The Custom Bills 2021, passed in the recently concluded Parliament session, brought down the custom duty at a uniform rate of 10 percent.
This has worried local manufacturers, especially sanitary pad producers, who say they will have to face huge price competition from foreign manufacturers whose products will now flood the country’s markets.
This has also come as a contradiction of the common notion that Bhutanese sanitary pad producers are protected and supported by the government.
The move is also seen as against the pledge of the government to promote the private sector and Cottage and Small Industries (CSI) in the country.
The founder and the CEO of Chechey Sanitary Pad, Pema Chezom, said that the government’s decision to reduce custom duty on imports from countries is illogical if they are to promote small and struggling businesses in the country.
She said that reducing custom duty for third countries import would come heavy on her business as she will have to compete with dirt-cheap prices.
“Who would prefer Chechey Sanitary Pads when better products are available at equal or lower price?” she said.
Pema Chezom said that though helps are provided from Prime Minister’s Office and Ministry of Economic Affairs, such untoward decision will kill local entrepreneurs who are already burdened with rising cost of production.
The founder of eco-friendly and reusable pad ZAMIN Friends Forever, Karma Yogini, said that the 10 percent reduction of customs duty would benefit only few individual and discourage budding entrepreneurs who cannot compete in the market.
She said if the government wants to develop private sector, either it has to look for solutions or it would mean we have to look for our own solutions.
Another CSI entrepreneur Chimi Dema, founder of Druna Ghu, said that though one cannot understand the policy of the government, the decision of 10 percent custom duty reduction is a big blow to all local entrepreneurs.
She finds it contradictory with plans and objectives to reduce custom duty when it is important to reduce import. She said it will further encourage ‘import.’
She said from the government’s side there won’t be any benefit to the end customers rather it would benefit only few. She is also worried that if import rates are made cheaper there would be more import and CSI entrepreneurs will dissolve over the years.
Chimi Dema wishes the government at least minimize imports during the pandemic which would help the local entrepreneurs to flourish.
However, the minister for Economic Affairs Loknath Sharma said that the economy, trade and business have to remain competitive to provide wider choices to people and market.
According to the minister, although heavy protectionist economy might limit competition, innovation and distort market chain, the customs duty (relevant to import from third country) is kept uniform at 10% by the recent parliament so import of sanitary towels/pad (third country) would also be 10% customs duty.
“The sales tax applicable currently is not altered, it is only the customs duty which has been amended,” the minister said.
Meanwhile, the minister said the government understands that there is a perception that this will impact the growth of CSI sector which is true to certain degree since these domestic industries are still nascent not being able to attain economy of scale besides geographic limitations.
However, he said that it is also important that this sector also imports raw materials except in few food and agriculture, arts and artifacts.
The PM said the benefit of reducing customs duty is larger to the economy than damage to select few CSIs which can be supported through other means like Financial Institutions.
In particular mention to Cheychey sanitary, Lyonpo Loknath Sharma said that MoEA and PMO had been trying to promote and enhance her products so that it is consumed in the market.
He said that the current customs duty reduction is not likely to have serious impact on Cheychey sanitary business as her competitive products are not from third country.
“We cannot restrict and limit to few brands or products which will be unfair as well as impose monopoly in the long run,” Lyonpo Loknath said.
The minister said that MoEA is committed to support CSI through innovation, support with raw materials, reducing cost of productions and providing tax cuts and other fiscal incentives.
“In the longer run, we must be able to move in a competitive nature providing trust, choice and price differentials to the economy at large,” he said.