January 11: While announcing the budget of the current fiscal year, the government had pledged to provide cash subsidy up to 8 per cent on cement exports. However, cement producers are uneasy with the procedure that enables cement exporters to receive cash subsidy of 8 percent only if the exports exceed Rs 500 million.

The budget announcement had excited the cement producers. After the government's announcement, the industrialists started the process of acquiring the Indian quality mark to export cement to India, which is a big market in proximity of Nepal. Palpa Cement and Arghakhanchi Cement are exporting their product with Indian quality mark. Other cement manufacturers are also in the process of acquiring the Ind ian quality mark for export.

Shivam Cement has not started exporting despite getting the quality mark. Raghunandan Maru, the director of the company, said that there is a problem with the export subsidy procedure.

“The government introduced a procedure to give 8 percent subsidy only if the export is worth more than Rs 500 million. It is not possible to export that much in the beginning," he said. 

He said that Nepali exporters cannot compete with the Indian cement if the subsidy is less than 8 percent.

The cement producers also complained that they had to face various kinds of hassles when the government introduced strict provisions in the same year they started exporting. They have also asked the government to reconsider the subsidy procedure as they cannot export in large quantities in the initial phase without brand promotion and market expansion.

Small cement producers in the Terai region of Nepal, which shares border with India, have complained that they will be the most affected by this procedure. 

Businessmen said that due to the close proximity to the Indian market from Terai, the transportation costs would be lower, but the conditions set for the 8 percent subsidy have ended the possibility of export.

The export subsidy procedure of the government states that subsidy of 4 percent of the total value of export will be given to the cement exporters. If the producer exports goods with at least 70 per cent value addition, they will get an additional subsidy of 1 percentage point. It is mentioned that if the export volume increases by 20 per cent in the corresponding year, the subsidy will increase by 1 per cent. To get an 8 percent subsidy, there is a provision that the company must have exported products worth more than Rs 500 million in a year.

The Ministry of Industry, Commerce and Supply insists that it is necessary to bring this kind of procedure to promote exports although the cement producers are not happy with it.

Joint Secretary of the Ministry, Govind Karki, shared that the procedure was introduced to encourage businessmen to export more.

"An 8 per cent subsidy is arranged for exports of above Rs 500 million because it will meet the export promotion objective of the government," he said.

Experts call the subsidy a short-term arrangement to promote exports. Economist Paras Kharel said that the company should increase its competitiveness in the long term.

"To increase exports, quality goods should be produced at low cost. The product will take the market only if it has better qualities than the competitors," he told New Business Age.

Kharel said that since the government cannot subsidize all products, there must be some kind of threshold. He thinks that a grant with a threshold cannot be given for a long period.