Nepal's textile industry is close to collapse as no stimulus package has been offered in the 2020-21 budget for it, according to the Nepal Textile Industries Association (NTIA), which recently said the textile sector is not included in the 44 industries allowed to open partially, even though it had been severely hit by the lockdown with 95 per cent of the factories closed.

The textile industry did not receive the incentives announced in the past and even the existing ones have been taken away, the association said.

The government had proclaimed that the textile industry would get interest subsidies, but it did not happen. And now the budget statement says the electricity tariff exemption has been removed. "The association is shocked and surprised by this announcement," it said.

In 2014 alone, investors pumped in another Rs1.5 billion, encouraged by the government announcement that they would get a 70 per cent value added tax refund. All that investment has been jeopardised with the government withdrawing the value-added tax adjustment benefit that fabric manufacturers have been getting for the past 20 years, a Nepalese newspaper quoted association president Shailendra Lal Pradhan as saying.

“The industry incurred heavy losses in the last two years for lack of government support. Government policy seems to have been designed to discourage the domestic textile industry, as it is insensitive to the sector's problems,” he added.

"We have reached a decision to close the industry as the government has failed to address a single demand," said the association. Industry leaders urged the government to act to solve their problems or simplify the company closure procedure so they can make a quick exit.

To legalise fabric imports, the association has recommended the government to determine the actual value of the merchandise and create a provision to impose customs duty and tax, but officials have not taken this proposal seriously.

There are 250 small and large textile factories operating in the country that employ around 50,000.

Fibre2Fashion News Desk (DS)

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