NADA Automobiles Association of Nepal (NADA) has urged the government to continue the process of opening letters of credit (LC) for private cars, jeeps and vans.

The Nepalese automobile industry which plays a pivotal role in the country’s economy has an investment of more than one hundred billion rupees and it employs about one million people, directly and indirectly. Even though the revenue contribution from this sector is almost double, the government has turned a deaf ear to NADA’s plea citing depleting forex reserves and liquidity crisis. Besides the factors of market behavior that can affect the automobile industry, the overdose of government regulations has been inappropriate on many fronts.

Statistics of the Department of Customs show that the import restricted passenger vehicle segment, which is 1 percent of the country’s overall import, contributes more than 6 percent to the import revenue. The import revenue which stood at Rs 36.21 billion in the last fiscal year has now decreased to Rs 34.06 billion. This has also seen a massive drop in revenue from the overall industry. The government’s revenue from the overall automobile industry for the current fiscal year stands at Rs 74.83 billion against Rs 89.89 billion during the same period collected last fiscal year. In terms of impact,

The automobile industry operates in a large ecosystem comprising different stakeholders. More than 25,000 small, medium and large businesses including dealers, garages and parts shops directly fall under the industry’s ecosystem. Due to the current import restriction, the automobile industry, which is one of the largest employment generating sectors in the country, also puts at risk the lives of more than one million families.

The current import restriction of passenger vehicles has been rather tough for the already struggling industry. To help the industry recoup lost ground, the policy intervention and regulation should take into account the practical problems of the industry. Going forward the government should look at the entire ecosystem in totality and should fix its focus on other alternatives to overcome the current liquidity crisis.