The second wave of menstrual revolution is supposedly here with open discussion of periods and period products. Nepal is striving to eradicate period poverty, a struggle that many low-income women and girls face while trying to afford menstrual products.
Growing discourse around the tabooed topic has led many people demanding removal of 13% value-added-tax (VAT) on sanitary pads. On its face, this might seem like a simple strategy to lower the final price for consumers. Being a tax on consumption, VAT is of regressive nature. As menstruation is not a luxury or a fad but a biological cycle running throughout a woman’s life, obviously consumption of sanitary pads is high. A zero percent VAT will definitely help reduce the sales price and the consumption burden.
But is it the ultimate solution?
In 2018, when a concession of 12% GST (similar to VAT) was levied on sanitary pads in India, a pack of 10 sanitary napkins with cost of an average of 100 rupees, would still cost around 88 rupees, leading to no landslide difference in price. From an economic standpoint, the rationale behind the concession in taxes applied on sales or consumption is weaker when compared to lowering the cost of production of sanitary pads. Nepalese manufacturers too, agree that it’s actually the custom tax on raw materials of sanitary pads that is majorly responsible for the added final product price.
Currently in Nepal, there is 15% import duty on sanitary pads. Similarly, for domestic producers of sanitary pads, import duties of 5% on key raw materials like cotton and pine wood pulp aerate the value-addition on sanitary pads. The compounding effect of these duties is relatively higher than that of VAT.
But while the debate to make sanitary pads cheaper is ongoing, the Nepal government has taken it up a notch.
In FY 2020, the government allocated a conditional grant of Rs.1.82 billion to local levels for free distribution of sanitary pads to girls studying in community schools. This initiative is meant to curb period poverty by increasing school attendance rate of females and access to sanitary products. Such grants are appreciable but there is no guarantee that the free sanitary pad distribution campaign will continue another FY with its parent legislation enacted for the span of just one year.
But if the government instead channels this fund to subsidize pad making facilities using local raw materials (with a lower rate of VAT levied on such inputs) and reduces tariff on import of raw materials useful for manufacturing sanitary pads, then pads can be made available at minimal cost. Sanitary pad Distribution and Management Working Procedure, 2076 also enables the local governments to produce sanitary pads themselves. If local governments set up firms or engage in public private partnership to produce sanitary pads then they can also create additional revenue for sustaining the practice.
Similar policies have been tried and tested on the face of emergency. Fighting period poverty demands the same. Until now, the government has been mostly receiving support from development partners on menstrual health management (MHM) issues but this is not sustainable in the long run. Instead of ballooning the debt, the government should make changes in the tax regime related to production and import of sanitary pads.