February 23: Nepal’s oil industries are facing shortage of raw materials due to the prospect of war between Russia and Ukraine.

Ukraine is one of the major suppliers of mustard seeds, sunflower seeds and wheat to the Nepalese industries, which have been processing the raw materials and selling them in the Indian market. The oil industries are worried that the shipment of those who have opened LC is unlikely to arrive due to the possible invasion of Ukraine.

Suppliers in Ukraine reportedly said that the shipping companies are delaying the shipments despite their request.

Nanda Kishore Rathi, vice-president of Morang Chamber of Commerce, said that the goods were ordered by opening LC but the goods have not been dispatched from there due to the possible invasion of Ukraine. “If the war starts, the companies will not be able to send the goods. Industries here can lose millions of rupees,” said Rathi.

Rising tensions between the two countries have pushed up the price of mustard by US$ 30 per ton. Besides Ukraine, mustard seeds are also imported to Nepal from Australia. According to the industrialists, the demand for mustard from Australia has increased due to the tension in Ukraine but it is more likely that the imports will be delayed due to the high demand. Even in Australia, the price of mustard has gone up by US$ 60 per ton. He said that the effect of this will be seen in the Nepali market after some time.

Krishna Kumar Agrawal, vice-president of the Confederation of Nepalese Industries, said that due to the tension between Russia and Ukraine, Nepal's oil industries have started importing mustard from Australia instead of Ukraine. According to Agrawal, although there is no shortage of raw materials in the market at the moment, the price of cooking oil is most likely to increase.

Prices of mustard, sunflower and soybean oil have been on the rise for the past one year due to the Covid-19 pandemic. The price of mustard oil, which has gone up by Rs 100 per liter, is expected to rise further. The retail price of a liter of mustard is now Rs 280, sunflower oil is around Rs 230 and soybean oil is around Rs 200.

Vice President of the Morang Chamber of Commerce, Bikash Kumar Begwani said that the shipment of mustard, wheat and sunflower from Ukraine has not stopped yet, but is certain to halt in a few days.

“Once the war breaks out, the goods coming from there will be stopped,” said Begwani adding, “However, imports from countries including Australia will continue.” He said that the price hike of US$ 30 to 60 per ton of mustard has already affected the Nepali market.

He says that if there is a war, the price of petroleum products will also go up and so will the cost of transportation. Banks in Nepal have been reluctant to open LCs for some time due to fear of a war between Ukraine and Russia.

The price of mustard has already gone up by US$ 60 per ton in the international market in the last two months, said Naresh Rathi, vice-president of the Association of Nepalese Rice, Oil and Pulses Industry. Rathi, who is also the operator of Chandrashiva Rice and Oil Mills, says, “The LC of mustard I opened two months ago at US$ 755 per ton has now arrived in Kolkata''.

But now the price of mustard in Australia has already reached US$ 820 per ton. The price of mustard was between US$ 580 to 600 per ton in January last year.

The crisis has intensified after Russia's recognized two separatist territories in eastern Ukraine as independent states. Recognizing the region as an independent state, Russian President Vladimir Putin has ordered his troops to enter Ukrainian territory. The Government of Nepal has taken interest in Nepalese living in Ukraine and has started collecting their data. European countries and the United States have strongly criticized this move of Russia.