September 23, 2021, Thursday
Nepal 1:37:26 pm

Budget for FY 2078-79 (2021-22) revised

The Nepal Weekly
September 14, 2021

Motorcycles will be dearer but will support to ebikes

House of Representative has endorsed the revision on the Budget of current fiscal year 2078-79 (2021-22). Finance Minister Janardan Sharma, on Friday September 10, 2021, tabled a bill to revise the budget for the current fiscal year in the House of Representative amidst obstructions of Nepal Communist Party (UML) parliamentarians. The revised budget called ‘fact based’ is somehow sized down to Rs. 1,632.83 billion. It modifies the budget the budget ordinance by the earlier government. Finance Minister Sharma has reduced the debt target by Rs. 37 billion through the budget.

Minister Sharma explained that some unrealistic projects such as 144 road construction projects for which then Prime Minister Khadga Prasad Sharma Oli had virtually initiated of construction but without provision for fund have been taken for suspending for the time being. Some social benefits are added. Similarly some attentions have been paid on natural calamity hit sectors and reduce climate change effects.

However, the budget gave a strong blow to automobile market as the government increased the excise duty and road maintenance tax on two-wheelers through the revised budget. Consequently prices will increase from Rs. 15,000 to Rs. 50,000 depending on the engine capacity of the motor cycles.

This latest hike in excise duty and road maintenance tax will impact those who were planning to buy a two-wheeler during the upcoming festive season of Dashain and Tihar. Taking the festive occasions as good sales opportunities, automobile dealers offer discountsunder various schemes.Price-conscious buyers also take advantage of the offers to buy a new vehicle during the season. Automobile dealers say that sales of two-wheelers rise by 60 to 65 percent during such offer period.

The revised budget increased the excise duty on 125cc to 200cc two-wheelers by up to 50 percent. Before this, the government charged a 40 percent excise duty on 155cc two-wheelers and 40 percent excise duty on 155cc to 250cc two-wheelers. The 125cc to 250cc segment of two-wheelers make up the majority of sales in Nepal.

The excise duty on bikes with engine capacity of 500cc to 800cc has been increased to 100 percent, a 20 percent hike from the earlier provision.

The government has also hiked the road maintenance tax on two-wheelers. As per the new provision, the road construction charge on bikes over 125cc is Rs. 15,000 per unit. Similarly, the road maintenance tax on 125cc to 250cc bikes is Rs.18,000 while 250cc to 400cc bikes will be charged Rs. 50,000 per unit and bikes exceeding more than 400cc will be charged Rs. 100,000.

Also to be importantly remarked is, though the government has increased the tax on two-wheelers, it has provisioned a 50 percent waiver on the parts used by the two-wheeler assembling industry, an increase from the old 25 percent.This will help domestic assembly industries lower their pricesand become more competitive with imported motorcycles. Ultimately this will support establishing industry in the long run.

Currently, there are Golchha Group and Jagadamba Grouphave assembly industries to produce Bajaj and TVS motorcycles respectively.

Automobile dealers say that despite a slow-down in economic activities, two-wheelers sales saw significant growth compared to four-wheelers after the lockdown was lifted last year as people opted for private transport due to the fear of contracting Covid-19 while using public vehicles. 

Meanwhile, Finance Minister Sharma had explained that tax hike in import of motorcycles is a motion to support electric motorcycles and scooters to be promoted. This will help users to consider shifting electric drive.

Electric drive has been the government priority to support climate change effects activities, reduce public health in relations to air borne diseases, reduce use of fossil fuel, utilise electricity generated in the country by hydropower plants and other renewable energy technologies. 

The tax relaxation in importing electric vehicles which was reinstated with little change in the budget of Fiscal Year 2078-89 had created conducive environment for users to buy in cheaper price. The earlier budget for Fiscal Year 2077-78 had lifted all such easy rules exercised since a few years. Consequently EV promotion in Nepal witnessed almost zero growth in the last fiscal year. (By R.P. Narayan)