Government Halts Export Subsidy Applications, Leaving Past Dues and Policy Uncertain

The government’s decision to stop accepting applications for cash subsidies on exports has created uncertainty over whether exporters will receive payments accrued in the previous fiscal year (FY 2024/25). Though the policy granting export subsidies has not been formally scrapped, the lack of clarity on pending disbursements has alarmed exporters and industry stakeholders.

Since FY 2012/13, Nepal has been providing cash incentives ranging from 4 to 8 percent to exporters of around three dozen products, including cement, readymade garments, handicrafts, processed herbs, steel, chhurpi (hardened cheese), pashmina, catechu, and plywood. These subsidies were granted under the Procedures for Providing Cash Subsidies on Exports (Second Amendment), 2079, which required exporters to apply to the Department of Industry within three months after the fiscal year ended.

However, on October 9, the Department of Industry issued a notice stating that it would not accept applications for FY 2024/25. The department cited concerns about creating new financial liabilities in the current fiscal year (FY 2025/26). This has raised doubts over whether the subsidies for the previous year will ever be paid.

A senior official at the Department of Industry said the status of subsidy payments for the FY 2024/25 remains uncertain. “The procedures for export subsidies have not been repealed, which means the dues should technically be paid. However, since no decision has been made to extend the application deadline, the ministry has decided not to accept applications for now,” the official said.

Jitendra Basnet, spokesperson for the Ministry of Industry, Commerce and Supplies, confirmed that discussions are underway with the Ministry of Finance regarding possible payment of subsidies to those who already applied before the notice. “No final decision has been made,” he added.

The department has also returned applications that exporters had sent through postal mail, suspending all processing of subsidy claims. Officials said the government decided to stop the scheme due to its inability to clear old dues and the need to allocate large sums for reconstruction of structures destroyed during recent protests and for the upcoming elections.

According to Nepal Rastra Bank (NRB), between FY 2012/13 and 2023/24, the government paid more than Rs 7.9 billion in export subsidies. Still, about Rs 5 billion remains unpaid.

Exporters accuse the government of backing out of its commitment, which they say has discouraged exporters at a critical time.

Pashupati Dev Pandey, president of the Nepal Readymade Garment Industry Association, criticized the decision, saying it undermines confidence among exporters. “This move discourages those who have long relied on the 4 percent export subsidy,” he said.

Similarly, Raghunandan Maru, president of the Nepal Cement Manufacturers’ Association, said the government’s sudden reversal has dampened the morale of industrialists. “When exporters are already struggling, such decisions further demotivate them,” Maru said, adding that his association plans to meet the concerned minister to request reconsideration. He warned that the decision could hurt cement exports, which had recently begun increasing toward the Indian market.

Before halting the program, the government had been preparing to change the modality of export incentives. According to spokesperson Basnet, the ministry is now shifting from export-based subsidies to a production-linked incentive model. “The current budget has allocated Rs 960 million for this purpose. The new system will focus on encouraging production rather than providing direct export subsidies,” he said.