The government plans to hike the export cash incentive to 5 percent from 2 percent in a bid to promote exports of domestic products.

According to the Ministry of Industry, Commerce and Supplies, it has received the go-ahead from the Ministry of Finance and is now seeking the Cabinet’s final approval. “We sent the proposal to the Cabinet last week,” said Commerce Secretary Chandra Kumar Ghimire.

As per Ghimire, the ministry has proposed to raise the cash incentive to 3-5 percent, depending on the nature of the goods and value addition. “We will also simplify the procedure of obtaining cash incentives,” said Ghimire.

Currently, the government provides a 2 percent incentive for goods with a value added percentage of at least 30 percent. The Federation of Nepalese Chambers of Commerce and Industry and the Nepal Chamber of Commerce issue certificates of origin verifying the value addition.

Exporters complain that they have a hard time receiving the government’s cash incentive due to the lengthy paperwork. Potential recipients need to present official letters from the Industry and Commerce ministries, the certificate of origin and bank documents.

Dharma Raj Shakya, president of the Federation of Handicraft Associations of Nepal, stressed the need to simplify the procedure besides raising the rate. “As almost all exporters receive payment by letter of credit, it would be better if they are paid the cash incentive directly through the concerned bank,” said Shakya, adding that this would help minimise the paperwork that traders need to fulfill to receive the money.

Shakya urged the government to provide cash incentives to exporters too. Currently, only producers get the incentive. “The role of exporting companies is vital to boost sales in the international market.”

The government launched the Cash Incentive Scheme for Exports through the budget for fiscal 2010-11 in a bid to improve exports of domestic products with a high comparative advantage. The scheme went into effect in 2012.

In the first year, 28 firms received cash subsidies totalling $1.6 million. In 2016-17, the government allocated $3 million for incentive payments.

Citing the low incentive, exporters have long been demanding that the government increase it. They claim that the scheme has hardly helped to make their products competitive in the international market. Durga Bikram Thapa, president of the

Nepal Pashmina Industries Association, said the incentive was very low compared to what neighbouring countries were giving to their traders.

According to Thapa, a cash incentive of at least 10 percent will make Nepali products competitive in the international market. “Such incentives should also be offered to cottage and small industries that supply their products to large exporters,” he said.