June 19: Nepal’s footwear industry, which is striving to become self-reliant, has complained of being hard hit by the illegal import and smuggling of footwear from India and China. The footwear industry of Nepal had been meeting 65 percent of the internal demand. However, they say that they have been forced to downsize the production due to smuggling of goods from across the border.

The industrialists say that Nepal’s renowned brands are operating at 20 percent of their capacity at present. Relatively new industries are also operating at 50 to 60 percent of their capacity.

Although the government has announced cash subsidy of 8 percent for the export of shoes and slippers, the industries are skeptical about the implementation of such provision. They complained that the smuggling of footwear has increased excessively in the last three to four years.

Vidushi Rana, executive director (branding and marketing) of Kiran Shoes Manufacturer, the producer of Nepal’s renowned Goldstar brand shoes, says that the industry is facing lots of problems at present. She said that the Goldstar company used to operate round the clock and export 70 percent of its products to foreign countries. But now, it operates only for 6 hours a days, said Rana.

“We are currently operating at 20 percent of our full capacity. The market has been affected by smuggling and dumping of goods,” said Rana.

Rana claimed that Goldstar provides direct employment to 3,000 people at present.

“But it is not certain when we have to downsize the number of employees between 500 to 1000,” she added.

“We are struggling to compete in the market due to the smuggled goods. It has also caused us problems in repaying bank loans.”

Rana complained that the government has failed to promote production-oriented industries even when economy is in crisis due to the import-oriented policy of the government.

High cost of production is the main challenge faced by the domestic industries of Nepal.

“Goods come from India and  China through illegal channels at low cost. There is a trend of paying revenue for a pair of shoes while importing ten pairs.”

Rana suggests that the smuggling of footwear can be controlled to some extent if it is categorized into three HS codes. She said that low-quality shoes of world-renowned brands such as Adidas and Nike are entering Nepal from China while those entering Nepal from India make their way through illegal channel.

Industrialists say that China has been dumping low quality goods while majority of shoes entering Nepal from India are smuggled.