Policy Reforms Energize Entrepreneurs Despite Industry Budget Cut
The government has allocated NPR 831 million for the industry and commerce sectors for the upcoming fiscal year 2078/79, marking an 18 percent reduction in the budget. To streamline investor services, the ‘Investment Express’ concept will be implemented within the next three months, consolidating all services in one location. Customs duty rates have been reduced on 273 types of raw materials, and excise duties on 360 items have been abolished.
May 29, Kathmandu – Although the government claims to be shifting the industrial and commercial sector towards production-oriented growth, the budget has been cut. Finance Minister Dr. Swarnim Wagle presented a budget for fiscal year 2078/79 that is NPR 183 million less than the current fiscal year, with a total allocation of NPR 831 million. While structural reforms and the implementation of Investment Express in the industry sector have been announced, the budget still reflects an 18 percent decrease. The government announced that within three months, all investor-related services will be made available at a single point through the Investment Express. Services will cover company registration, financial assistance, tax processes, and visa applications. The budget also states, “Projects approved by the Investment Board will not require additional approval from other agencies, as per legal provisions.” Investment visas will be issued for approved projects. Processes such as share transfer, tax payments, asset valuation, loan repayment, dividend distribution, and liquidation will be simplified along with social benefits.
Virendra Raj Pandey, President of the Federation of Nepalese Industries, characterized the budget as overall positive for facilitating investment and ease of repatriating profits. He stated, “The budget will boost both confidence and investment. Previously, foreign investors faced difficulties in repatriating profits; now, they can transfer funds abroad by simply notifying authorities, which is a positive development. Many of our recommendations have been included in the budget.” Policies will advance provision of industrial infrastructure and energy incentives. Private sector involvement will be encouraged in the construction and operation of industrial zones like Motipur and Mayurdhapa. A ‘Special Economic Administrative Zone’ will be established within special economic zones to centralize decisions on taxation, customs, import-export, and investment. To enhance industrial competitiveness, the government will review electricity demand charges and provide concessions on electricity tariffs. Industries will be permitted to mortgage structures built on government-provided land for banking purposes.
A ‘Business Revival Loan’ scheme will target industries unable to operate at full capacity due to capital shortages. NPR 65 million has been earmarked for industrial infrastructure. Emphasizing startups, innovation, and technology as key industrial reforms, a minimum of 1 percent of capital expenditure will be allocated for science, technology, research, and innovation. Startups will receive not only loans but also early-stage grants, concessional loans for ventures with proven potential, and growth capital for expansion stages. Minister Wagle explained, “Startups will be strengthened via profit-based tax incentives, priority in public procurement, and digital registration aligned with their recognition, skills, market access, and financial connectivity.”
The government announced the establishment of the ‘Mining and Minerals Authority’ to regulate mining, petroleum, and environmental management sectors. Petroleum commercial production technology will be advanced in Dailekh. The government plans to reduce its involvement in the Dhaula Dhaulee iron industry by introducing a public-private partnership (PPP) model. NPR 50 million has been allocated to ensure electricity access, road construction, and maintenance for mining and large industries. NPR 22 million is dedicated to replacing traditional boilers with electric boilers.
To facilitate foreign trade, customs duties on raw materials will be reduced by at least one tariff level compared to processed goods. Customs duties were cut on 273 raw materials, and the existing 11 tariff levels were consolidated into seven. NPR 118 million has been allocated for the implementation of the Trade and Industrial Logistics Master Plan. President Pandey noted that this will provide significant relief to domestic industries. He said, “We sought a customs duty gap of at least 5 to 10 percent between processed goods and raw materials; reducing duties on 273 items maintains that gap, enhancing competitiveness.” The budget also addresses excise duties as per private sector demand. “Our position was that excise should only apply to items harmful to health and environment or those utilizing biofuels; now, excise on 360 items will be abolished,” he explained.
Customs procedures will be improved to introduce a fast-track clearance system called the ‘Blue Lane’ for reputable businesses, with an online clearance process based on transaction value ensuring transparency. Regulatory bodies will be strengthened to eliminate syndicates, cartels, black marketing, profiteering, and unhealthy competition. To stabilize fuel prices, a study on ‘futures contracts’ will be conducted, and policies encouraging the installation of electric vehicle (EV) charging stations at petrol pumps will be adopted.
Tax system reforms include positive steps towards resolving disputed tax cases. President Pandey noted, “The personal income tax threshold has been increased, and the top tax rate reduced by 10 percent. A provision allows payment of 1 percent to waive penalties on disputed tax, easing burdens on businesses.” As part of financial reforms, a personal credit scoring system will be implemented for the first time, along with regulation of peer-to-peer transactions. Policy measures will support the provision of long-term loans at stable interest rates in agriculture, industry, tourism, and hydropower sectors. To improve management of non-performing loans in the banking sector, Minister Wagle announced the establishment of a ‘National Asset Management Company’ by the end of this fiscal year.