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Currently, the government has put a ban on passenger vehicle import citing the depleting foreign reserves due to the import of automobiles. What is your view on this?
Yes, the government has put a ban on passenger vehicle imports due to the decline in the country's foreign reserves, however, there are few aspects to it. The automobile import figure comprises everything from passenger vehicles to commercial vehicles, two-wheelers, tractors, spare parts, lubricants, tyres, etc. In this aspect, since tractors and commercial vehicles are mainly used for the farming, manufacturing and transportation of essential goods, there is no restriction on imports which is absolutely correct. Passenger vehicles, whose import is currently banned, constitute only a small fraction of the total imports out of automobile import and the government should reconsider this decision.
The passenger vehicle segment is the highest contributor of duties and taxes (250% to 350%) with total annual imports totaling just 15 Billion Rupees. The government will face a major challenge to meet its revenue target if it keeps restrictions on imports of passenger vehicles. As there are still many vehicles in transit so there may not be a visible difference in the next 2 -3 months, however, the effect will be seen from August 2022 onwards.
The car industry is already experiencing a significant slump due to the liquidity crisis and the unavailability of finance. Although there was growth in the first four months of the financial year, sales declined after November. Imports were declining even without the imposition of the ban. Imposing a ban will send a wrong message to manufacturers and they might even end up comparing us to Sri Lanka and stop taking our order without advance payment.
There is a long order to lead time in automobiles. This import prohibition means that even if imports are resumed in the middle of July and we place orders with companies, they will only accept production in September or October, which means Indian manufactured products will arrive in Nepal by November and other international manufacturers will arrive only by January 2023. Consequently, this will lead to a major shortage of vehicles in Nepal. And, if the government decides not to open by Ashad (mid-July), things will get even worse.
On average, automobile dealerships employ 2000-3000 across Nepal.If automobile import is banned, do auto dealerships give force leave to their employees? What about rentals to landlords and repayment of loans to banks? You have to remember that the automobile industry is generating lots of employment and business opportunity for people and it is an integral part of our economy.
The government should lift the ban on automobile imports and work on avenues to increase forex inflow from the upcoming fiscal year. If correct measures are not taken on the upcoming budget, it could very well lead to the collapse of the automobile industry. Furthermore, the government should not increase duty on any products whether automobile or non-automobile related as duty increase will sharply impact inflation in the country.
