NATIONAL 5 (Spotlight Weekly)]

Domestic Disturbance

Apart from triggering tens of millions of rupees in revenue losses, contradictory government policies are undermining local industries

By KESHAB POUDEL

By issuing import licenses for products that fall within the exclusively right of Nepal-based manufacturers, the government is hurting the local industry as well as losing millions of rupees in revenue. As import of such products continues, many Nepal-based manufacturers are facing deep financial trouble.

Illegal prodects entering Nepal : Harassing domestic industry

Because of this unhealthy situation and other problems, Nepal Battery Company, a tie-up with a leading multinational, has shut down its manufacturing unit in Kathmandu and is selling imported products. Surya Tobacco Company, the sole official importer of 555 cigarettes, is said to have stopped officially distributing the brand because of uncontrolled flow of counterfeit cigarettes in the market. Johnson and Johnson, too, faces similar problems.

Apart from discouraging the import of genuine products, the government's muddled policy has also deprived the treasury of millions of rupees of revenue. Consumers, too, face uncertainty over the quality of the product arriving in the market illegally.

Nepal Lever Ltd., one of the largest and modern manufacturers of various consumer products like toothpaste, detergent powder, Lux soap, shampoo and facial cream is facing problems in competing with counterfeit products.

Despite enjoying exclusive legal rights to sell such products in Nepal, a wide range of Lever products manufactured for sale in other parts of the world have been coming in through importers.

Nepal Lever won a court battle affirming that it has exclusive rights to sell the products in Nepal. But without support of concerned officials and understanding at the policy level, guarantees of such rights appear to have little meaning. To prevent such market distortions, the government should ban the entry of such products and take action against those who sell them.

Although Nepal Lever produces Lux soaps, Fair and Lovely cream and Sun Silk shampoos with an exclusive legal right to sell in Nepal, some business groups are allowed to import similar goods. Many stores are found carrying products exclusively intended for sale in other countries.

While Nepalese products have to pay all local taxes, imports do not face such requirements. As a result, local sellers get larger commissions on the imported products. Nepal stores are seen carrying Lux soaps made in Indonesia, Sun Silk produced in Thailand and Fair and Lovely cream made in India with stickers authorising sale only in those respective countries. But nobody seems to be concerned about control this breach of exclusive legal rights enjoyed by Nepal Lever Ltd, a subsidiary of Hindustan Lever Limited.

Because of the easy availability of such products, Nepal Lever is compelled to scale back its production. Surya Tobacco also faces a similar situation. After a large flow of counterfeit 555 cigarettes, the company has stopped importing the brand for sale in Nepal. This trend has caused serious revenue losses for a government that is struggling to raise funds to meet growing security expenses.

Although Hindustan Lever Limited, India and Nepal Lever Limited won the court ruling against the illegal import and use of Lux trademark, the flow of such products continues in the market because of lapses at the executive level.

In recent decisions, the appellate court and the Department of Industry prohibited the illegal import and sale of Lux soaps in Nepal. Hindustan Lever Ltd and Nepal Lever Ltd, registered and authorized user of the trademark, filed a case against one importer, but such soaps continue to adorn store shelves.

"The Department of Industry has already issued the necessary order to the concerned officials making the sale of such products illegal," said a senior official. "There is no question of allowing the import of such products in Nepal."

"We have been spending millions of rupees to create markets for those products, but foreign products are allowed to penetrate them," said a senior executive of Nepal Lever Ltd. Even the appellate court has upheld our right."

The quality and standard of all Nepal Lever products are similar to those produced in other parts of the world. In some cases, they are comparatively better. But consumers are duped. The Lux soap made for sale in Indonesia clearly indicates the use of halal products, conforming to Islamic requirements.

It's difficult to understand how one government agency goes on issuing an exclusive manufacturing license to certain companies while another grants import license to other parties. "There seems to be misunderstanding between the agencies are concerned," said a senior official at the Ministry of Industry.

The Department of Commerce issues import licenses and is not concerned with the decision of the Department of Industry. The Department of Customs has already issued a notice not to allow the entry of such products, but it cannot stop the products imported through license. "We can stop the illegal entry of any product, but we cannot stop products that have a valid license issued by the Department of Commerce," said a senior customs official.

Every product produced in Nepal by Hindustan Lever or Surya Tobacco and other firms is subjected to all kinds of tax, including VAT. "If the government continues to allow the entry of such products, Nepal Lever would have no other option than to shut down," said a senior executive of the company.

At a time when Nepal Lever has to rely on Nepalese market for its survival and the government continues to allow the import of similar kinds of product, it will affect the overall production of the company. Along with providing quality products and huge revenue, Nepal Lever has also been sponsoring various programs in the country, including the Close-Up Music Award and health-awareness programs.

Because of the availability of imported products, the government has already lost revenue amounting to millions of rupees. Nepalese consumers are not used to using locally made products, as the country has depends on imports for so long. However, Lux soaps produced in Nepal are of excellent quality. The Sun Silk produced in Nepal is similar in quality to those manufactured in Thailand and Malaysia.

The time has come to protect the national industries by forbidding the sale of such products. This would work in the interest of the government, industry and consumers. If things remain unchanged, more companies will find themselves in the position of Nepal Battery ó selling products manufactured in other countries.