KATHMANDU, AUGUST 31

Economists and traders have criticised the government's decision to extend import restriction of certain non-essential items, terming the move 'irrational and politically driven'.

"The move to lift the ban on certain items while extending it for others seems politically driven and aimed at benefiting certain groups with economic clout," said economist Bhim Bhurtel, citing the example of removal of import curbs on diamonds.

Issuing a notice on Nepal Gazette on Tuesday, the Ministry of Industry, Commerce, and Supplies (MoICS), lifted the embargo on six non-essential items, including edibles products such as snacks (chips, crackers, etcetera), cigarettes and tobacco products, diamonds, coloured television sets (bigger than 32 inches), all kinds of toys, and playing cards. But it extended the import restriction on all kinds of readymade beverages, vehicles (jeep, car and vans, with exception of ambulances and hearse), two-wheelers (above 150 cc) and mobile phone sets (above $300) till October 14.

Narayan Prasad Regmi, spokesperson for MoICS, said the government's decision aimed to narrow the country's trade gap and ease the pressure on foreign exchange reserves.

The automobile dealers are largely unimpressed with the approach taken by the government.

According to Dhurba Bahadur Thapa, president of NADA Automobiles Association of Nepal, import restriction on automobiles will impact the festive sales and also dent the government's revenue collection. "Import of four-wheelers totals around Rs 19 billion in a year, which accounts for about one per cent of the total foreign currency reserves. Meanwhile, the revenue generated is nine times the said amount," Thapa told The Himalayan Times.

Likewise, the government's move has also dampened the spirits of liquor traders.

Amit Sharma, director of international business at Shiraj Trading Concern Pvt Ltd, said that the extension of import ban on liquor will promote its smuggling in view of the upcoming festive season, which will not only affect the business of liquor traders, but also the government's revenue.

As per the Liquor Importers Association of Nepal, import of bottled liquor totals around $12 million annually, which accounts for about 0.10 per cent of the total foreign currency. Meanwhile, the revenue generated for the government through imported alcoholic beverages is about Rs 3.3 billion, which more than covers the small dent made in the forex reserves.

"Because of this decision, import of alcoholic beverages through illegal channels via India will be widespread during Dashain and Tihar," he warned.

However, Punya Bikram Khadka, director of Department of Customs, informed that the department with coordination of concerned bodies has been closely monitoring possible customs fraud in the border areas. "We have even secretly deployed two teams in border areas to keep any illegal trade activities at bay," Khadka said.

Pradyumna Prasad Upadhyay, the spokesperson for the Department of Revenue Investigation, also said that apart from a few incidents, the department has not come across massive increase in illegal imports. "We've been tightening the monitoring targeting the festive season."

MoICS Spokesperson Regmi assured that the government will lift the import ban on all remaining items in the coming days. "For now, we're sticking to import restrictions as there is still external pressure."

"The government will lift the ban in the coming days," Regmi said. "For now, we've sticking to import restrictions as there is still external pressure."

However, according to economist Bhurtel, the government should identify and implement long-term sustainable solutions rather than simply firefighting. "The move is a short-sighted one and unlikely to prop up the forex reserves and reduce the trade deficit."

A version of this article appears in the print on September 1, 2022 of The Himalayan Times.