Government subsidies to private sectors in Nepal

Government subsidies are essential to encourage entrepreneurs to start their own business. In Nepal, subsidies are mostly provided to export-oriented industries, prioritized industries, and industries established in the least developed, undeveloped and underdeveloped regions. The government provides subsidies in these sectors to promote and protect domestic industries and to improve domestic investments.

(Note: Refer to the (Industrial Policy Act/Schedule 9) to recognize the industries prioritized by the country. And (Industrial Policy 2075, Schedule 10) for areas falling under least developed, undeveloped and underdeveloped regions.)

In recent years, the government with the aim to empower emerging entrepreneurs has surged in providing subsidies. According to the Budget Speech of Fiscal Year 2018- 2019, the government has provisioned subsidies in the following areas:

 Subsidies for Acquisition to Industries Operating Through Cooperatives

The budget has made a provision to provide twenty-five percent subsidy for the acquisition of necessary equipment for milk, meat, fruit, and vegetable processing industries operating through cooperatives. The subsidy will also apply for the establishment of feed industries for fish and livestock based on non-food industries at the local level. (Fiscal budget 18-19, 79)

Agro-Based Subsidies

For the aim of improving agricultural outcomes in rural Nepal, the government has been providing subsidies under the Prime Minister Agriculture Modernization Project. In the current fiscal budget 2018- 2019 the project has been expanded ((Fiscal budget 18-19, 70) and high priority have been given to the districts in Biratnagar and Morang. The following are the subsidies provided under the new provision:

• Fifty percent subsidy on the purchase of agricultural equipment.

• Provide fifty percent subsidy in the purchase of the tractor.
• Rupees One million subsidy while purchasing 39 types of mechanical tools.
• Fifty percent subsidy while purchasing seeds and fertilizers.

To be eligible for this subsidy the farmers need to have five hectors cultivable land for the purchase of the tractor and 1.5 hectors cultivable land in the case of power tiller. Furthermore, grants will be provided on improved seeds and plants of tea, coffee, cardamom, areca nuts, potato, banana, and lemon.

 Interest Subsidies on Loans

• To encourage young entrepreneurs with higher education to launch their own business government will provide the loan of up to Rs. 700,000 with a five percent subsidy in the interest rate. To obtain this loan one needs to keep educational certificates as collateral. Moreover, the establishment of the challenge fund is provisioned to provide startup capital for businesses initiated by entrepreneurs with innovative knowledge, skill, and capacity. (Fiscal budget 18-19, 25)
• Loan (on collective guarantee) of up to Rs. 1 million at five percent interest subsidy will be provided for each Dalit community by socially integrating them to run the business through cooperatives and community production system. There is a provisioned budget for modernizing and promoting traditional skills and occupation. (Fiscal budget 18-19, 62)
• The government will also provide six percent interest subsidy on collective project-based loan up to Rs. 1.5 million operated by women through the development of their entrepreneurship, skill development, and training. Furthermore, the budget has provided provision to get the interested subsidy on loan for commercial agriculture and livestock. (Fiscal budget 18-19, 103). 

 Subsidies on Export

• Five percent cash incentive is provided on exports in the sector of industrial development for products such as cement, sugar and iron rod, among others. There will be compulsory provisioning of credit guarantee and insurance of such businesses. (Fiscal budget 18-19, 106)

Government subsidies come along with many preconditions and procedures. At the same time subsidies in different forms and volumes are being made available through agencies at both the Federal and Local level. Thus, before moving forward with the procedures of obtaining subsidies entrepreneurs need to recognize the concerned ministry/ department/ agency that needs to be contacted and communicate with the right governmental body.

Moreover, at the local level most legislations are in offing stage, so entrepreneurs striving for subsidies also need to be wary of the ongoing changes in the legislation and understand the scope and limit of the subsidies they are expecting.

For more information on the current Industry Policies of Nepal refer to the Industrial Policy Act.