Despite Treaty, CVD Dogs RMG Sector

The Counter Valuing Duty (CVD) even after the bilateral trade treaty is haunting the Nepali readymade garment (RMG) industry. Though there were great expectations from the trade treaty, Nepali RMG industry is still awaiting preferential treatment. The trade treaty made during the visit of Prime Minister Madhav Kumar Nepal to India was supposed to support hugely in the economic enhancement granting relief to the Nepali people. However, no attention has been given to the four per cent additional duty charge on the maximum retail price (MRP) of Nepali garment export to India. The 2007-08 garment export to India data show that there was RMG export worth Rs 1620 million to India but due to the additional four per cent duty, the export possibility to India is declining.

"The four per cent CVD is rational but we are having great problems due to the additional duty charge on MRP," said Garment Association of Nepal (GAN) president Prashant Kumar Pokharel adding that they are ready for CVD on transaction value but CVD on MRP is not fair. He pointed out that as it is the MRP itself is four times the factory price and that additional CVD on it makes a great difference in the garment price.

"There should be preferential treatment in trade to Least Developed Countries (LDCs). The trade treaty recognized new products and allowed duty free access to about 65 different products and opened five more customs points but still the garment sector is not getting facilities in export trade," said Pokharel. There is great scope for Nepali RMG in the Indian market as currently 70 per cent of Nepali RMG is exported to India. The export scenario to the United States, which used to be the largest buyer of Nepali RMG, is at zero.

According to Pokharel, a secretary level meeting in Kathmandu on November 10 is scheduled to be held where the government will forward its request for removal of trade barriers and making trade more compatible with India. WTO ministerial meetings will also be organised on November 30, December 1 and December 2 where people representing the private sector will participate.

"We are hopeful that issues related to the Nepali RMG export will be addressed there. We are trying our best to safeguard the garment sector, and we hope the secretary level meeting might help to sort our problems," said Pokharel.

Recent garment export to the US data show that the export of Nepali RMG in September fell by 86 per cent. The total Nepali RMG exported in September was worth $90,860.43.