Kathmandu, June 11

The government has decided to give cash incentives on export of 27 different products to India.

Though such incentive facility was limited to third-country exports earlier, the Ministry of Industry, Commerce and Supplies (MoICS) recently decided to incentivise exports to India in a bid to promote Nepali exports to India and narrow down the widening trade deficit with the southern neighbour.

Nepali products, including vegetables, fruits, footwear products and cardamom, among others, will enjoy cash incentives ranging from three to five per cent on exports to India, informed Kedar Bahadur Adhikari, secretary at MoICS.

“India is Nepal’s largest trading partner and is the major export destination for Nepali products. As India is a larger market for Nepali products and comparatively more accessible compared to other international markets, such incentives will boost Nepal’s export base to India, which will ultimately help narrow down the country’s trade deficit with India particularly, and overall trade deficit in general,” said Adhikari.

Citing that Nepal should raise its production and export base to address the trade deficit issue, Adhikari said that incentives like this will encourage domestic industries to enhance production and give priority to exports. “Increased exports to India will also enhance Nepal’s currency earnings amid increasing pressure on the balance of payments situation.”

As per MoICS, the announced cash incentive to India-bound Nepali goods will be based on nature of goods and their value addition. While goods with value addition of up to 30 per cent will receive three per cent export incentive, those goods with value addition of up to 50 per cent will receive five per cent cash incentive.

With the intention to boost exports, the government started providing cash incentives to different industries from fiscal year 2011-12. However, such incentives were limited only to third-country exports. In recent years, the private sector had been pressurising the government to provide cash incentive to industries that export to India citing Nepali products are losing competitiveness in the Indian market due to availability of cheaper Indian products.

Meanwhile, the private sector has welcomed the government’s decision. “The government should gradually raise the number of products that can enjoy such cash incentives and ensure that industries get cash incentives on the basis of value addition in products,” said industrialist Pashupati Murarka.

Exporters can receive such incentives by opening an account with Nepal Rastra Bank.

They will also have to produce a letter of credit and receive Indian currency as payment for the exported goods.