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Economy
Industry & Trade
Industrial Policy 1992
- Objective:
- To increase the contribution of industrial sector to the national economy through the enhancement of
industrial production and productivity.
- To emphasis the development of the industries utilizing local resources and industries, which are
export, oriented.
- To reduce the pressure of unemployment and under employment in agriculture sector through the
development of labour intensive industries.
- To adopt appropriate policy conducive to industrialization for the balanced regional development of the
country.
- Policy
- To develop the industries through healthy competition in order to utilize the comparative advantage of
the country.
- To protect industries through customs duties.
- To eliminate, as per time bound schedule, the protection accorded to the industries.
- To develop industries utilizing national labour, skill and resources as well as industries having
national importance.
- To accelerate the economic development through export of industrial goods.
- To emphasize development of small, cottage and agro-based industries in order to create the employment
opportunities particularly in rural areas.
- To attract the foreign investment and to emphasize the transfer of advance technology and efficient
management.
- Strategies
- To liberalize and simplify the procedures for the establishment, expansion and modernization of industry.
- To provide all the necessary services to be accorded to industries through one window system.
- To emphasize development of competitive import substitution industries in the country itself in order
to reduce the pressure on the economy resulting from imports of daily consumer goods and construction
materials.
- To make the industrial protection system simple and transparent.
- To encourage industrial investment in underdeveloped areas in order to achieve balanced regional
development.
- To make necessary arrangements in order to meet as much as possible the requirement of skilled
industrial manpower within the country and to conduct all the related training and research programmes in
an integrated way.
- To provide additional incentives to the entrepreneur reinvesting his profit to his own industry or to
other ancillary industries.
- To carry out the restructuring programmes with a view to rehabilitate the sick industry after reviewing
the conditions of such industry.
- To make the necessary institutional arrangements for productivity improvement through the upgradation
or technical know-how and efficiency of the industries in order to compete in the free and competitive
world market.
- To take ahead the production and productivity improvement campaign.
- To take measures to minimize the adverse effect to environment while establishing, expanding and
modernizing industrial units.
- To conduct skill development programmes for the development of skilled manpower.
- To reserve the cottage and small-scale industries for Nepalese only. However, technology transfer will
be permitted in these industries.
- To transfer the state owned industries to private sector in a phased manner.
- To prepare and implement, in a phased manner, the guidelines relating to environment and pollution in
order to control and mitigate the impact of industrial pollution on environment, residential area, national
heritage etc.
- Classification of Industries:
- Manufacturing Industries
Industries which produce goods by utilizing or processing raw materials, semi-processed materials by
products or waste products or any other goods.
- Energy Industries
Industries generating energy from water resources & wind, solar, coal, natural oil and gas, bio-gas or
any other sources.
- Agro and Forest-Based Industries
Business mainly based on agriculture or forest products such as integrated sericulture and silk production,
horticulture and fruit processing, animal husbandry, dairy industry, poultry fanning, fishery, tea
gardening and processing, coffee fanning and processing, herticulture and herb processing, vegetable seed
farming, mushroom, vegetable farming or vegetable processing, tissueculture, green house, bee-keeping,
honey production, rubber farming, floriculture and production, and forestry related businesses such as
lease-hold forests, agro-forestry, etc.
- Mineral Industries
Mineral excavation or processing thereof.
- Tourism Industries
Tourist lodging, motel, hotel, restaurant, resort, travel agency, skiing, gliding, water rafting, cable car
complex, pony-trekking, trekking, hot air ballooning, para sailing, golf-course, polo, horse-riding, etc.
- Service Industries
Workshop, printing press, consultancy service, ginning and baling business, cinematography, construction
business, public transportation business, photography, hospital, nursing home, educational and training
institution, laboratory, air services, cold storage, etc.
- Construction Industries
Road, bridge, ropeway, railway, trolley bus, tunnel, flying bridge and industrial, commercial and
residential complex construction and operation.
- Cottage Industries
The traditional industries utilizing specific skill or local raw materials and resources and labour
intensive and related with national tradition, art and culture as mentioned in Annexure 3.
- Small Industries
Industries with a fixed asset of up to an amount of thirty million rupees sball be named as small
industries.
- Medium Industries
Industries with a fixed asset between thrity million rupees and one hundred million rupees shall be named
as medium industries.
- Large Industries
Industries with a fixed asset of more than one hundred million rupees shall be named as large industries.
- Facilities and Concessions to be Accorded to Industries
- No income tax in excess of twenty percent shall be levied on the income derived from any industries
other than the ones producing cigarettes, bidi, cigar, chewing tobacco, khaini and industries producing
other goods of a similar nature utilizing tobacco as their basic raw materials, and alcohol or beer
producing industries.
- Except for cigarettes, bidi, cigar, chewing tobacco, khaini, industries and industries producing other
goods of a similar nature utilizing tobacco as their basic raw material. Industries producing alcohol or
beer, and saw mill and catechu industries, any other industry using eighty or more than eighty percent of
indigenous raw materials in its products and supplying all its manpower from among Nepali citizens shall be
granted a rebate at the rate of 10 percent of the income tax.
- Any national priority industry, which constructs and operates road, bridge, tunnel, ropeway, flying
bridge, and manufactures and operates trolley bus and tram as enlisted in Annex-4, shall be granted a
rebate of fifty percent of the income tax on their income for a period of ten years from the date of
operation and other industries as enlisted therin shall be granted a rebate of fifty percent of the income
tax on their income for a period of seven years from the date of operation.
- Any industry, established in any Remote, Undeveloped, and Underdeveloped Areas as enlisted in Annex-3,
othe than cigarettes, bidi, cigar, chewing tobacco, khaini industries and industries producing other goods
of a similar nature utilizing tobacco as their basic raw materials, and industries producing alcohol or
beer, shall be granted a rebate of thirty, twenty-five and twenty percent of the income tax respectively
and thirty-five, twenty-five and fifteen percent of the excise duty respectively for a period of ten years
from the date of operation.
- Fruit based fruit processing and cider and wine industries with a fixed asset of up to two million five
hundred thousand rupees established in Mugu, Humla, Jumla, Dolpa, Kalikot, Bajura, Darchula, Bajhang,
Achham, Mustang, Manang, Solukhumbu, Sankhuwasabha and Taplejung districts shall be entitled to an excise
duty exemption for a period of ten years, and fruit based alcohol industries shall be entitled to excise
duty exemption for a period of five years. On completion of such exemption period, His Majesty's
Government may grant excise duty exemption to the fruit based alcohol industries for up to an additional
period of three years.
- While calculating depreciation on the fixed assets, industries shall be entitled to add one third to
the rate of depreciation allowed under the existing income tax laws.
- If an industry diversifies itself through reinvestment in the same or any other industry, or expand its
installed capacity by 25 percent or more, modernizes its technology or develops ancillary industries, it
shall be entitled to a deduction of 40 percent of new additional fixed assets from its taxable income. Such
remission may be deducted on a lumpsum or on an instalment basis within a period of three years.
- Permission shall be granted for a reduction of up to 50 percent from the taxable income for the
investment of any industry on process or equipment, which has the objective of controlling pollution or
which may have a minimum effect on the environment. Such remission may be deducted on a lumpsum or on a
instalment basis within a period of three years.
- Pre-operation costs incurred by any industry in connection with skill development training shall be
allowed to be capitalized.
- After an industry comes into operation, 10 percent of the gross profit shall be allowed as a deduction
against taxable income on account of expenses related with technology, product development and efficiency
improvement.
- An industry donating an amount of up to 5 percent of its gross income to any school, college,
university, hospital, religious place and in social activities shall be entitled to a deduction of such
donated amount in course of assessing the taxable income.
- Up to5 percent of gross income spent for the advertisement of the products or promotion services,
hospitality and any other similar expenses shall be allowed to be deducted while assessing the taxable
income.
- If any industry provides direct employment to six hundred or more than six hundred Nepali citizens
round the year, it will be, in addition to other facilities, granted an additional income tax rebate at the
rate of ten percent for that year.
- If any other industry utilises locally available raw materials, chemicals and packing materials, etc.
on which excise duty is already imposed, the excise duty shall be reimbursed to the industry utilizing such
raw materials chemicals and packing materials. The amount to be so reimbursed shall be refunded within
sixty days after an application to that effect has been duly submitted.
- The customs duty is excise duty on raw materials and auxiliary raw materials, etc. utilized by any
industry in connection with its product during its production shall be reimbursed on the basis of the
quantity of the export.
- In cases where any industry sells its products in the Export Promotion House, the customs duties levied
on the raw materials imported for producing the products so sold as well as the excise duty levied on the
products so produced shall be reimbursed to the concerned industry on the basis of the quantity of sale and
export.
- If an industry sells its product within the Kingdom in any foreign currency, the excise duty and custom
duty on such product and customs duty, excise duty levied on the raw materials and auxiliary raw materials,
etc. utilized in such product shall be reimbursed.
- The customs duties and excise duty on the production materials of intermeiate goods to be utilized for
the production of exportable industrial goods and excise duty levied on the product shall be reimbursed to
the concerned industry producing the intermediate goods, on the basis of the quantity of export.
- No tax, fee or charge of any kind shall be levied on the machine, tool, equipment, machinery and raw
material to be employed by an Export Promotion Industry as well as on the products of such industry.
Provided that if, for any, reason, any product of such industry is required to be sold within the country,
tax, fee or charge thereof shall be required to be paid on the basis of the quantity of sale.
- An industry will be entitled, for the purpose of the income tax to deduct the amount of expenses
incurred by it for the long-term benefit provided to its workers and employees including housing, life
insurance, health facilities, education and training.
- The rate of customs to be levied on the basic raw materials which are not produced in Nepal and are
required for the production of industrial machinery or of any other goods may not be more than the rate of
import duty that may be levied on the import of industrial machinery or ready made goods as is produced
with the use of such raw materials.
- If an industry producing intermediate goods sells its products to any other industry producing finished
goods, the custom duty and excise duty to be levied on such products will be allowed to be adjusted on the
basis of the quantity utilized by the industry producing the finished goods.
- Provided that such a finished goods producing industry shall be required to have been registered for
the purpose of excise duty.
- Forest-based industry may be made available any forest on a leasehold basis.
- No royalty shall be imposed if any industry generates electricity for its use.
- His Majesty's Government may, be notification published in the Nepal Gazette, grant additional
facilities to the Export Promotion Industry, and prescribed industries established in the Export Processing
Zone and in the government or non-government industrial estate.
- On the recommendation of and with the decision of the Council of Ministers, and by notification
published in the Nepal Gazette, additional facilities may be granted to any National Priority Industry or
any industry established in Nepal by the way of invention therein.
- Cottage industries provided with additional facilities.
- Cottage Industries
With the exception of cigarettes, bidi, cigar, chewing tobacco, khaini industries and industries producing other
goods of a similar nature utilizing tobacco as the basic raw material, alcohol and beer producing industries,
Handloom, Pedalloom, Semi-automatic loom. Warping, Dyeing and Printing, Tailoring (Other than Readymade Garments),
Knitting, Handknitted Woollen Mat and Blanket (Radi, Pakhi), Woollen Carpet, Pashmina, Woollen Garments, Carpentry,
Wooden Artistic Product, Cane and Bamboo Works, Natural Fibre Products, Handmade paper and Goods made up thereof.
Gold, Philigiree Procucts including Silver, Brass, Copper Precious and Semi Precious Stones, Ornaments, Sculptures
and Pottery, Honey, Chyuri, Cardamom Processing, Clay or Ceramic Pottery, Leather Cutting and Tanning, Rural
Tanning and Leather Goods producing Works, Jute, Sabai Grass, Babio, Choya, Cotton Thread Products, Artistic
Products made up of Bones and Horns, Stone Carving, Ceramic Fine Arts, Pauwa, Boutique, Incense Stick (Dhup),
Dolls and Toys Industries and cottage industries with the fixed asset of up to two hundred thousand rupees.
Note:
- Unless otherwise mentioned speciafically, machines of the above mentioned industries should not
employ through electric motors of diesel or petrol or crude oil engine more than a total of five kilowatt.
Power looms shall not be included under Cottage Industries.
- Permission shall be required for the establishment of mechanised woollen spinning and mechanised
woollen carpet manufacturing.
- Industries Requiring Permission
Industries producing explosives including arms, ammunition and gunpowder, security printing, bank notes and coin industries.
Cigarettes, bidi, cigar, chewing tobacco, khaini industries and industries producing goods of a similar nature utilizing
tobacco as the basic raw material and alcohol or beer producing industries.
- National Priority Industries
- Agro and forestry-based industries.
- Engineering industry (producing agricultural and industrial machine).
- Industry manufacturing fuel saving or pollution control devices.
- Solid waste processing industry.
- Road, bridge, tunnel, ropeway and flying bridge constructing and operating industry, and trolley bus
and train manufacturing and operating industry.
- Hospital and nursing home (only outside the Kathmandu valley).
- Industries producing ayurvedic, homoeopathic and other traditional medicine, and industries producing
crutch, seat belt, wheel chair, stretcher and stick and so on to be used in aid of the disabled and
orthopaedic.
- Cold storage installed for the storage of fruits and vegetables.
TRADE POLICY 1992
- Objectives:
- To enhance the contributions of trade sector to national economy by promoting internal and
international trade with the increased participation of private sector through the creation of an open and
liberal atmosphere.
- To diversify trade by identifying, developing and producing new exportable products through the
promotion of backward linkages for making export trade competitive and sustainable.
- To expand trade on a sustained basis through gradual reduction in trade imbalances.
- To co-ordinate trade with other sectors by expanding employment-oriented trade.
- Basic Policy:
- The role of public sector will be minimized and used as a catalyst to expand the role of private sector
in trade.
- A liberal and dynamic trade policy will be pursued with the objective to improve balance of payments
position by promoting exports to increase foreign exchange earnings as well as by fulfilling internal
demand of economic and quality products.
- Production of quality goods and services will be increased for internal consumption as well as for
exports through effective and appropriate utilization of economic resources.
- Special efforts will be made to promote and diversify trade both in the range of commodities and
country destinations.
- Liberal procedures will be adopted for encouraging interactions between trade and industry for
sustained export promotion and for fulfillment of internal demand through increased domestic production.
Emphasis will be given on modernizing management and technology, on promoting market and on attracting
direct foreign investment in order to identify and develop new products as well as raise the production and
quality of the traditional products.
- The public sector trading corporations will gradually be privatized taking into considerations the
development and efficiency of the private sector.
- In support to above policy measures, necessary steps-as pre-conditions-relating to foreign exchange,
monetary and fiscal policies, will be taken up towards (full) convertibility of the Nepalese currency in
trade and service sectors. For this purpose, major changes will be made in the administrative procedures to
make them simple, transparent and dynamic.
- Taxation system will be simplified by introducing necessary changes in order to foster competition in
trade.
- Emphasis will be laid on institutional development and information network as well as on monitoring
system and quality improvement for the promotion of foreign trade.
- The existing trade treaties and agreements with various countries and international agencies will be
effectively implemented, and new ones will be concluded, as and when necessary, for the promotion of
international trade.
- Foreign Trade Composition of Nepal
| F.Y 1998/99 TO 2000/01 |
Value in '000 Rs. |
| Direction |
FY 1998/99 2055/56 |
% in Total |
FY 1999/2000 2056/57 |
% in Total |
FY 2000/2001 2057/58 |
% in Total |
| Exports: |
| India |
12,530,700 |
35.5 |
21,220,700 |
42.8 |
27,304,100 |
48.3 |
| Overseas |
22,180,871 |
62.9 |
27,827,917 |
56.2 |
28,690,299 |
50.8 |
| Tibet |
557,701 |
1.6 |
512,411 |
1.0 |
525,401 |
0.9 |
| Total |
35,269,272 |
100.0 |
49,561,028 |
100.0 |
56,519,800 |
100.0 |
| Imports: |
| India |
32,119,700 |
34.9 |
39,660,100 |
34.9 |
46,662,300 |
38.8 |
| Overseas |
58,262,294 |
63.3 |
69,838,040 |
61.4 |
68,276,422 |
56.8 |
| Tibet |
1,621,396 |
1.8 |
4,189,009 |
3.7 |
5,229,187 |
4.4 |
| Total |
92,003,390 |
100.0 |
113,687,149 |
100.0 |
120,237,909 |
100.0 |
| Trade Deficit: |
| India |
19,589,000 |
|
18,439,400 |
|
19,358,200 |
|
| Overseas |
36,081,423 |
|
42,010,123 |
|
39,586,123 |
|
| Tibet |
1,063,695 |
|
3,676,598 |
|
4,773,786 |
|
| Total |
56,734,118 |
|
64,126,121 |
|
63,718,109 |
|
Note: - Trade with India for the F.Y 1998/99 and 1999/2000 is revised.
* Provisional Trade data with Tibet, Autonomous Region of China have been recorded through Tatopani Customs only.
Source: - Trade Promotion Centre, Rastra Bank & NCC Trade Directory Export Directory of Nepal.
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