August 31: The government has allowed the import of 6 out of the 10 items that were banned since April 26. The ban on import of the remaining four items on the other hand has been extended until October 14.

Issuing a notice in the Nepal Gazette on August 29, the Ministry of Industry, Commerce and Supplies extended the ban on the import of personal cars, jeeps, vans, etc other than ambulances as well as all types of readymade liquor except industrial raw materials, motorcycles with a capacity of more than 150 cc and smart phones worth more than USD 300.

The items on which the government lifted the ban include foods items like Lays and Kurkure, color televisions larger than 32 inches, playing cards, diamonds, cigarettes and tobacco products and all types of toys.

The Ministry of Industry, Commerce and Supplies had banned the import of those goods since April 26 to ease the pressure on foreign exchange reserves.

The ministry, exercising the authority given by Sub-section 1 of Section 3 of the Export Import (Control) Act, 2013, had imposed a ban on the import of those 10 items.

According to the ministry, the objective of the ban was to protect the country's external financial position and balance of payments by preventing a serious decline in foreign currency reserves.

After the pressure on the foreign exchange reserves declined, the government lifted the restrictions on import. Last week, the customs department announced that the country's trade deficit decreased by 10 percent in the first month of the current fiscal year compared to the corresponding period of last FY.

The foreign exchange reserves also increased in mid-July compared to last mid-April. By mid-April, Nepal had foreign exchange reserves equal to Rs 1167.92 billion. According to Nepal Rastra Bank, this will cover the import of goods and services for 6.9 months.

The government decided to ban imports only after the foreign exchange reserves had declined and reached that level. The policy of discouraging imports was taken by the government since November.

However, as the Covid-19 pandemic has largely subsided and the tourist season is about to start, the government decided to lift the ban on  import of 6 items as it is the right time of earning foreign currency.

The government started tightening imports since last November. Initially, NRB, the government's economic advisor and financial sector regulator, set a limit on the foreign exchange rate for import of silver. In January, arrangements were made for  50 and 100 percent cash margin while opening LC for the import of luxury goods.

As there were no signs of decline in imports, the NRB officials in the second week of April issued verbal order to the chief executive officers of commercial banks instructing them not to open LCs for the import of vehicles for private purposes. Eventually, as a last resort, a formal ban was imposed on the import of luxury items.

The importers have been claiming that despite the ban imposed by the government, the import of goods other than four-wheelers and two-wheelers, which can be driven only after registration, has continued unabated through illegal channels.

Madan Mittal, the former secretary general of Foreign Trade Association says that banning the import of goods other than vehicles and large machinery tools gave smugglers an opportunity to take advantage of this situation. He says that because the southern border is open, smuggling cannot be stopped and claimed that imported items are easily found in the market.

Former State Minister for Industry, Commerce and Supplies Moti Lal Dugar while addressing the opening session of the 42nd Annual General Meeting of the association last Friday also raised a question for the incumbent Industry Minister about the justification of the ban saying that the goods banned from import are coming unhindered through illegal channels.

The Nepal Liquor Importers Association has been claiming that illegal import has increased after the ban on imports through formal channel. Liquor importers say that if alcohol is bought directly from the producer one has to pay US$ 15 per liter. However, if it is bought from India, one has to pay US$ 41 per liter.