February 28: Illegal imports of onions and potatoes have increased after the government increased the tax on the vegetables to promote domestic production.

Businessmen claim that legal import of onions has stopped after the government adopted a policy of charging 13 percent VAT on potatoes and onions through the budget for the current fiscal year (FY). The supply of potatoes is covered by domestic production.

The government also levies 9 percent customs duty and 1.5 percent advance income tax on the import of potatoes and onions. Importers of potatoes and onions in Birgunj held a press conference on Tuesday and said that government’s policy has increased the illegal import of onions.

Businessman Rajesh Kumar Kalwar claimed that the supply of potatoes is fulfilled by domestic production but onions are being imported illegally.

Since the cost of illegal import is less than the revenue to be paid to the customs office, certain groups are actively involved in the unauthorized import of such goods in the border areas. Businessmen say that illegal imports have increased as they have to pay a total of 27 percent of taxes including customs duty, VAT and income tax for legally importing potatoes and onions.

Importers say that those importing onions and potatoes have to pay an extra 10 to 15 percent of the total cost for transporting the vegetables the Indian market to the bordering towns of Nepal.

Moreover, the import of onions have come to a complete halt after the Indian government imposed a ban on exports from last December to March. India will lift the export ban by fixing a quota after March 31.

Munna Kumar Rai, another importer, claimed that there will be no legal import until VAT is removed. Madhav Rajpal, vice president of Birgunj Chamber of Commerce and Industry said that the government’s revenue is dying up instead of increasing due to its own policy.

Even though the policy of import control for self-reliance of domestic products is correct, unauthorized imports have increased.

“As a result, the government has lost revenue in one hand while the businessmen involved in legal imports are in trouble," said Vice President Rajpal.

Nepal is mostly dependent on imports to meet the market demand for onions. The annual consumption of onions in Nepal is 401,000 tons, but the country produces only 169,000 tons of onions, according to government figures. Importers say that the country has to import onions to meet the demand.

About 3.8 million tons of potatoes are consumed in Nepal every year, while the country still imports 400,000 tons of potatoes annually, according to the businessmen.

Businessman Rakesh Kumar Kalwar says that the price of onion in Nepal's border market is up to Rs 10 more expensive than in the Indian market.

Traders say that illegally imported onions in Nepal are delivered from border areas to Kathmandu, Pokhara, Narayangadh and other cities. They claim that the illegal traders are running such business by influencing the local police, administration and government agencies responsible of revenue leakage control.

Prem Prasad Devkota, chief investigation officer of the Revenue Investigation Office, Pathalaiya, said that they have increased surveillance after they noticed illegal import of onion. According to Devkota, the office has collected Rs 765, 000 in fine from illegal importers as of mid-February.