OM PRAKASH KHANAL

BIRGUNJ: The domestic rice industry of Nepal has been adversely affected by the tariffs imposed by India on rice exports. India implemented a policy last year that charges a 20 percent export duty on rice to control its domestic market prices. Although India waived this export duty for Nepal by determining a rice quota last year, this year, the absence of such a quota has hindered the import of rice from India, crippling the local industry.

Industrialists report that the majority of rice factories are operating at minimal capacity, with Nepal's rice industry heavily reliant on Indian rice.

Subodh Kumar Gupta, outgoing president of the Nepal Rice, Pulses and Oil Industry Association, stated that the domestic rice industry is currently operating at only 10 to 20 percent of its capacity. India periodically restricts food grain exports to stabilize domestic prices.

In addition to rice, India has implemented export controls on other food grains, including wheat and sugar, while imposing zero customs duty on edible oil imports to reduce its price. This zero customs duty policy has also placed the domestic oil industry in crisis.

Gupta, who also heads the Trade Committee of the Federation of Nepalese Chambers of Commerce and Industries, indicated that India's policy changes, aimed at managing its supply system, have severely impacted domestic production in Nepal. He criticized the Government of Nepal for failing to take effective diplomatic steps to address the issues arising from Indian policies.

"While it is understandable for India to adopt trade policies favorable to its interests, our government did not take the necessary diplomatic initiatives," said Gupta. "As a result, the rice industry here is on the brink of collapse."

Gupta highlighted that the Indian government's policy of reducing food prices was influenced by the recently concluded Lok Sabha elections. Early last year, India imposed a 20 percent export duty on paddy and rice and later halted the export of all rice except basmati rice.

Data from Birganj Customs show a significant decrease in rice imports. Dilaram Panthi, Chief Customs Officer of Birgunj Customs Office, reported that rice imports were halted this year as India removed the quota allocation. From mid-July to mid-June of the last fiscal year (FY 2079/80), Nepal imported 340,829 tons of rice from India. This quantity dropped to 201,319 tons in the corresponding period of the current fiscal year (FY 2080/81).

An official from the Ministry of Industry, Commerce and Supplies stated that the Lok Sabha elections in India affected the rice quota allocation. Efforts are being made to resolve this issue, said the official.

Importing rice from India requires paying a 20 percent Indian customs duty, a 5 percent agricultural reform fee, and a 2.5 percent advance income tax to customs office of Nepal. Industrialist Gupta noted that the cumulative cost of these duties makes it unfeasible to sustain the industry with imported rice.