Introduction
Twine and cordage manufacturing is a recognized industrial activity in Nepal, linked closely with agriculture, construction, packaging, fisheries, handicrafts, and logistics. The Government of Nepal regulates the establishment and operation of such manufacturing units through multiple sectoral laws, industrial policies, environmental regulations, labor statutes, and local government frameworks. Registration of a twine and cordage manufacturing unit is mandatory before commencing commercial production or sales. Registration of Twine and Cordage Manufacturing Units in Nepal.
This article explains, in a factual and structured manner, the complete legal and procedural framework for registration of twine and cordage manufacturing units in Nepal. It covers applicable laws, regulatory authorities, eligibility requirements, step-by-step registration process, documentation, tax compliance, environmental clearance, labor obligations, industry classification, licensing, renewal, and compliance responsibilities. The discussion is based on prevailing Nepalese statutes, including the Industrial Enterprises Act, 2020, Company Act, 2006, and related regulations. Medha law and partners is a leading law firm in Nepal.
Legal Framework Governing Manufacturing Units in Nepal
Twine and cordage manufacturing units are governed primarily by industrial and commercial laws of Nepal. The core statute is the Industrial Enterprises Act, 2020 (2076), which regulates the registration, classification, operation, incentives, and obligations of industries. Manufacturing of twine, rope, cordage, jute products, plastic twine, or synthetic fiber ropes falls within the definition of “industry” under Section 2 of the Act.
Other applicable laws include:
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Company Act, 2006 (2063)
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Environment Protection Act, 2019 (2076)
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Labor Act, 2017 (2074)
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Income Tax Act, 2002 (2058)
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Value Added Tax Act, 1996 (2052)
Compliance with these laws is compulsory for lawful operation.
Industry Classification of Twine and Cordage Manufacturing
Under Schedule 1 of the Industrial Enterprises Act, 2020, industries are classified based on nature, scale, capital investment, and production capacity. Twine and cordage manufacturing generally falls under manufacturing industry and may be categorized as micro, cottage, small, or medium industry depending on capital investment and machinery usage.
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Cottage Industry: Traditional rope or fiber-based production using local skills and minimal machinery
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Small Industry: Mechanized twine and cordage manufacturing with fixed capital up to NPR 150 million
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Medium Industry: Capital investment exceeding small industry thresholds
Industry classification affects licensing authority, incentives, tax benefits, and environmental requirements.
Competent Authority for Registration
The registration authority depends on industry size and legal structure:
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Department of Industry (DOI) for medium and large industries
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Office of the Cottage and Small Industries (OCSI) at provincial or district level for cottage and small industries
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Company Registrar’s Office (OCR) for company incorporation
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Local Level Office for firm registration and operational approvals
Each authority exercises jurisdiction under respective laws and delegated powers.
Choice of Legal Entity for Manufacturing Units
Before industrial registration, promoters must choose an appropriate legal structure. Common structures include:
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Private Limited Company under the Company Act, 2006
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Partnership Firm under the Partnership Act, 2020
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Sole Proprietorship under the Private Firm Registration Act, 2014
Private limited companies are widely preferred due to limited liability, scalability, ease of capital mobilization, and regulatory recognition.
Company Registration Process for Manufacturing Units
For company-based twine and cordage manufacturing units, incorporation must be completed before industrial registration.
The process includes:
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Name reservation at OCR
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Preparation of Memorandum of Association and Articles of Association
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Filing incorporation application through OCR system
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Payment of registration fees
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Issuance of Certificate of Incorporation
This process is governed by Sections 3 to 12 of the Company Act, 2006.
Industrial Registration under Industrial Enterprises Act, 2020
After legal entity formation, industrial registration is mandatory under Section 16 of the Industrial Enterprises Act, 2020. Without registration, manufacturing activities are prohibited.
The application must specify:
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Nature of twine and cordage manufacturing
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Raw materials and production process
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Capital structure
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Machinery and technology
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Employment generation
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Land ownership or lease details
Upon approval, an Industry Registration Certificate is issued.
Documents Required for Industry Registration
The following documents are generally required:
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Application form as prescribed by authority
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Certificate of incorporation or firm registration
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Memorandum and Articles of Association
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Citizenship certificates of promoters
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Land ownership certificate or lease agreement
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Project profile or feasibility report
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Environmental screening form
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Local level recommendation letter
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Tax registration certificate, if applicable
Authorities may request additional documents depending on industry scale.
Environmental Clearance Requirements
Twine and cordage manufacturing involves fiber processing, dyeing, plastic extrusion, or chemical usage in some cases. Environmental compliance is governed by the Environment Protection Act, 2019 and Environment Protection Rules, 2020.
Depending on scale:
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Initial Environmental Examination (IEE) may be required
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Environmental Impact Assessment (EIA) may be required for large-scale units
Environmental approval must be obtained before industrial registration or construction.
Land Use and Zoning Compliance
Manufacturing units must comply with land use regulations enforced by local governments. Industrial activities are generally permitted only in industrial zones or designated areas.
Documents required include:
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Land ownership certificate
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Land use classification letter
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Local government recommendation
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Building construction approval
Violation of zoning rules may result in cancellation of registration.
Local Level Approval and Business Operation Permit
Under the Local Government Operation Act, 2017, local levels regulate business operations within their jurisdiction. After industrial registration, a business operation permit must be obtained.
This permit confirms:
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Compliance with local tax rules
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Safety standards
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Sanitation and waste management arrangements
Local approval is mandatory for operational legality.
Tax Registration and PAN/VAT Compliance
All manufacturing units must register with the Inland Revenue Office under the Income Tax Act, 2002.
Mandatory registrations include:
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Permanent Account Number (PAN)
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Value Added Tax (VAT) registration if annual turnover exceeds threshold
Tax compliance includes filing returns, withholding tax obligations, and record maintenance.
Customs and Raw Material Import Compliance
Twine and cordage manufacturing units importing raw materials or machinery must comply with the Customs Act, 2007.
Manufacturers may qualify for:
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Reduced customs duty
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VAT deferment on machinery
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Import facilitation through bonded warehouses
Compliance with customs valuation and documentation is mandatory.
Labor Law Compliance for Manufacturing Units
Employment of workers is regulated by the Labor Act, 2017 and Labor Rules, 2018.
Key obligations include:
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Employment contracts
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Minimum wage compliance
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Social Security Fund registration
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Workplace safety measures
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Leave and working hour compliance
Non-compliance attracts penalties and legal action.
Safety and Occupational Health Standards
Manufacturing units using machinery must comply with occupational health and safety standards under the Labor Act.
Requirements include:
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Machine guarding
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Fire safety equipment
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Emergency exits
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Worker safety training
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Insurance coverage
Industry Renewal and Amendment Requirements
Industrial registration certificates require renewal as prescribed by provincial authorities. Changes in ownership, capital, production capacity, or location require amendment approval.
Failure to renew or update records may lead to suspension of industrial status.
Incentives Available to Manufacturing Industries
The Industrial Enterprises Act provides incentives such as:
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Income tax concessions
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Customs duty exemptions
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Export incentives
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Power tariff discounts
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Land acquisition support
Eligibility depends on classification, location, and compliance status.
Export Registration for Twine and Cordage Products
Export-oriented units must register with the Department of Customs and Trade and Export Promotion Centre.
Compliance includes:
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Export code registration
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Certificate of origin
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Quality and packaging standards
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Foreign currency repatriation rules
Export laws are governed by the Export Import Control Act, 2013 (1957).
Quality Standards and Certification
Manufacturers supplying institutional or export markets may need compliance with Nepal Standards (NS) issued by Nepal Bureau of Standards and Metrology.
Quality certification enhances market acceptance and regulatory compliance.
Cancellation and Suspension of Registration
Registration may be cancelled under Section 28 of the Industrial Enterprises Act for:
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False information
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Non-operation beyond specified period
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Violation of laws
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Environmental damage
Common Compliance Challenges
Manufacturers often face issues related to land zoning, environmental clearance delays, tax compliance, and labor documentation. Proper legal planning reduces compliance risk and operational disruptions.
Role of Legal Advisors in Manufacturing Registration
Legal advisors assist in entity structuring, regulatory approvals, compliance audits, licensing, and dispute resolution. Professional legal support ensures accuracy, timeliness, and compliance with evolving laws.
FAQs
Is industrial registration mandatory for twine manufacturing units in Nepal?
Yes. Section 16 of the Industrial Enterprises Act, 2020 mandates registration of all industries before operation. Twine and cordage manufacturing qualifies as a manufacturing industry and cannot operate legally without obtaining an industry registration certificate from the competent authority.
Can a sole proprietorship register a cordage manufacturing unit?
Yes. Sole proprietorships registered under the Private Firm Registration Act, 2014 can register cottage or small-scale manufacturing units, subject to capital limits, environmental compliance, and local government approval.
Is VAT registration mandatory for manufacturing units?
VAT registration is mandatory if annual turnover exceeds the threshold prescribed under the Value Added Tax Act, 1996. Units below the threshold may operate with PAN registration only.
Can foreign investors establish twine manufacturing units in Nepal?
Yes. Foreign investment is permitted under the Foreign Investment and Technology Transfer Act, 2019, subject to approval, minimum investment thresholds, and sectoral compliance.