment generating sectors. The government’s decision to annul VAT exemption on import of raw materials for those export houses that export 100 per cent finished goods will hit the sector hard.

The provision allowing the private sector in large and middle scale hydropower projects under Build, Operate, Own and Transfer (BOOT) system is laudable, while the government should also simplify the environment for impact assessment procedures.

The budget has recognised the potential of NRNs to contribute to the nation’s development through transfer of knowledge, skills and technology as well as investment.

Despite the budget having incorporated many policies and programmes on social sector development, it remains silent on private sector investment promotion, measures to stop capital flight and building confidence, says NCC.

Meanwhile, Association of Pharmaceuticals Producers of Nepal (APPON) has drawn attention of the government to nullifying VAT exemption on the import of primary and secondary raw materials as well as packaging items.

In a press statement, APPON has said that the budget 2006-07 has imposed VAT on import of some of these materials, which will lessen the competitiveness of Nepali pharmaceutical products. APPON has further said the new provision will make Nepali medicines dearer compared to imported medicines, as they are free of VAT. “If the situation continues, Nepali firms has to shutdown,” the release states.