Nepal exporters rejoice as India rolls back garment duty

Kathmandu, Nov 8 (IANS) Nepal's beleaguered garments industry has heaved a sigh of relief with neighbour India, currently one of the biggest destination for Nepali products, slashing customs duty on garments by 50-75 percent.

Kantipur, Nepal's biggest daily, Saturday quoted a senior official of the Garment Association of Nepal (GAN) as saying that India's union government has issued an announcement, rolling back the 'unfair decision' to raise customs duty.

Uday Raj Pandey, vice-president of GAN, said that though Nepal's garment exporters should not have to pay duty as per the India-Nepal trade agreement that pledges zero percent trade duty, about two years ago India's customs authorities started slapping duty on transaction value.

It resulted in Nepali merchants having to pay four percent customs duty on cotton apparel and eight percent on polyester clothings.

To add to Nepali exporters' woes, around late August, Indian authorities began to slap the duty based on maximum retail price (MRP) instead of the invoice-indicated price.

With the MRP always being higher than the invoice price, the policy switch resulted in a steep hike in customs duty.

The action reportedly affected top Indian brands like John Players, Peter England and Pantaloons, who are now outsourcing from Nepal.

Indian tobacco giant ITC, the makers of John Players, built a state-of-the-art garments factory in Biratnagar town in south Nepal under its Nepal joint venture Surya Nepal to manufacture the garments in Nepal.

The sudden customs hike reportedly left consignments worth around Nepali Rs.40 million ($620,000) stranded at Panitanki, the customs checkpoint at eastern Nepal.

Nepal's garments industry, once one of its major forex earners and employers, took a bad hit during the 10-year Maoist insurgency when exports to the US plummeted due to frequent strikes.

However, it had begun regrouping with neighbour India emerging as a leading buyer.

The new customs duty had caused panic among Nepali exporters, raising fears that Indian buyers would now seek new sources in Bangladesh.

GAN and Nepali exporters began lobbying for the revoking of the new duty, ultimately resulting in its rollback.

Currently, Nepal exports readymade garments worth over Rs.100 million to India.