October 17: The leather industry of Nepal was at the forefront of export until a decade ago. However, export of leather has shrunk now as it is becoming difficult for the leather industries to compete with the price of leather produced in India.
The management of Narayani Leather Manufacturing Industry of Bara-Parsa Industrial Corridor, which was honored as the best exporter by the Birgunj Chamber of Commerce and Industry in the past, has become a challenging task now. This is a common problem for all the 13 leather industries in the country.
Managing Director of Narayani Leather, Manoj Chachan, says that the leather industry has become problematic. The main market of leather produced in Nepal is India. Some industries were also exporting to third countries.
According to Mohammad Junaid Iftakhar, general secretary of the Nepal Leather Tanners Association and managing director of Nepal Leather Industries, the export of leather has dropped by 20 percent in the last five years. “In the fiscal year 2073/74, leather worth Rs. 750 million was exported. Likewise, in the last fiscal year 2077/78, the export of leather dropped to Rs 150 million,” he said.
As per the association, leather worth only Rs 110 million was exported in the fiscal year 2076/77 due to the Covid-19 pandemic.
Industrialists say that the product has not been able to compete in the market due to the high customs duty and value added tax levied on the import of raw materials. Chachan blames the government's policy of taking exorbitant revenue from import of raw materials and cumbersome export policy.
Nevertheless, the government has a policy of giving up to 5 percent cash incentive to the leather industry for export. However, the industrialists complain that the implementation of this policy has been made very cumbersome. Entrepreneurs demand zero customs and value added tax on imports of all kinds of raw materials.
India, on the other hand, has zero customs duties on imports of raw leather and auxiliary raw materials to protect its industry.
Entrepreneurs say that they cannot compete in the Indian market as the leather produced in India is up to 35 percent cheaper.
Entrepreneurs say that even if the government refunds the VAT paid on raw materials after the leather is exported, its implementation is very cumbersome. Secretary General Iftakhar says that despite the policy of refunding VAT, it has not been refunded yet and such amount has become an additional burden on production.