A financial crisis in Europe, which has been the key market for Nepali carpet, is only compounding the problem for the local carpet industry.[break]
Overall cost of production of carpet has shot up by more than 50 percent over the last one year with the rise in the cost of labor, wool, cotton and bank loans. Together, these factors have blunted the competitive edge of the Nepali carpet industry in the international market.
"Whatever rise we witnessed over the last few months is because of the agreements made in January this year. Nepali carpet exporters negotiate and strike business deals in January every year," Kabindra Nath Thakur, president of Nepal Carpet Exporters Association, told Republica.
He said the cost of production is over 30 percent higher than that of Indian carpet, which is the major rival of Nepali carpet in overseas market.
Nepal Rastra Bank data shows that export of carpet from Nepal increased by a whopping 19.1 percent to Rs 4.85 billion during the fiscal year 2010/11 compared to the previous fiscal year. Similarly, carpet export almost doubled to Rs 665.3 million during the first month (mid-July- mid-August) of the current fiscal year 2011/12 compared to Rs 335.3 million during the same month in the last fiscal year.
According to Thakur, cost of production per square meter of carpet is around Rs 4,500, which is considerably up from around Rs 3,000 per square meter a year ago. The labor cost has increased from Rs 4,600 per month to Rs 6,200 per month and bank interest rate has gone up to around 15 percent. The cost of wool and cotton has also seen a sharp rise over the last year.
"We are compelled to price Nepali hand-woven carpet at around 70- 80 Euros per square meter. Export prospects are dim, especially in Europe as buyers who are buying our carpet at 40 Euros per square meter are not willing to buy at the new price," said Thakur.
Gopal Krishna Joshi, vice-president of Carpet Producer Association Nepal, said the cost of wool imported from New Zealand has jumped to $6.5 a kg from $4.5 a kg a year earlier. Similarly, the cost of Tibetan wool has increased to Rs 300 per kg from Rs 230 per kg over last couple of months. Cotton, which is an important ingredient for carpet, costs Rs 175 per kg now from Rs 150 per kg a few months ago.
Nepali carpet producers and exporters are also facing a shortage of skilled carpet weavers, making us unable to fulfill the demand from US market which has improved with the housing sector slowly returning to normal.
"Rising demands for Nepali carpet in US market has encouraged us as the reality market is limping back to normalcy pushing up the carpet demands," said Joshi. He expected that export of carpet to US would touch 400,000 square meters next year.
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