June 8: The government’s move to encourage the import of sanitary pads is certain to shut down 35 home-grown sanitary pad industries set up with a total investment of around Rs 6 billion. The move is a setback to the sanitary pad industry, which is self-sufficient to meet the domestic demand.
According to the stakeholders, the indigenous industries have the capacity to produce about 900 million units of sanitary pads on an annual basis. Entrepreneurs say that the current demand of Nepal is around 300 million units.
The government has made an arrangement to give 90 percent customs duty exemption for the import of sanitary pads through the budget of the coming Fiscal Year (FY) 2079/80. The import duty on foreign sanitary pads used to be 15 percent but now it is only 1.5 percent.
The sanitary pad manufacturers complained that the government should have given priority to domestic products instead of reducing the customs duty on foreign products from 15 to 1.5 percent. According to the stakeholders, this has threatened the existence of the sanitary pad industries of the country. Nepal's sanitary pad industry employs 6,000 people.
Ironically, although the customs duty on other imported raw materials is maintained at 1 percent, the overall tax on the raw materials used for pads is 8.25 percent.
According to the industrialist, seven raw materials are required to make a pad. The customs duty on flock pulp is 5 percent. It is the raw material required for 65% of sanitary pads. Perforated P film, release paper, glue, sap powder is subject to 1 percent customs duty each. Entrepreneurs say that if the customs duty of 30 percent on wrapper paper is added along with excise duty of 5 percent, the overall tax will be 8.25 percent. As the government has given 90 percent customs duty exemption on import of foreign ready-made pads, importers will have to pay only 1.5 percent tax.
Due to this, the price of imported pads in the market will be Rs 10 cheaper than Nepali pads, says Puneet Sharda of Jasmine Hygiene.
"The policy brought by the government for the benefit of limited traders is inappropriate at a time when the production of sanitary industry of Nepal is exceeding the demand. It should be rectified," said Sharda. Moreover, he also says that the government has given 90 percent exemption in customs duty on sanitary pads contrary to its own policy of raising the tariff on finished goods one level more than raw materials.
Stating that the government should protect the domestic industries, Sharda said that the government should amend its decision before the budget is passed by the parliament. He said that the country has become self-reliant on sanitary pads and the government should impose an additional 5 percent customs duty for an overall 20 percent customs duty for the import of such goods.
Bhavesh Rathi, director of Health and Hygiene, another company that manufactures sanitary pads, said that the government's policy is certain to shut down the domestic industry and promote import of foreign pads.
He also complained that the government's policy has compelled them to shut down the industry at a time when they have set up a new plant to manufacture adult diaper. He informed that the pads imported from abroad have been given exemptions while those produced in the country are subject to quality mark, lab test and scientific size. He noted that the investment in the pad industry was at risk due to the government's policy.
"While the Nepali industry is preparing for export by meeting the domestic demand, the government has encouraged the import of pads needlessly. It is unfortunate,” said Rathi
Chairman of the Chamber of Industry, Morang, Suyash Raj Pyakurel, said that 6,000 people would lose their jobs and Rs 6 billion would be lost due to the wrong policy of the government.
Navin Rijal, president of the Morang Trade Association, objected to the provision in the budget to give some limited industrialists the opportunity to earn more. He said that the government has come up with a policy that will only benefit some importers and some industrialists while many cannot afford it. He demanded that the government amend its policy for the benefit of all.
Bhim Ghimire, president of the Province 1 Chapter of the Confederation of Nepalese Industries (CNI), has termed the government's exemption in sanitary pads, iron industry, palm oil industry and electricity as policy corruption. "The government should adopt a policy that is equal and valid for all," Ghimire said.
Pads imported from abroad come in kilograms and pieces. In FY 2077/78, 3.58 million pieces and 1738 tons of sanitary pads were imported in Nepal. In the first eight months of the current fiscal year, 99 million pieces have been imported.
In the fiscal year 2075/76, after the government reduced the customs duty on all raw materials for sanitary pad to 5 percent, the number of indigenous industries had increased. In the budget of FY 2077/78, provision was made for the new industry to get tax exemption for 5 years. Entrepreneurs and businessmen were excited by this prospect. The possibility of opening more industries had increased.
The government implemented the procedure of distribution and management of sanitary pads in 2076 BS. The minimum standards for sanitary pads produced by large industries and locally produced are different. Nepal's quality mark No 587 specifies the length, width, absorption capacity, pH value, presence of microorganisms, etc of the pad.
Locally produced sanitary pads should use white cotton and muslin cloth, the fabric should be at least two cubits long and half a cubit wide. There is a provision that 95 percent cotton cloth must be used to ensure the quality of the pad.