Export-oriented industries will get tax refund facility on purchase of raw materials, according to the amended Trade Policy 2015 unveiled on Wednesday. Also, the government will provide additional benefits if the exporters use locally-produced raw materials.

The move is aimed at boosting exports and promoting local products to reduce ballooning trade deficit that has been hurting the economy. Nepal’s trade deficit rose to Rs689.36 billion last fiscal year, from Rs622.37 billion in 2013-14.

The new policy that came into effect from Wednesday states the facilities will be provided on both imported and domestically-purchased raw materials.

Last time the government had amended the policy was in 2009. The Cabinet had last week approved the amended policy.

The government would also refund the value added tax and excise duty imposed on outsourced goods produced domestically if the purchases are meant for exports, the policy said.

Minister for Commerce and Supply Sunil Bahadur Thapa said amended amended trade policy seeks to address the ballooning trade deficit. “The policy has included almost all the major issues and will be helpful for the domestic market to integrate with changing global trade,” he said.

Thapa said the policy also aims at helping Nepal meet its target of graduating to a developing country by 2022. He urged exporters to focus on a particular country for particular products. “One-product-one-country initiative could help boost exports,” he said.

The policy has pledged subsidies to export-oriented companies while importing modern equipment. It has also pledged surcharge waivers on transporting finished products along with machines and raw materials for export-oriented companies.

Amid criticism that the Nepal Trade Integration Strategy (NTIS) is ineffective to boost exports, the trade policy has sought proper coordination with the private sectors to identify goods with comparative advantage.

“To promote the competitiveness of such items, including the NTIS products, their value chain will be developed through public-private-partnership,” states the policy.

Commerce Secretary Naindra Prasad Upadhyaya said they amended the policy to ensure implementation of specific and focused programmes to correct the growing trade deficit. “It mainly focuses on improving the supply chain by promoting investment and institutional capacity building,” he said.

Upadhyaya sought the inter-ministerial coordination for effective implementation of the policy. “We have started devising an action plan for the purpose,” he said. “Through the action plan, we will also provide a timeline to implementing agencies for effective management of import substitute goods.”

Private sector representatives urged the government to consider promoting alternative energy, involving the private sectors in enforcement of anti-dumping measures, facilitating local products and capacity building while implementing the amended trade policy.

Pashupati Murarka, president of the Federation of Nepalese Chamber of Commerce and Industry, said lack of coordination among ministries resulted in weak implementation of policies. “The Commerce Ministry has announced waiving customs duty and other taxes, but the other ministries, including the Finance Ministry and Industry Ministry, often impose barricades while enforcing the policy regulation in practice,” he said.