FNCCI urges government to resume export cash subsidies

KATHMANDU: Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has urged the government to resume the system of cash subsidies on exports, arguing that its suspension has seriously affected investment, exports and employment.

The government had introduced the cash subsidy in fiscal year 2011/12 to promote the export of goods with domestic value addition amid weak export performance and a widening trade deficit.

Last Thursday, the Department of Industry issued a notice stating that it would not accept new applications that would create additional liabilities in current fiscal year 2025/26. Citing instructions from the Ministry of Industry, Commerce and Supplies (MoICS), the department had also urged stakeholders not to register self-declaration details for fiscal year 2024/25, leaving businesses confused.

According to businesspeople, cash subsidy had provided relief in Nepal’s export trade and had helped to increase exports by minimising the trade deficit and earning foreign currency.

It is to take a note that total exports had risen from Rs 74 billion in fiscal year 2011/12 to Rs 277 billion in fiscal year 2024/25, while the trade deficit had reached Rs 1,527 billion and the export–import ratio had stood at 1: 6.5. In the first two months of the current fiscal year, the trade deficit has been Rs 257 billion and the export–import ratio 1: 10.5.

In a statement, the FNCCI said that Nepal’s export situation has remained unsatisfactory and that halting the subsidy has further harmed exports. Various studies have indicated that Nepal’s transport costs are up to 25% – 30% higher than those of neighbouring countries, underscoring the need for cash subsidies to remain competitive internationally. The FNCCI has therefore urged the MoICS to resume the subsidy for export promotion and import substitution.