Prashant Khadka

KATHMANDU, July 31: Nepal faces a looming sugar shortage, exacerbated by India's ongoing export ban implemented in June 2022. The government has not yet started the process of importing sugar from India for this year's Dashain and Tihar festivals, which could lead to a significant price hike during the festive season.

Although the private sector supplies sugar to the market, the government's limited supply helps prevent price hikes. With domestic production declining and India's export ban still in place, the risk of a price surge is imminent.

The Salt Trading Corporation reports a demand of about 30,000 to 35,000 metric tons of sugar during Dashain and Tihar. Currently, it has only about 2,200 metric tons in stock, purchased from local traders. Last year, the government did not initiate the import process in time, leading to long lines and price hike up to Rs 130 per kilo during the festivals.

This year, the preparations appear similarly inadequate. The Salt Trading Corporation and Nepal Food Corporation have requested permission to import 20,000 metric tons of sugar each, but the Ministry of Industry, Commerce, and Supplies has not received budget approval from the Ministry of Finance. Ten industries have permission to import 19,000 metric tons of from India, but the state-owned Salt Trading Corporation and the Nepal Food Corporation have yet to secure their quota.

Joint Secretary of the Ministry of Industry, Commerce, and Supplies, Chandi Prasad Ghimire, indicated uncertainty about receiving additional quotas from India. Even if immediate approval is granted, the procurement process via international tenders will delay the arrival of sugar before Dashain.

Domestic sugarcane production has decreased in recent years, increasing reliance on imports from India. Last year, Nepal produced 165,000 metric tons of sugar, down from about 200,000 metric tons a decade ago. Annual sugar consumption is around 250,000 metric tons. The Ministry of Agriculture and Livestock Development reports a decrease in sugarcane cultivation by 1,521 hectares and a production drop of 53,834 metric tons over the last three years.

With the decline in sugarcane and sugar production, Nepal's dependence on Indian imports has grown. Given India's continued export ban, a price increase during Dashain and Tihar is likely.

Kumar Rajbhandari, spokesperson for the Salt Trading Corporation, warns that a situation similar to last year might repeat if the process of importing sugar is delayed. The government sells sugar at concessional rates during festivals to curb black market activity and high prices. However, it takes about three months to import sugar via global tender, and Dashain is only two and a half months away. Thus, it is unlikely that subsidized sugar will arrive in time.

Amulkaji Tuladhar, general secretary of the Retail Trade Association, predicts that without timely arrival of concessional sugar, prices could spiral out of control, leading to increased black market activity and shortages. Currently, sugar costs Rs 110 per kilo, but this could rise significantly if the government fails to act soon.