Govt to provide 50% VAT rebate on dairy products

KATHMANDU, March 7, 2013

Bowing down to pressure from big dairy producers, the government has decided to provide 50 percent Value Added Tax (VAT) rebate on sales of dairy products.

Local dairies were earlier exerting pressure on the government to exempt their products from VAT citing erosion in competitive power of their products to similar Indian products.

At one time, they had even threatened to re-introduce milk holidays and reduce fresh milk collection from dairy farmers to press their demands.

"We have recently decided to provide 50 percent VAT rebate on sales of dairy products as per the recommendation of the Ministry of Agriculture Development (MoAD) so that local dairies can strengthen their capacity and compete with Indian dairy products," Rajan Khanal, joint-secretary at the Ministry of Finance (MoF), told Republica.

Khanal said the new decision would be enforced once the government publishes list of VAT-exempt products through the gazette.

Once the decision is enforced, the government will start providing 50 percent VAT concession on sales of paneer, butter, clarified butter, cheese, ice cream and powdered milk. Fresh milk and curd are currently exempt from VAT.

Existing VAT Act has specified 13 product categories, including basic agricultural products, goods of basic need, live animal and animal products, agriculture inputs, medicine and health service, education, books and newspapers, artistic and cultural goods and services, transport service, services rendered by artists, writers, sportsman and artists, casinos service, financial service, insurance services, gold and woolen products, among others, as exempt from VAT.

Pradip Maharjan, president of the Dairy Industries Association, said Nepali dairies would be capable to compete with Indian products once VAT concession is provided.

"Indian products, which are entering Nepal without paying customs duty, are over 30 percent cheaper as compared to domestic products. VAT concession will help us bring down our production cost, making our products more competitive in the domestic market," said Maharjan.

The government decision to waive VAT on sugar, refined flour and vegetable ghee had also drawn flak from revenue officials in the past. The latest government´s move to provide VAT rebate on additional dairy goods has also created dissatisfaction among MoF officials.

"We are continuing to lose revenue from VAT every passing year due to waiver or concession of VAT on additional products due to pressure from different interest groups. Such trend has encouraged businesspeople to make unnecessary demands for VAT waiver," said an official at the Inland Revenue Department (IRD).

List of goods included in VAT exemption list has increased significantly over the last couple of years as the government continues to bow down to demands from entrepreneurs without considering the impact on revenue collection. The government reserves the authority to waive VAT on particular commodities if it deems necessary.

"Now, even tourism entrepreneurs have approached us to waive VAT on TV sets used in hotels, which is ridiculous," said the official.

Worse, the government has failed to bring new sectors under the net of VAT despite repeated attempts. Large number of brick kilns, law professionals, medical doctors and stationary producers, among others, are still not covered by VAT regime. As per the government´s estimate, at least 400 brick kilns alone are evading VAT worth Rs 400 million annually.

Collection of VAT--the largest government revenue source, which accounts for around 30 percent of the total revenue collection--rose to Rs 47.08 billion, up 18.06 percent, in the first seven months of the current fiscal year.

Source: Republica

Tourist arrivals up 6 percent in Feb

KATHMANDU, MAR 06, 2013

Nepal welcomed 45,123 tourists in February, up 6 percent compared to the same period last year.

Figures released by Tribhuvan International Airport (TIA) show that arrivals from Asia (other than South Asia) grew 46 percent. Arrivals from China, one of the fastest growing tourist markets for Nepal, jumped 135 percent to 7,601 in February. However, arrivals from India, the largest source market, dropped 18.2 percent to 11,093 in February, TIA said.

Visitor arrivals from Malaysia and Singapore registered a positive growth of 288.1 percent and 111.9 percent respectively. However, visitor arrivals from Japan, South Korea and Thailand slipped 20.1 percent, 29.4 percent and 0.3 percent respectively. Arrivals from the South Asian region recorded a negative growth of 15.2 percent with Pakistan (44.3 percent) and Sri Lanka (35.3 percent) registering positive growths. Visitor arrivals from Bangladesh declined 5.3 percent.

Meanwhile, the European market registered a negative growth of 5.5 percent with major destinations showing fluctuating arrival figures. Arrivals from Germany and the Netherlands rose 8.3 percent and 21 percent respectively while arrivals from the UK, France, Italy, Switzerland and Russia recorded negative growths of 6 percent, 13.7 percent, 31.8 percent, 8.7 percent and 8 percent respectively.

Tourist arrivals from the US, Canada and New Zealand increased 11.2 percent, 42.2 percent and 44.8 percent respectively. However arrivals from Australia decreased 5.5 percent.

A total of 48,783 foreign tourists departed from TIA in February 2013.

Source: The Kathmandu Post

Air travel drops due to high fares, better road transport

KATHMANDU, MAR 06, 2013

High airfares and convenient surface transportation have caused a decline in domestic air passenger traffic in 2012. According to Tribhuvan International Airport (TIA), domestic passenger movement dropped 0.55 percent to 1.575 million in 2012. Airport authorities and airlines said that a reduction in airline seat capacity and an economic slump were other reasons why fewer travellers chose to fly in 2012.

“Nowadays, a large number of luxury buses are operating on the highways and due to less road blockades, price conscious travellers have many options to travel which has adversely effected airline occupancy,” said Purna Chudal, chief of Kathmandu’s domestic airport terminal.

Likewise, a drop in business activities following a downturn in the real estate business and development activities due to the release of a partial budget have also been cited as reasons for the reduction in air traveller movement. The Nepali skies saw 70,877 flights in the review period, a drop of 10.49 percent. According to the stats, an average 195 planes took off and landed at TIA daily.

AIRFARE HIKES

Industry watchers said that a sharp hike in airfares in the form of an increased fuel surcharge had discouraged frequent fliers.

The Airlines’ Operators Association of Nepal revised the fuel surcharge thrice in 2012. The fuel surcharge has risen by more than 25 percent during the year.

For example, flying from Kathmandu to Bhadrapur now costs Rs 6,550 (Rs 3,250 fare and Rs 3,300 fuel surcharge), compared to Rs 4,200 in 2010. Similarly, the normal airfare to Pokhara has soared to Rs 4,035 from Rs 2,500 two years ago.

“The reason airlines are only getting their frequent travellers is the airfare structure that has increased significantly,” said Ankur Rana, reservation manager at Yeti Airlines. Airlines said fuel accounts for more than 30-35 percent of their overall operating cost, and that they were compelled to hike the surcharge which has resulted in a significant rise in airfares over the last two years.

Nepal Oil Corporation (NOC) hiked prices of aviation turbine fuel (ATF) by 10.09 percent to an all-time high of Rs 120 per litre in 2012. However, due to an ongoing competition between two major aviation rivals — Buddha Air and Yeti Airlines — industry watchers said that travellers were still benefiting from the promotional fares.

Meanwhile, domestic passenger movement saw a robust growth of 12.83 percent in 2010 compared to 2009 as airlines cut fares amid stiff competition.

“As the country suffered the highest number of strikes in 2010, particularly in the Tarai region, domestic airlines saw a record high demand and also fierce price competition,” said Prajol Thapa, chief of marketing and sales of Simrik Airlines.

Sources said that it had become difficult for airlines to attract new flyers due to the price factor which has become non-affordable for many.

TWO RIVALS

According to TIA stats, Buddha Air secured 60 percent of the market share among the seven commercial domestic airlines. The carrier flew 881,611 travellers in 2012, up 27.59 percent.

Buddha’s nearest contender, Yeti Airlines took 28.74 percent. Yeti flew 452,806 travellers in 2012, a slim growth of 0.74 percent compared to 2011. Industry watchers said that the eventual collapse and irregular operation of struggling airlines like Agni Air, Guna Airlines and Sita Air had benefited Buddha and Yeti.

As usual, both airlines engage in an advertising war during the lean season even violating the basic code of conduct of promotional advertising.

“But actually, these rival airlines do not go for a price competition,” said an official at the Civil Aviation Authority of Nepal. “However, as per the market demand philosophy, they raise the airfare when traveller movement is high and announce promotional fares when travel demand is low,” the official added. Rana of Yeti admitted that fuel prices had put an extra burden on them, but the market still sees stiff cut-fare wars.

Apart from these two rivals, all five airlines saw a negative growth. Agni Air was the major loser in terms of passenger occupancy. Agni Air which has been grounded since mid-November last year due to its management problem, saw its passenger movement plunge 57.19 percent. The carrier flew 197,346 travellers in 2011. The carrier plans to resume flights in March.

Meanwhile, Yeti’s subsidiary Tara Air flew 68,758 travellers in the review period, down 12.09 percent. The state-owned national flag carrier Nepal Airlines lost 19.82 percent in 2012. The carrier flew 36,874 travellers. Among the major losers, Guna Air (now Simrik Airlines) saw the number of its passengers drop by 71.98 percent to 26,752. Simrik which has been operating flights to Pokhara and Mountain View flights, plans to operate to Simara from March 6. “We also plan to resume flight to Bhairahawa soon,” Thapa said.

Likewise, Sita Air saw its passenger movement drop by 43.36 percent to 8,803 in the review period.

Source: The Kathmandu Post

Transport entrepreneurs hinder plan to raise passenger insurance coverage

KATHMANDU, March 6, 2013

A plan to raise insurance coverage for every passenger traveling on public vehicles to Rs 500,000 is not likely to see the daylight as transport entrepreneurs have denied to sit for talks unless the government ensures proper enforcement of Motor Insurance Directive 2009.

The Insurance Board, the insurance sector regulator, had some time ago floated the idea of raising passenger insurance coverage from existing Rs 100,000 to Rs 500,000. The proposal was tabled to provide relief to people traveling on public vehicles and curb anomalies taking place in third-party insurance, under which compensation of Rs 500,000 is provided if an insured vehicle causes damage to properties and human lives that are outside of the vehicle.

The regulator then started holding talks with insurance companies and transport entrepreneurs to determine a premium rate for the coverage.

But soon after the talks began, transport entrepreneurs started voicing their objection.

“At a time when the government has not been able to properly implement motor insurance directive launched in 2009, proposal to make amendments to it is simply illogical,” said Dol Nath Khanal, general secretary of the Nepal Transport Entrepreneurs National Federation - an umbrella body of transport entrepreneurs which was leading talks with the Insurance Board.

His main concern was delay made by insurance companies in settling claims. “We have to wait for months to get the compensation and on top of that police make us pay more than the sum insured to settle disputes related to third-party claims,” Khanal claimed.

“If the government is able to effectively implement the directive for at least six months, we will do whatever the Insurance Board tells us to do,” Khanal said.
Talking to Republica earlier in November, Khanal had, however, cited extra amount that transport entrepreneurs will have to fork out to pay annual premium as the reason for their inability to accept the government´s proposal.

Currently, transport entrepreneurs are paying annual premium of Rs 150 per seat to insurance companies to provide passenger insurance coverage of Rs 100,000. Once the coverage is raised to Rs 500,000, per seat annual premium amount is expected to go up to a range of Rs 300 to Rs 400.

“Such a raise will definitely affect our profitability and put us in a tight position,” Khanal had told Republica in November, adding, “We do not want the Insurance Board to raise the premium or the coverage amount for now as we are not in a position to bear such cost.”

The government sources, however, cited different reason for differences expressed by transport entrepreneurs.

“They actually want the accident coverage for drivers and helpers to go up along with hike in passenger insurance coverage,” a person privy to the issue told Republica.

Currently, drivers and helpers of public vehicles are covered with insurance of Rs 500,000 each, as against Rs 100,000 for passengers.

“We are told that entrepreneurs will come under pressure from unions of drivers and helpers if they agree to raise insurance coverage of passengers without making similar changes to insurance coverage of their workers. Raising coverage for drivers and helpers in a similar range is not possible as insurance companies will not agree to subsidize the premium cost for them. That´s why the Insurance Board´s plan has hit a roadblock,” the source said.

Jyoti Baniya, general secretary of Consumer Rights Protection Forum, was of the opinion that consumers should not be affected by the blame game that is going on.
Baniya, who was one of the members of public transport fare fixing committee, said: “Considering the fare that transport entrepreneurs are collecting, they won´t lose anything even if the passenger insurance coverage amount is raised to Rs 1 million.”

Source: Republica