Nepal’s steel import tariff reaches up to 30%
It is reported that the Nepalese government imposed import tariffs on several steel products in its annual budget announcement on May 29, 2022, in order to control foreign exchange expenditures amid rising inflationary pressures. The government has proposed to keep inflation within 7% in its 1.79 trillion Nepalese rupee budget, emphasizing the need for “Made in Nepal” and boosting domestic manufacturing.
The tariff on low-carbon steel wire rods has increased from 5% to 10%, but galvanized iron (GI) wire, angle steel, channel steel, crossbeam, and corrugated sheet will be subject to a 30% tariff, and the import tariff on cold-rolled sheet will increase from 5% to 15%.
However, due to Nepal’s heavy reliance on steel imports to meet demand, tariffs on hot-rolled plates and semi-finished products (billets) remain unchanged. In the 2021 fiscal year, Nepal imported 2.06 million tons of steel, of which approximately 1 million tons were billets, followed by 650000 tons of flat steel and 310000 tons of long steel.
Import volume from India may decrease in the later stage
The annual installed smelting capacity of Nepal is about 500000 to 600000 tons, which has increased compared to the previous period. At present, steel mills in Nepal mainly use sponge iron for production. In 2021, the Nepalese government reduced tariffs and consumption taxes on imported sponge iron from the previous 5% to zero, citing the need to promote domestic manufacturing growth. Therefore, in the fiscal year 2022, Nepal’s imports of sponge iron from India doubled year-on-year, reaching 370000 tons, while the amount of imported billets from India decreased.
The government is providing tax refunds to exporters to support foreign exchange reserves and has increased the consumption tax on domestic steel producers.
It is expected that Nepal’s efforts to restrict steel imports will mainly affect Indian suppliers. India is the main steel supplier to Nepal, and Nepal imported about 2 million tons of products from India last year, accounting for approximately 96% of Nepal’s total imports. Under the dual impact of India’s increase in export tariffs and Nepal’s increase in import tariffs, Nepal’s imports from India may decrease.