On slippery ground

The recently tripled duty on palm fatty acid distillate has discouraged soap industrialists

Sujata Awale
Kathmandu

At time when industrialists have been advocating with the government for removing the existing five per cent duty on import of raw materials, 15 per cent duty on a basic ingredient to produce soap has added burden to the industry. Moreover, illegal import of soaps from the open Nepal- India border has increased unhealthy competition in the market.

“ If the imposed duty is not removed soon, the industry might be facing a hard time to sustain,” said Mahesh Jaju, Managing Director of Himgiri Soaps and Chemical Industries. Citing that increased duty directly affects the price of finished goods, he said, “ At present domestic products cannot compete with illegally imported Indian soaps as they are 20 per cent cheaper than local products.

With the rising duty on palm fatty acid distillate, domestic players can’t compete.” Jaju informed that Indian products are cheaper as the Indian government has made zero per cent duty on importing essential raw material for manufacturing soaps.

He added that the government has to learn from the neighbouring country and help boost the industry which is contributing to the direct employment of 1,000 people. According to him, they produce superior quality products, however, due to lack of proper market monitoring many players play foul on weight and quality. “ Every year a huge quantity of illegally imported soap penetrates the market posing unhealthy competition of domestic producers,” said Jaju, adding that there is a need to strictly monitor open border areas.

Additionally loadshedding, tough competition, labour crunch, strikes and increasing cost of transportation are other hassles for the industry. “ Though we have an installed capacity of producing 125 metric tonnes per day, we can only produce 60 per cent of our total capacity,” said Ghanashyam Kabra, Managing Director of Quality Soaps and Chemicals. Citing that last year’s Madhesi strike affected his business, he said, “ Due to strikes we had to suffer a lot and as a result we did not witness any growth last year.” Kabra further said, “ While we are lobbying for zero per cent duty on raw material imports, the decision has disheartened all manufacturers.

Once again the government has pushed us into the same situation seven years ago where many soap factories faced closure as they could not survive.” He further added that with the increased 15 per cent tax on palm fatty acid distillate, domestic products become 30 to 35 per cent dearer than Indian products. “ The market presence of domestic product will definitely decrease with this vast difference in price,” he stated.
He claimed that it is likely to led to an increase of five per cent on domestic soap selling price.

Adding that government policy plays a vital role in boosting domestic industries, he said, “ We are optimistic that the government will address our problem and bring favourable policies to uplift the industry.” Citing that a decade ago Nepal used to export to India especially Bihar, he said, “ However, now due to unfriendly export policy, the cost of Nepali products has increased and export has come to full stop. It is high time the government sketched policies to create and assist export oriented businesses.” According to him, Nepali companies are fulfilling 60 per cent of the demand for laundry soap while imported ones enjoy 40 per cent market share. The domestic soap industry manufactures round soap that sells in kilograms targeting local costumers. The cost of such local soaps starts at Rs 75 to Rs 90 per kilogram while it costs Rs 90 to Rs 115 for industrial produced products. There are altogether 40 big and small domestic soap manufacturers in the country.

Reportedly, companies import almost all raw material like soap oil, palm crude, coconut oil, castic soda, et cetera from India, Malaysia, Australia, Thailand and China whereas minimal per cent of vegetable oil used is found locally.

 http://epaper.thehimalayantimes.com/epaperpdf/2952016/2952016-md-hr-21.pdf
Published on The Himalayan Times, Perspectives, May 29, 2016