FNCCI Urges Govt to Reinstate Export Subsidies

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has urged the government to reinstate export subsidies, saying that the recent suspension of the program could severely impact investment, exports, and employment.

A statement issued Tuesday, October 14, by the country’s top private sector body emphasized the decision could undermine Nepal’s already fragile export sector and widen the country’s trade deficit.

Nepal introduced the cash subsidy system in the fiscal year 2011/12 to promote the export of domestically produced, value-added goods.

However, the Department of Industry, through a notice issued on October 9 announced it would no longer accept applications that could create additional liabilities in the current fiscal year, 2025/26. The department, citing directives from the Ministry of Industry, Commerce, and Supplies, also requested all stakeholders not to submit self-declaration details for last fiscal year’s export, a move that has left many business operators uncertain about future export incentives.

Business representatives argue the cash subsidy program has played a crucial role in boosting exports and mitigating Nepal’s trade imbalance by helping exporters compete internationally.

According to government data, Nepal’s total exports increased from Rs 74 billion in 2011/12 to Rs 277 billion in 2024/25. Despite this growth, the country’s trade deficit during 2024/25 stood at Rs 1.527 trillion, with an export-import ratio of 1:6.5. In the first two months of the current fiscal year alone, the trade deficit has already reached Rs 257 billion, and the export-import ratio has widened to 1:10.5.

These figures highlight the country’s unsatisfactory export performance, said FNCCI, cautioning discontinuing cash subsidy programme could exacerbate the problem.

Given that freight costs in Nepal are 25–30% higher than in neighboring countries, the FNCCI argued that maintaining cash subsidies remains essential to enhance Nepal’s export competitiveness in international markets.