Nepali handknotted woollen carpets are valued for their unique texture and colour, resiliency, strength and durability. Made from refined pure wool dyed both with vegetable and chemical dyes these carpets have an international cache that makes them the second largest Nepali export.

The carpet industry has another important function. The factories, usually on the outskirts of major urban centres, absorb many unskilled rural immigrants . A decade ago, nearly 300,000 people were employed spinning woollen yarn. But most of them have now been replaced with machines. Gopinath Majhi, chairperson of the Woollen Yarn Labour Union, believes only about 60,000 still have their jobs. "It is difficult to earn a living spinning wool these days," he says.

Up against the perfect yarn produced by machines, workers are under pressure to churn out similar results. This, Majhi says, has felled productivity from 5kg to around 3kg of super 60-knot yarn a day, for which the worker is paid between Rs 20-28 per kg. A machine, on the other hand, can spin almost 1,000 kg of the same wool a day, replacing the work of almost 500 labourers. "If we can stop using machines, about 200,000 jobs will be created immediately," claims Majhi.

The debate over machine-spun yarn for carpets has raged for almost a decade. The principal beneficiaries are carpet factory owners who profit by slashing production costs and then selling their products at the price of handspun woollen carpet. Despite present laws forbidding the use of machine-spun wool for carpets, it is a common practice. During our three hours at a yarn shop, two suppliers and three phone enquires came for machine spun yarn.

Mills are allowed to spin yarn below 30 microns, officially intended only for woollen knitwear. However, these mills supply yarn for carpets as well, which should use wool above 30 microns. "We produce thread according to the buyers' demands," says Dinesh Khetan of Amulet Wool Industry. "It is not our concern if our clients use it in carpets , sweaters or dump it elsewhere."

Handspun yarn entrepreneurs filed a complaint in 1998 demanding immediate action to stop the illegal operation of mechanised mills, but this has had little impact. They believe Nepal has a niche market because of fine handwoven craftsmanship. Instead of trying to compete with rock-bottom prices of machine-made carpets, they say we should protect and promote our carpets as traditional and completely handmade.

"We can not wait in business ," says Deepak Kumar Bhattarai, owner of Paramount Carpet Industry, one of Nepal's biggest carpet exporters. "We have to meet the client's demands and it doesn't make sense to stick to handspun wool." He says his company uses only handspun woollen yarn, but admits that machines can increase production and make Nepali carpets more competitive in the international market. Even so, others blame machine-spun yarn for the drop in carpet exports. The handmade carpet industry exports peaked in 1993/94 with over 3.3 million sq m of carpets worth Rs 9.5 billion. Gradually things went downhill. By 2003, exports were down to 1.6 million sq m. Bhattarai doesn't think the drop is entirely because of entrepreneurial weakness or even government policy. "It is due to declining global consumption of carpets," he said. He also holds Indian exporters responsible for undercutting the Nepali market by hiring Nepali craftsmen to imitate Nepali handknotted products.

Gehendra Bahadur Bajracharya, executive director of the Wool and Carpet Development Board, thinks global economic recession and a change in consumer demands are also responsible for the slump. "The new generations prefer fashionable and perishable items to lasting heirlooms," he says.

Priorities have changed and the European market that the Nepali carpet industry relies on so heavily has become intensely competitive. The fall in quality doesn't help. Two years ago, Belgium's Benelux Orient Company, one of the 10 largest buyers of Nepali carpets in Europe, wrote to the Nepali embassy about low quality and fake carpets from Nepal. The government circulated the letter to carpet exporters but nothing was done.

Without the distinction of being high quality, handmade products, Nepali carpets don't stand a chance against cheaper, machine-made ones from India and China. A lack of creativity to keep up with changing tastes could be another reason for the downturn. However, carpet entrepreneurs believe machine-made thread is the biggest threat to the Nepali carpet industry.

The Wool and Carpet Development Board, established in 1992, has control over the General Special Preference (GSP) licenses that industries need to export. Ideally, this board should monitor quality and stop carpets using machine-spun yarn. Unfortunately, the GSP certificates are distributed solely on the basis of a self-declaration made by the stakeholder as the board has no testing lab or verification tools. With just two inspectors who make occasional factory visits, only shipments woven on machines are stopped. Machine-woven thread is a neglected concern.

Handspun yarn entrepreneurs claim that over 50 percent of carpets are currently made with machine-spun yarn, but Bajracharya is sceptical. Komal Prasad Palikhe, planning section director at the Department of Cottage and Small Scale Industry, says they have been working on this problem for more than five years. "We took action against many industries but there were no results," he says. "We have limited resources, how is it possible to check every industry?" Bhattarai thinks all this is a non-issue: "There is a conflict of interest between entrepreneurs. The main concern must be how to increase exports, raise the economy and create more jobs." KPK