CHAPTER - ONE

INTRODUCTION

1.1 Background of the Study

Draped along the greatest heights of the Himalayas, the kingdom of Nepal is a land of eternal
fascination. It is a land of ancient history, colorful culture and traditional craft. It is the home
of the famous Pashmina mountain goat locally called "The Chyangra" Scientifically "Capra
Hircus". Warmth without weight and incredible softness is what Pashmina is all about! These
hardy mountain goats live at an altitude of 12,000 to 14,000 ft. where they are exposed to
harsh climate condition and scarce vegetation. Because of these extreme conditions nature
has blessed and provided them with a thick coat of hair. Pashmina is the thin, short inner coat
of hair obtained from these goats.

Pashmina is a diamond fiber extricated from the body of the mountain goat "Chyangra" or
"Capra Hircus". Blessed with very thin, short and the softest wool found in the nature. It has
an exotically silky texture, weightless lightness but super warmth which when wearing it next
to the skin, provides a uniquely titillating experience which has been described as Sensual
Sublimity by our ancestors.

Pashmina, the finest cashmere wool has been popular for centuries among royalty and other
elites as the finest, most luxurious wool in the world. For a thousand years or more, this
glorious wool has been prized for its warmth, lightness and durability. For lightness and
warmth, Pashmina wool is unmatched. Delicate and soft to touch, it caresses the skin. It is
not surprising that Pashmina has been successful in establishing its uniqueness among
fashion wear through out the planet.

Nepal is also known for its finely woven Pashmina shawls and other Pashmina product which
is a unique product of Nepal. It is hand made from the wool sheared off from mountain goats
that are found in the mountainous regions. The wool next to the skin is cut out. This wool is
carded to separate the rough outer part. The soft wool is then hand spun into thin and even
Pashmina yarn. This yarn is then woven into the shawls, sweaters, scarf etc. While making

1
these products the use of hand spun Pashmina wool yarn has presently been replaced by
imported fine machine spun yarn.

1.1.1 Introduction of Lhapsa Concern

Lhapsa Concern was established in 2051 B.S.and is commenced its business of Pashmina
with variety of shawls, scarf, sweater, stole, blanket etc. It has been involved in the export of
Pashmina products in the countries like America, Sweden, Switzerland, Taiwan, Korea and
Japan. Whereas, India import Pashmina products from Nepal to re-sell them. Lhapsa Concern
delivers its products through air (courier, cargo) after getting the order from E-mail and after
getting advance payment through bank, letter of credit (L.C.), T.T. (wire transfer).

It imports raw materials from China and it imports machines from India. It also purchases
semi-electric machines from Balaju, Katmandu. While importing raw materials and machines
from china and India respectively, it has to face the problem of importing low quality raw
materials and machines.

It takes minimum 1 week to transfer raw materials into finished goods.200gm (Pashmina &
silk)is needed to produce 1 shawl of 28”*80” size .i.e. 1 kg of Pashmina & silk produces 5
shawls. About 26-27 employees are needed in the production process:

 For making bobbin and to do extra small jobs that support in making bubbin 4
employees are needed.

 For wrapping 8 employees are needed.

 For weaving loom wise i.e. 1 loom equals to 1emplooyees 5 to 7 employees are
needed.

 For dying 8 employees are needed.

 For finishing and packaging 8employees are needed.

 For exporting 2 supervisors are needed.

For knitting and finishing purpose, local employees are used.1 loom costs Rs.500, 000 and it
has 5-6 loom machines.

2
Besides this, one master technician is needed. Each process or unit is supervised by one
supervisor. The main job they do is they check the quality of products produced, whether the
raw materials used in the production process are of high quality or not i.e. to avoid the use of
low quality raw materials, to check whether the high quality or high priced chemicals are
used or not. Above all, they check whether the employees are working according to the
schedule or not and to record their working behaviors.

1.1.2 Production of Lhapsa Concern

Lhapsa Concern produces its Pashmina products as per demand and their demand is outlined
hereunder:
1. Quality 2 (70%-30%) Pashmina & silk of medium size has demand of 50% of its
annual sales i.e. 7 cores from Europe and America.

2. Quality 1 (70%-30%) Pashmina & silk has demand of 25% of its annual sales
from Asian countries, Taiwan, America.

3. Quality 4 (70%-30%) Pashmina & silk has the demand of 25% of its total annual
sales from Europe and America.

Pashmina products like sweater, shawls, muffler (scarf), stole has the most demand. Lhapsa
Concern has 1 wholesaler in each of its customer countries. The Pashmina products have the
main season from July to December/January and off season (very) is from April to June.

Lhapsa Concern has the made policy to increase its profit by increasing its sales and
decreasing its cost per unit. It is increasing its customers through advertisement in webpage
and magazines. It is also has the plan to open showroom in near future in Kathmandu, Nepal
to promote Pashmina products in its own domestic country, Nepal. Lhapsa Concern is very
much sensitive to quality. So, it is following measures outlined hereunder for quality
improvements and to maintain the quality:

1. Recruit only skilled and experienced employees.

2. Avoid the use of low quality raw materials, machines and chemicals.

3. Check the working style of the employees.

3
 4. Have good/friendly behavior with the employees (direct contact) so that the
owner can know the thinking and feelings of the employees and motivate them
according to it.

1.2 Statement of the Problem

While storing the raw materials Lhapsa Concern has the problem of the insects in case if
there is not much air for the raw materials. While importing raw materials from China,
sometimes, it receives low quality goods for which it can’t complain because of its smallness.
It also has the income tax problem and income tax is based on earning of the company. It has
to pay Rs.500 for consignment page as export tax. There was no policy of income tax in last
few years and the policy has emerged only from that time.

It also has the dyeing problem because it makes the water dirty. For which the system should
be made to avoid the water from being impure. It is using the underground water for the
dying purpose which is not suitable for dying so it is made suitable through different
processes. In manufacturing process, it produces sound pollution which is less in compared
to other manufacturing process of other companies .There is also the problem of electricity
which can’t be overcome due to low investment. Thus, this results in the delay in delivery
which may also result in the serious problem of losing customer.

All these problems must be overcome to have improvements in quality and production
process as well as to keep good relation with its customers (foreign countries).

1.3 Literature Survey

Generally, a producer solely made by human hands without using any kinds of complicated
machinery and equipment is called handicraft. A simple dictionary meaning of handicraft is
“an art or craft needing skill with the hands”. It is the practice of making decorative of
functional objects, wholly or partly by hand, an requiring both manual and artistic skill.
According to Encyclopedia Britannica; “Handicraft is the occupation of Making by hands
usable products graced with visual appeal. Handicraft includes such activities as needlework,
lace-making, weaving, printed textile decoration, basketry, pottery, ornamental, metal

4
working, jeweler, leather working and wood working and such crafts as glass blowing and
the making of stain glass that requires complex facilities”.

Therefore, we can say that handicrafts are an occupation that involves making usable or
decorative products by hand. For example Origami (Japanese for paper folding). Developed
in Japan, Origami is the art of making/creating different kinds of objects by folding a sheet of
paper. They created forms range from simple figures to complex designs complete with
handicraft enjoyed worldwide. It has been popular especially as an art form and hobby in
Spain and Latin America.

Handicrafts have been a valuable part of Nepalese heritage. They express the great tradition
and proud culture of this great Himalayan Kingdom. Their origin can be traced back to the
Stone Age when human beings were devoid of tools of any king. The history of articles of
everyday use may be as old as the history of man living in Nepal itself. But the history of
“artistic handicrafts” probably can be traced only since the 5th century A.D. When one looks
back to the Nepalese handicrafts design, materials, tools, craftsmanship and product develop-
ment he/she finds them as old as the human civilization.

1.4 Objective of the Study

While doing anything first of all we need to determine certain objectives after the doing.
Without determining the objectives we can’t reach at the final destination of the project. Of
this field report also has certain objectives, which will be meeting at the end. The objectives
of preparing field report on this topic are as follows:

 To fulfill the partial requirement of BBS degree.

 To gets real/exact information about the working style of Pashmina business

in the Country.

 To study how the policy in the country is applied in such business.

 To accumulate the knowledge of export in Pashmina business.

 To find out the emerging opportunities in Pashmina business and take benefits
out of it (find its scope in future)

5
1.5Significance of Study
Following are the significance if the study:

 It can be good assets of library and guideline for the report writer.

 It may help other researches as well.

 It may help other researches as well.

 The report is useful for the laphsa concern, as the suggestion and
recommendation.

1.6Limitations of the Study

 The data used in this report rare secondary data.

 5 years data have been analyzed which is not sufficient to figure out the
actual position of the business.

 The study is focused on export business of Pashmina only.

 It ignores its promotion in the domestic country, Nepal.

1.7 Research Methodology

1.7.1 Sample Unit

As it is the explanatory that the study is based on the field works, a single unit, Laphsa
Concern has been selected for the study purpose. Hence, there is no need to express the unit
in terms of sample size.

1.7.2 Nature and Source of Data

Data are collected from different sources, by visiting different places, and medium. Here, I
have collected the required data through the secondary source only. The secondary data are
collected by the print out brusher provided by the proprietor of Lhapsa Concern, websites,
reference books in library (report in the reference room), department of customs duty, cottage
and small industry department. Primary data are collected by the interview with the
proprietor himself and staffs of Lhapsa Concern.

6
1.7.3 Data collection Procedures

The data collection methods used for this fieldwork report writing are as follows:

Secondary data collection method

The source of the secondary data collection is:

a) Internal sources: Annual reports of Laphsa Concern

b) External sources: website, different books in library

1.7.4 Classification and tabulation of data

After collecting the data, they are classified ad arranged in tables with columns and rows.
They are presented in a very systematic and very sequential procedure which has made the
study quite easy and convenient.

Presentation of data
In order to present the data clearly, various diagrams such as pie chart and bar diagrams have
been used. This has made the study very easily understandable.

Tools used for analysis of data

Various statistical tools and mathematical tools are applied like mean analysis and others
analysis.

7
 CHAPTER – TWO
DATA PRESENTATION AND ANALYSIS
2.1 Presentation of data
First of all collection of related data is necessary to know about the particular topic. The data
collected from the different sources, like the annual report and other bulletins etc, might be
difficult to understand to others. Therefore the data must be presented in simply form as
graph and so on is called presentation of data. The data has presented as well analyze as
below:
2.1.1 Yearly data of export of Pashmina Products
Table 2.1

Fiscal year 2065/66 2066/67 2067/68 2068/69 2069/70 2070/71

Total 286071170 5663343571 5643629926 1412877312 989897860 661373832

export

Source: Handicraft Association of Nepal, Thapathali Height (2065/66 to 2070/71)

Fig: 2.1
Bar diagram of export of Pashmina products
6000000000 5663343571
5643629926
5000000000

4000000000

3000000000

2000000000
1412877312
989897860
1000000000
286071170 661373832

0
Total export(Rs)

8
9 Month’s Comparison Data of Handicraft Goods Exported
Fiscal Year 2069/70 and 2070/71 (2012/13 and 2013/14)

Month: (Shrawan-Chaitra)
Table 2.2
(Amount in Nrs.)
S.N. Description 9 month’s Data Percentage +/-
F/Y 2069/70 F/Y 2070/71
1. Pashmina Products 535712857 552347119 3
2. Woolen Goods 335705373 396385778 18
3. Silver Jewelry 269861636 282442650 5
4. Handmade Paper Products 199065833 199261353 0.10
5. Metal Craft 215080424 242609525 13
6. Silk Products 111624285 95297987 (15)
7. Cotton Goods 88121510 73321028 (17)
8. Wood craft 49224580 50588484 3
9. Hemp/Allo goods 28268284 43850775 55
10. Leather Goods 17108724 17227210 1
11. Incense 12597644 15226166 21
12. Thanka 10202518 15330783 50
13. Ceramics Products 8714618 13182467 51
14. Bone & Horn Products 7575792 10270967 36
15. Plastic Items 4364620 5958999 37
16. Other Textile Products 5438054 5315042 (2)
17. Beads Items 4453260 5057458 14
18. Dhaka Products 4277196 2879216 (33)
19. Stone Craft 2236531 2387819 7
20. Bamboo Products 1794174 1891230 5
21. Tea 3095414 9923233 221
22. Miscellaneous Goods 25972817 31500387 21
TOTAL 1940496143 2072255675 7
Source: Handicraft Association of Nepal, Thapathali Height (2065/66 to 2070/71)

9
NOTE: The Textile Products include products made from Rayon Nettle, Polyester, Velvet
and Jute.

2.1.2 Contribution of Pashmina products in total handicraft goods

Table: 2.3
Contribution of Pashmina products

Fiscal year Contribution (%)

2065/66 22.08

2066/67 79.07

2067/68 82.71

2068/69 51.95

2069/70 38.77

2070/71 25.72
Source: Handicraft Association of Nepal, Thapathali Height (2065/66 to 2070/71)

Fig:2.2
Pie chart of Contribution of Pashmina products in total handicraft goods

2070/71, 2065/66 ,
25.72 22.08

2069/70,
38.77

2066/67
79.07
Contribution %)

2068/69
51.95

2067/68,
82.71

Table 2.4

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 Import of raw materials from China

Product 2067/68 2068/69 2069/70 2070/71

Silk thread 400688000 64542000 18517000 9849000

Pashmina - 22790000 1110000 1598000

Source: Handicraft Association of Nepal, Thapathali Height(2064/65 to 2069/70)

2.1.3 Price Quotation of Pashmina Products for this year

Table 2.5

Grade Description 36”*80” 28”*80” 18”*72” 12”*60”

90*200cm 70*200cm 45*190cm 30*150cm
Quality 1 70%-30% 52.00 41.00 30.00 18.00
Pashmina & silk
Quality 2 70%-30% 43.00 34.00 22.00 13.00
Pashmina & silk
Quality 3 70%-30% 35.00 27.90 20.00 11.50
Pashmina & silk
Quality 4 70%-30% 18.80 15.50 12.00 9.50
Pashmina & silk
100% Pashmina
Quality 1 100% Pashmina 60.00 48.00 33.00
Quality 2 100% Pashmina 43.00 37.00 27.00
Ring shawl 70%-30% 50.00 39.60
Pashmina & silk
Source: Handicraft Association of Nepal, Thapathali Height(2065/66 to 2070/71)

NOTE: Price given is for plain solid color shawls and stoles.

The price has decreased 10%-20% in compared to last year.

2.1.4 Expenses on Salaries

Most of its employees are farmers who come to Kathmandu from plain and terai region. They
are given the facility of free accommodation and other incentives to motivate them. Salary to
the employees is contract base and piece wise. Total salary expense to the direct (regular)
employees is Rs. 30,000 monthly and total salary expense to the indirect (irregular)
employees is Rs. 20,000 monthly and according to the work.

Problems
11
While storing the raw materials Lhapsa Concern has the problem of the insects in case if
there is not much air for the raw materials. While importing raw materials from China,
sometimes, it receives low quality goods for which it can’t complain because of its smallness.
It also has the income tax problem and income tax is based on earning of the company. It has
to pay Rs.500 for consignment page as export tax. There was no policy of income tax in last
few years and the policy has emerged only from that time.

It also has the dyeing problem because it makes the water dirty. For which the system should
be made to avoid the water from being impure. It is using the underground water for the
dying purpose which is not suitable for dying so it is made suitable through different
processes. In manufacturing process, it produces sound pollution which is less in compared
to other manufacturing process of other companies .There is also the problem of electricity
which can’t be overcome due to low investment. Thus, this results in the delay in delivery
which may also result in the serious problem of losing customer. All these problems must be
overcome to have improvements in quality and production process as well as to keep good
relation with its customers (foreign countries).

2.1.5 Export table and bar diagram of Lhapsa Concern

Export of Pashmina products of Lhapsa Concern during last 5 years

Table 2.6 (Rs. In million)

Fiscal Year Export Increase/decrease % of growth per year

per year
2066/67 65942
2067/68 58720 -7222 -10.95
2068/69 33865 -24855 -42.33
2069/70 20141 -13724 -40.53
2070/71 43252 23111 114.75
TOTAL 221920

Source: Handicraft Association of Nepal, Thapathali Height (2065/66 to 2070/71)

Fig:2.3

12
 70,000

($)
60,000 2066/67
50,000
2067/68
40,000
2068/69
30,000
2069/70
20,000
10,000 2070/71
0
Export
Fiscal Year

2.2 Analysis of the Data

The table and the bar diagram drawn above show the export of Pashmina products of Lhapsa
concern in the last five years. According to these data export has decreased except in the year
2070/71. In 2066/67, the number of export was 65942 which was the result of the 6462
decrements. There is only 10.86% negative growth rate in this particular year but in 2067/68,
the number of export remains 58720. That is the number of export decrease by 7222. This
shows the diminishing trend of 10.95% and again in 2068/69, it has diminished rapidly and
reached to 20141, which was 24855 or 42.33% decrement. In 2069/70, it has decrement of
13724 or 40.53%. In the current year 2070/71 has increased by 23111 or 114.75%.

Taking the year 2065/66 as a base year and comparing it with all other years under study in
2066/67, the number of export has increased by 6462 or 10.86%. In 2067/68 it decreased by
7222 or 10.95%. In 2068/69, it decreased by 25615 or 43.06%. Also in the year 2069/70, it
has decreased by 39339 or 66.14%. And in the year 2070/71, it has decreased by 16228 or
27.28%.
In this way, the export has been decreasing year by year but in 2069/70 the percentage of
decrement was decreased by 38.86%. Thus the study of export of Pashmina shows that it is
not same in each year.

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2.2.1 Calculation of mean of yearly export of Pashmina products

Table 2.7
(Rs. In million)
Fiscal year Total Rs. export

2065/66 286

2066/67 5663

2067/68 5643

2068/69 1413

2069/70 989

2070/71 611

Total 14576

Source: Handicraft Association of Nepal, Thapathali Height

Figure 2.4

∑ fx
Mean (X) = ---------

14576

14
 = --------
6

= 52429.33

As seen in above table and chart, export of Pashmina product is beginning year is very low
which 286m is. But in second and third year it increase in maximum assets. Again from 4m
year the export of Pashmina started is decrease year by year is goes on decreasing rate.
Above mention figure shows first increasing then decreasing in export of Pashmina product.

2.2.2 Calculation of mean for Pashmina products in total handicraft goods.

Table 2.8

Calculation of mean for Pashmina products in total handicraft goods.

Fiscal year Contribution (%)

2065/66 22.08

2066/67 79.07

2067/68 82.71

2068/69 51.95

2069/70 38.77

2070/71 25.72

Total 300.3

Source: Handicraft Association of Nepal, Thapathali Height

Figure 2.5

15
 ∑ fx
Mean (X) = ------
N

300.3
= --------
6

= 50.05

According to the above presented table, the contribution of Pashmina products in total
handicraft goods mention. In the beginning year 2065/66 it contribution is up to 22.08%.
Which is very low? But in following two years its increase up to maximum as 79.01% and
82.71%. Then again from the year 2068/69 it started to decrease this year it fall to 51.95%. In
year 2069/70 it goes on 38.77% and in the final year 2070/71 also the rate of Pashmina
contribution is decreasing rate of 25.72%.

2.2.3 Calculation of Mean Showing Export of Lhapsa Concern.

16
 Table 2.9
Calculation of Mean Showing Export of Lhapsa Concern.
(Rs. In million)

Fiscal year Export

2066/67 65942
2067/68 58720
2068/69 33865
2069/70 20141
2070/71 43252
Total 221920
Source: Handicraft Association of Nepal, Thapathali Height

∑ fx
Mean (X) = -----
N

221920
= ---------
5

= 44384

Figure 2.6

Looking at the above table and figure we can see the export condition of Laphsa Concern is
last 5years. In the first year 2066/67, the export of Pashmina by Laphsa Concern was very

17
high which 65942 is. But then after year and years it goes on decreasing rate. In 3 nd year
2068/69 its export is up to 33865 in 4th year again its export is in decreasing rate 20141. But
in the 5th year it increases its export up to 43250.

2.3 Major Findings

 The export of Nepalese handicrafts is not smooth: The main problem of Nepalese

handicraft is there is not available development related program. So they are going

to decrease to export in national & international platform. The existing export

trend of Nepalese handicrafts was good than now.

 There is lack of advertisement publicity on the international platform: there is not

available any advertisement as well as publicity program in the international

platform.

 There is lack of legal provision for export policy: in Nepal, there is not any

necessary rules and regulation about handicraft promotion by the government.

 There is no facility of promotion and development: Simply, handicraft is not

recognizing in all area because it is not develop. So there is no facility of

promotion and development.

18
 CHAPTER - THREE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

3.1 Summary
In a developing country like Nepal, Cottage and Small Industry plays a vital role in its
economic development. Importance of Cottage and Small Industry in economic development
has increased since last decade. Cottage and Small Industry includes carpet industry,
Pashmina industry, handicrafts, foods industry, shoes factory, readymade garments, and
etc.C.S.I. covers 90% of total business and hence it is contributing by producing goods and
services for the required people, exporting them in foreign countries which help in promoting
domestic products in International market.

“Small is beautiful.” This statement tells us what C.S.I. mean to the whole nation. C.S.I. is
not only the sector that contributes in the export of goods but it also helps in providing
employment to the one who do not have educational qualifications and much money to invest
in large scale business. Since C.S.I. is customer oriented and it is sensitive to the price of the
products, it always thinks from its customers’ view which ensures its long run existence. In
short, it has become a blessing for our country.

In the context to Lhapsa Concern (Exporter of Pashmina products), it has set suitable policy
in order to attract more foreign countries keeping its main objective of earning profit in mind.
In one hand, the growing export business of Pashmina is contributing a lot in the Nepalese
economy. And in the other hand, the unhealthy competition of exporting low quality products
in the name of high quality products is decreasing the export business of Pashmina which has
become the reason for losing International market. This, in turn hampers our nation from
making good relation with foreign countries. Thus, the main problem in export business of
Pashmina is the involvement of low quality raw materials, low quality machines used in
production process; power cuts etc. so the government should have strict policy to restrict the
import of low quality products and machines, import of foreign products should also be
restricted which will simultaneously help our nation in upgrading its export business of
Pashmina.
3.2 Conclusions
19
By evaluating the output of this study of Lhapsa Concern, export business of Pashmina, we
can come to the conclusion that Lhapsa Concern is playing a significant role not only in the
export of Pashmina products but also in promoting domestic products in International market
for the development of Nepalese economy. This consequently helps in providing
employment to the semi-skill people in the country who are below the poverty line. In other
words, we can say that Pashmina business can be the major source of income to increase the
national income and foreign currency. Supply, demand and consumption of Pashmina
products show the opportunity, problem and development of Pashmina in Kathmandu valley
as well as in foreign countries. Thus, this is the engine of economic flourish. So, the
government should have control over unhealthy competition to enhance the export of
Pashmina business which will help in the economic development of the country.

Finally, I would like to state that in spite of all my devotions, this survey report may not
prove to be completely perfect and satisfactory. It may contain various limitations and
shortcomings. I have tried my best to analyze export business of Pashmina on Nepalese
context and I hope this would provide necessary information to figure out its scope in future.

3.3 Recommendations

After finishing the entire study of export of Pashmina business of Lhapsa Concern along
with the gathering of some information about Pashmina activities, I have following
suggestions in my mind regarding entire Pashmina business in Nepal :-

 Pashmina business is in its declining position. So, efforts should be made to

enhance export business by promoting domestic products in international market.

 Export being the source of income for nation, maximum efforts should be taken to
attract and increase the number of foreign customers.

 Big investors should be encouraged to invest in Pashmina business.

 Since, foreign countries are the main customers for export business, Pashmina
businessman should quote reasonable price for Pashmina products.

20
 Conduct research and development activities for the improvement in quality,
quantity and production process.

 Government should check and restrict the import of low quality raw materials and
machines.

 Government should impose high tax on the import of foreign products and should
encourage the use of domestic products, besides it should impose low taxes for
the export of these products.

 Facilities to the employees should be increased in order to motivate them.

 Use the latest technology.

 Provide credit facilities to its customers.

 The profit earning capacity vastly depends on the investment policy, dealing
technique and capability of people in Pashmina business. So, these things must be
improved to uplift the Pashmina business.

21