Hefty tax weighs airlines down

SANGAM PRASAIN

KATHMANDU, JUL 11 -

Private airlines operators on Sunday said heavy tax levied by the government in the domestic airline operations since 2002 has made it difficult for the aviation sector to survive.

At an interaction on 'Existing Issues of Nepalese Aviation Sector', here on Sunday, the umbrella organisation of private airline companies, the Airlines Operators Association of Nepal (AOAN), said heavy lease tax, landing charge, parking charge,

navigation charge, housing charge and other taxes levied on this sector has affected the efficiency and services, adversely affecting passengers.

The AOAN has suggested the government consider the issue in the upcoming budget so as to make the sector sustainable in the long run and one that would deliver more efficient and competitive services.

It also suggested the Civil Aviation Authority of Nepal (CAAN), the regulatory body which is preparing to revise the existing airfares, make the revision on a “scientific basis.” The airlines have not revised the airfare since 2006. In 2006, the aviation fuel was Rs. 53 per litre, which now costs over Rs. 75 per litre. 

The airlines are also suffering from extra Value Added Tax As per the VAT Act 1995, airlines are not allowed to raise the tax from passengers. However, the government imposes VAT on every spare part and other materials imported. “This is totally impractical as per the international theory,” said Yog Raj Kandel, general manager of Simrik Air, presenting a paper on 'Existing Issues of Nepalese Aviation Sector'.

According to him, the government's rigid lease tax has also affected the growth of private airline companies.

No aircraft has been leased for the past 7-8 years because of the 10 percent lease tax levied on leasing an aircraft. 

The lease tax was 3 percent before the government revised the Income Tax Act in 2001. The same tax is 1 percent in India. “This clearly shows that the private airline services in Nepal cannot compete with other international airlines,” Kandel said.

Similarly, over 50 percent tax on ground supporting equipment, tools catering equipment and other imported tools has also led to the airlines having to bear a high operating cost. Kishore Thapa, the newly-appointed secretary at the Ministry of Tourism and Civil Aviation (CAAN), said the recommendation made by the AOAN will be discussed.

He said the aviation industry needs to deliver efficient services so as to be awarded tax incentives and other financial packages.

 Rameshwar Thapa, president of AOAN, said Nepali private airlines have started cross-border flights, which is boosting  the aviation industry.

Biz sector slams special budget

SANGAM PRASAIN
KATHMANDU, JUL 12 -
Economists and business leaders on Monday said that the ‘special budget’ presented on Monday will not address problems the economy is currently facing. They also regretted the fact that the budget, once again, became a prey to political uncertainties.

 Economists and business leaders said the ‘special budget’ will affect the investment and employment opportunities in the next fiscal year. It will also hit the government target of reducing poverty, they added.

Until the Appropriation Bill for the next fiscal year is presented in the legislature parliament, the government has to manage expenditure and income through the ‘special budget.’

When will the full-fledged budget come? It all depends on how quickly major political parties resolve the deadlock over the formation of a new government. Former Finance Minister Prakash Chandra Lohani told the Post that the compulsion to bring in the ‘special budget’ shows the major political parties are not serious about the economy. 

“Constitution making has been delayed, corruption has increased and now the government fails to present a full-fledged budget. It indicates we’re gradually moving towards a failed state,” Lohani said.

Economist Biswombhar Pyakurel said a recent study of South Asian countries shows Nepal as an example where low political will and instability has marred the economic growth. “If the government fails to expedite development expenditure, economic activities will slow down affecting the poor,” said Pyakurel.

The private sector that was looking for incentives in the export sector through a full-fledged budget is also disappointed with the government presenting the ‘special budget.’ The special budget has failed to address the problems the economy is currently facing. The private sector that contributes 70 percent in investment is worried about the situation that forced the presentation of the ‘special budget.’

The heads of two apex bodies of the Nepali private sector, Kush Kumar Joshi and Binod Kumar Chaudhary lamented that political leadership is yet to realise the grave consequences of not coming up with a full-fledged budget.

Joshi, the president of Federation of Nepalese Chambers of Commerce and Industries, bluntly termed the ‘special budget’ as a move to provide salaries to civil servants. “We cannot term it a budget as it has no policies and programmes,” he told the Post.

“Once again, the country’s development process and economy has taken a backseat,” said Chaudhary, the president of Confederation of Nepalese Industries (CNI). “Economic development can’t be accelerated through a special budget.”

No chill pill, for sure 

"Govt presents Rs 110.21 b special budget"

KATHMANDU, JUL 12 -
For the second time in three years, there is a special budget, thanks to political wrangling. The government has managed a way out for regular government expenditure but development and expansion of economy will be hit.

Even Finance Minister Surendra Pandey regretted that the budget was a victim of political tussles.

“It is not a happy  situation,” said Pandey on Monday. He presented a special budget of Rs 110.21 billion, tabling the ‘Bill Empowering Government to Withdraw Money from Consolidated Fund’ to carry out regular services in the coming fiscal year.

The bill will give the government authority to incur expenditure up to one-third of the total revised expenditure of the current fiscal year from the consolidated fund until the Appropriation Bill, 2010 is tabled in the Legislature-Parliament.

Of the Rs 110.21 billion, the government proposes Rs 31.40 billion for chargeable expenditure (that does not need parliamentary approval) for the whole fiscal year 2010-11 and Rs 78.81 billion for expenditure appropriated from the consolidated fund which will amount to one-third of the actual expenditure of the current fiscal year.



Economists and business leaders say the special budget will affect investment and employment opportunities in the new fiscal year. With GDP growth declining and major economic indicators including balance of payment bleak, the special budget was not the right prescription. “This is not a budget,” said Kush Kumar Joshi, president of Federation of Nepalese Chambers of Commerce and Industry. “It will reverse economic development.”

Pandey acknowledged, “The economy will suffer if the formation of a government is delayed,” said Pandey.

“A full fledged budget is a must.” Delay in full-fledged budget will have multiple impact on the economy. It will not only hit the growth of revenue collection but also delay investment and expansion plans of the private sector. As no changes can be made in tax structure, revenue collection will be hit.

Also hit will be new employment opportunities that the annual budget would provide through new programmes. “From government expenditure to foreign grants, loans and funds for multi-year contracts, all will be affected,” said Minister Pandey.

Import substitution a must, says govt

SANGAM PRASAIN

KATHMANDU, JUL 03 -

The government will take import substitute measures to protect the domestic industry in the areas of meat, vegetables and fruits, cements and dairy. With the trade deficit as high as 52 percent and Balance of Payment deficit at Rs. 17.36 billion, the government is seeking to reduce imports.

Finance Secretary Rameshwor Khanal on Saturday said the measure would substitute imports worth Rs. 25-30 billion. Nepal imports 55,000 tonnes meat annually while import of other agro products is high and which has triggered BOP deficit to some extent.

“We have low competitive edge products compared to neighboring countries. In this situation, substituting import of these products will be viable as we cannot think of exporting products that reduce the ballooning trade gap immediately,” he said.

He said that the government would also take some tough measures on petroleum products (PoL) and hike electricity tariff in the upcoming budget. “We have to take these measures keeping in mind the increasing demand for PoL products as the government will not be able to subsidize the products that account for the huge BOP trade,” Khanal said at a pre-budget discussion organised by Society for Economic Journalists of Nepal (SEJON).

The government will also be harsh on electricity tariff. If the same tariff remains, the Nepal Electricity Authority (NEA), which is reeling under a huge loss, could go bankrupt. “This will affect people for a short time but will be beneficial and sustainable,” he said.

The upcoming budget has also adopted measures to substitute some import based industrial and agro products by prioritising their production and encouraging them in the home country. Among the industrial products, import of cement and dairy products would be substituted by domestic production. Secretary Khanal said that by mid-January there will be an additional 12,000 tonnes cement production in the country, which will help substitute import of cement.

“If one more big dairy processing industry is established, it will help import substitution,” Khanal said adding that the government was committed to provide all facilities regarding roads and electricity in those industries.

The government is planning to bring the advance budget by the next week. “A full-fledged budget will be announced by the national consensus government,” said Khanal quoting the Prime Minister who resigned recently.

Khanal said the development budget will take a slow growth path due to lack of political commitment. Delay in budget will not hamper the monetary policy and other issues related to it, but it will severely impact the development budget.

Garment exports sink to zero

 

 SANGAM PRASAIN

KATHMANDU, JUL 05 -

Long plunging garment exports to the US have hit rock bottom with not one piece being shipped in June. Nepal's readymade garment manufacturers received zero orders from the US during the month.

Statistics of the Garment Association of Nepal (GAN) show that garment exports in the first six months of 2010 recorded a decline of 38.9 percent. According to GAN, exports to the US amounted to US$ 2.19 million during the review period. Exports during the first six months of 2009 were worth US$ 3.59 million.

Exports to the US have been consistently declining since the elimination of quotas in global apparel trading in 2005. The decline in exports to the US in the last four years has pushed Nepal's garment industry to the verge of collapse.

Even though exports to the US had grown by around 25 percent in January 2010, the last five months have been dismal. According to GAN, exports have nosedived by 90 percent during the period 2005 to 2009.

Garment manufacturers are not surprised by this massive decline. "This is not a new story for the garment industry," said GAN past president Kiran Sakha. "Manufacturers and exporters both have lost hope due to the constant labour unrest and bandas that have crippled production."

"This was bound to happen," said trade expert Ratnakar Adhikari. He added that Nepali readymade garments had been losing competitiveness in the US market. "Garment manufacturers and exporters should look to other markets including the EU rather than relying on the US market only," said Adhikari.

With Nepal not being able to get duty-free access for its readymade garments in the US market, the only hope is the Trade and Investment Framework Agreement (TIFA) which Nepal and the US are to sign in the near future. TIFA has provisions that will help Nepal to gain favourable market access in the US.

Team hails itself for scaling Yala Peak

SANGAM PRASAIN

KATHMANDU, JUL 07 - A team of civil servant mountaineers are raring to have a crack at the world's highest peak after scaling the 5,550-m Yala Peak in Langtang as a warm-up exercise.

 

The 20-member group of mountain climbing bureaucrats plan to make an attempt on Everest during the next spring season. Speaking at a press conference on Tuesday, the expedition members said that the objective of their mission was to gather information based on facts and to keep themselves abreast of the impacts of climate change on the Himalaya.
The team also wants to help make Nepal Tourism Year 2011 a success through the participation of civil servants, said Lilamani Poudel, secretary at the Office of the Prime Minister.
“The Everest expedition by civil servants will help to boost their morale besides helping to gather information regarding mountain tourism,” said Kishore Thapa, secretary at the Ministry of Tourism and Civil Aviation.
The adventurous officials underwent extensive training at the Mountaineering Training Foundation last week under the guidance of seasoned climbers.
The government has allocated Rs. 3 million for the warm-up climb and Rs. 30 million for the Everest expedition.
Ang Tshering Sherpa, immediate past president of the Nepal Mountaineering Association (NMA), said that the country had tremendous potential in mountaineering tourism, and that the Everest expedition would enlighten the government officials on the kind of programmes and policies needed to boost the sector.
Pemba Gyalzen Sherpa, chief instructor to the expedition, said that the performance of the civil servants on Yala Peak had been more encouraging than he had expected.
“I had estimated that 60 percent of the team would be able to get to the top, but everybody made it,” he said. He added that Everest would be much tougher and that success would be determined by weather conditions.

Petrol, diesel dearer, LPG spared

SANGAM PRASAIN

KATHMANDU, JUL 07 - Nepal Oil Corporation (NOC) has revised oil prices effective from Tuesday. The state-owned monopoly has increased the price of petrol by Rs. 3 per litre and diesel and kerosene by Rs. 2.50 per litre citing mounting losses due to poor supply. 
Petrol now costs Rs. 85 per litre and diesel and kerosene both Rs. 65.50 per litre. Prices are lower by Rs. 1.50 per litre in the Tarai. With the hiked rates, NOC will make a monthly profit of Rs. 79.9 million, said deputy managing director Bachhu Kumar Kafle.
He added that NOC makes a profit of Rs. 5 per litre on petrol, Rs. 0.76 on diesel, Rs. 8 on kerosene and Rs. 16 on aviation fuel. However, NOC still incurs a loss of Rs. 130 on a cylinder of LPG, Kafle said. NOC said it would not hike the price of LPG immediately. “The government has provided Rs. 800 million to adjust the price of LPG, and increased profits on gasoline will help offset the losses incurred in cooking gas,” said Purushottam Ojha, secretary at the Ministry of Supplies.
NOC said its losses in the current fiscal had reached Rs. 1.16 billion. The company also has outstanding loans of Rs. 10.74 billion.
With the country crippled by a petroleum shortage for more than a week, NOC hiked the prices saying that the deficit had been caused by India Oil Corporation’s (IOC) move to cut deliveries by 50-60 percent as NOC had fallen behind in its payments.
Kafle said they revised the prices in line with the recent hike made by IOC. The Indian supplier had revised its prices on July 1 resulting in monthly losses of Rs. 100 million to NOC. He added that it had become necessary to raise the rates as fuel was cheaper in Nepal and this was encouraging smuggling to India. “This revision has not been induced by international prices. We have been forced to hike the rates as we were short of cash to import fuel,” Kafle said.
According to NOC, it imported 957,711.91 kl of petroleum products in the first 11 months of the current fiscal including 553,117 kl and 147,189 kl of diesel and petrol respectively, 128,296 tons of LPG and 76,008 kl of aviation fuel.

Revised Rates

Year           Petrol        Diesel       Kerosene
                    (Rs/Lt)      (Rs/Lt)         (Rs/Lt)
2003               56             33.50          27
2004               62             41               36
2005               67             46               39
2006               67             52.50          47.65
2007-Oct       73.50         56.25          51.20
2007-Dec       80              56.25          51.20
2008              100             70               65
2008-Dec      85.50         60.50          60.50
2009              77.50          57.50          57.50
2010-Feb      77.50           59               59
2010-Mar      80                61               61
2010-Apr       82               63                63
2010-July       85               65.50           65.50

Source: NOC