Smugglers flooding the market with cheap textiles from India and Chinese-administered Tibet are costing Nepal six billion rupees ($76 million) a year in lost revenues, as well as closures and lay-offs affecting three-quarters of the country's industry, an industry official says.

"Over 75 per cent of the industries have either voluntarily closed or are preparing to shut down as the smuggled textiles are much cheaper than the domestically produced goods," the president of the Nepal Textiles Industries Association, Mahesh Lal Pradhan, told AFP.

He said some 300 million meters (one billion feet) of textiles were brought into Nepal each year, but only one-sixth of this was recorded for customs tariffs.

Investments of around 15 billion rupees ($192 million) over the past two decades have failed to halt the decline of the industry, which employs 700,000 workers. In the mid-1990s, the kingdom produced 80 million metres of textiles but this has now fallen to 20 million metres.

More than 75 per cent of Nepal's textile industries - including what was the largest, Butwal - have since shut down, and the remaining 25 businesses are incurring losses, Pradhan said.

Not only are textiles from India and Tibet significantly cheaper than those made domestically, but a bilateral trade treaty renewed earlier this year states Nepal must give concessional duty rates to Indian products.