Carpet exporters risk losing US, European markets

Nepali carpet producers and exporters say they are facing tough time retaining their traditional European and US markets as international buyers are not willing to buy carpets at the increased rates. Nepali carpet producers are preparing to raise price of hand-knotted Nepali carpets due to hefty rise in remuneration of workers. They say cost of production has increased significantly after remuneration of workers was increased in line with the government fixed wage. Though the fresh remuneration hike was enforced in mid-June, carpet entrepreneurs implemented it only from mid-August. Though there have been some improvements in the demands for Nepali carpets from Europe and the US, carpet producers and exporters said they were not in a position to supply carpets at the price agreed earlier with overseas buyers. “Double digit rise in remuneration of workers has jacked up our cost of production forcing us to increase the prices of our products,” Gopal Krishna Joshi, former vice president of Central Carpet Industries Association. “But foreign buyers are not interested to buy our products at the increased rate.” The government increased minimum monthly pay of workers to Rs 8,000, including Rs 2,900 in allowance, and daily wage at Rs 318. Earlier, workers were drawing minimum salary of Rs 6,200 per month and Rs 231 per day. With the fresh hike in remuneration, Joshi said wage per square feet of carpet has gone to Rs 1,600 from Rs 1,200. Four years ago, the wage per square feet was less than Rs 800. Over the past four years, prices of raw material, mainly wool, have increased considerably, according to carpet producers. “We can´t supply carpets without adjusting the price in line with the rising cost of production,” said Joshi. According to entrepreneurs, overall cost of production has increased by more than 40 percent during the four-year period. Average export price of Nepali carpets stand at around Rs 8,500 to Rs 9,000 per square feet. “We are trying to convince the European and US buyers that we were compelled to increase price of carpets due to rising cost of raw material and recent hike in wage of laborers,” added Joshi who is also the proprietor of Joshi Carpet Industries. Nepali carpet entrepreneurs are sending formal letters to the western buyers, informing them the reasons behind rice hike in prices of Nepali carpets. Meanwhile, Nepal´s carpet exports dropped by 13 percent during the first eleven months of 2012/13, compared to figures of the same period last year. According to Trade and Export Promotion Center (TEPC), Nepal exported 586,934 square feet of carpet worth Rs 5.1 billion during the review period. It had exported 662,732 square fee of carpet worth exported Rs 5.86 billion in the same period of 2011/12. Responding to economic slowdown in US and Europe, Nepali exporters had focused on the Chinese market for the last couple of years. They, however, are returning to US and European markets after demand from the conventional market started increasing gradually. “The positive thing is rate of decline in carpet exports has gone down compared to last year. We are hopeful that we can reclaim our buyers in western market which is more lucrative than the Chinese market,” Joshi added. China has been sourcing small-sized carpets from Nepal, while large carpets are popular in European and US market. Producers are interested to supply large carpets which are comparatively less costly compared to the smaller ones.