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| Kathmandu, Wednesday March 19, 2003 Chaitra 05, 2059. |
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Govt to allow cotton yarn
import on convertible currency
By Milan Mani Sharma
KATHMANDU, March 18 : In a bid to relieve the
textile industries from the downturn, the government is mulling to allow import of cotton
yarn in foreign currency from India. The Nepal Rastra Bank (NRB), to which a proposal in
this line has been forwarded, has principally agreed to allow importing yarn from India.
"The decision on the proposal forwarded by
the Cotton Development Board would be taken soon," said a highly placed NRB official
preferring anonymity. He added that the payment for the yarn in convertible currency makes
the import cheaper by 16 per cent than importing it paying Indian currency.
Apart from the price factor, the Nepali
importers would enjoy various incentives on imports made in convertible currency, as per
the Indian Government’s new policy, said the source. "Hence, it will relive the
domestic textile industries hit hard by the high price of raw yarn," he added.
But this facility would be provided only when
the import price is cheaper than domestic prices of yarn, he said. This is said to
encourage domestic producers to cut down their supply prices, to the relief of textile
industries.
The import of cotton yarn from India in
convertible currency, however, is not a new practice. Yarn import at the cost of
convertible currency prevailed till 1996 before the government scrapped the provision on
the pressure of the private sector.
While the textile industries then convinced the
government that adequate supply realised from the domestic spinning mills required
protection from the cheap yarn import, they now argued that changes are necessary to
ensure competitiveness in the shrinking spinning market.
Currently, Jyoti Spinning Mills (JSM) and
Reliance Spinning Industry (RYI) are among the strong domestic cotton yarn producers.
Butwal Spinning Mills, however, is incurring losses of millions of rupees due to weak
management.
The latest change in the provision of yarn
import being exercised has drawn flak from a few officials. They argued that it might
trigger yarn smuggling and misuse of hard-earned foreign currency. "Moreover, this
might boost the transshipment of the yarn back to India without much value addition,"
they said.
However, the NRB source said that a number of
stringent measures have been adopted along with the facility to curb such anomaly. To make
use of the facility the importer must submit a proof that import price is cheaper than the
domestic supply, informed the source.
Mandatory submission of import recommendation
from Nepal Textile Industry’s Association (NTIA) is another condition.
"Likewise, prior revelation of the capacity of industry has also been made
mandatory," the source said, adding that the import certification would be issued
only after tallying the proposed import quantity with its production capacity.
Moreover, importers would be required to timely
submit reports on yarn import, textiles produced and value added tax (VAT) payment, among
others, to the Cotton Development Board and the Ministry of Industry, Commerce and
Supplies (MoICS).
The source argued that the transshipment of the
cotton yarn is very unlikely, as it would not be profitable. A debate on the to-be
endorsed provision has been going on since long between the textile industries and cotton
yarn producers.
Experts argued that deteriorating
competitiveness of the domestic textile industry was not due to higher price of raw yarn
alone. "Massive cross-border smuggling from the southern neighbour and heavy influx
of cheap clothes from northern neighbour are the major factors behind the erosion of
domestic textile industry, they said.
The largest textile factories of the country
including Hetauda Textiles, Balaju Textiles and Annapurna Textiles were closed due largely
to their failure in fighting with these adversities, they added.
According to official data, Nepal imports cotton
yarn worth Rs 40 million annually.
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