India’s export tariff on rice sparks fears of food inflation in Nepal

India’s new export tariff on rice has sparked fears of food inflation in Nepal, which is bracing for a poor summer harvest.

On Thursday, the southern neighbor imposed a 20% export duty on various types of rice, except for parboiled rice and basmati rice. The tax came into force on September 9 as experts considered the possible repercussions in Nepal, where paddy production is expected to fall due to multiple factors.

Nepal is a rice-eating country like much of Asia, and crop disruption is a national concern. According to agro-experts, the 2022-23 harvest is uncertain as Nepal suffered from a shortage of chemical fertilizers during the paddy transplanting period in June-July.

A drought-like situation then hit the main food producing districts. In August, a heat wave spread over most of the southern Tarai, the country’s food basket, which scorched summer crops, especially paddy, in the fields.

Experts say that with food-producing countries imposing export bans, poor countries could be in dire straits as many could face food shortages or prices could rise sharply.

India, the world’s biggest grain exporter, has launched a series of restrictive measures as it tries to boost supplies and calm local prices after below-average monsoon rains reduced planting of paddy.

It exports rice to more than 150 countries, and any reduction in its shipments would increase upward pressure on food prices, which are already rising due to drought, heat waves and the invasion of Ukraine by Russia.

India first tightened its wheat exports, followed by an export ban on broken rice. In a new development, he raised export duties on non-basmati rice to discourage buyers from shopping in India.

New Delhi has also banned exports of 100% broken rice, which could impact Nepal’s food industry. This could make feed more expensive and it could affect chicken meat prices.

Long-grain rice has a unique charm in global markets, including Nepal, and this has led to a growth in rice imports, despite the country producing surplus grains, agri-experts have said.

Nepal does not grow fine rice in adequate quantities, and Indian rice is much cheaper than the local product due to India’s low production cost and heavily subsidized agricultural sector, experts say.

“The recent decision by the Indian government will not only create a shortage of rice, but also increase the price of rice by 20 percent,” said Subodh Kumar Gupta, chairman of the Nepal Rice Industry Association, India. oil and legumes.

The bad news comes ahead of Dashain, Tihar and Chhath, Nepal’s main festival season, when demand for fine rice skyrockets.

According to him, there are 2,500 rice mills, large and small, operating in the country, employing 50,000 people. “The decision is also going to impact their sustainability,” Gupta said.

“It will also increase the illegal rice trade. Inflation will rise further.

This year, the government did not provide chemical fertilizers to farmers during the peak paddy transplanting period in June. The government had promised that the fertilizers would be available after India started sending shipments under a government-to-government deal. But that didn’t happen.

Predictions by South Asian meteorologists that Nepal would receive above normal rainfall have also been proven wrong.

Madhukar Upadhya, a climate change expert, told the Post in a recent interview that insufficient rainfall could affect paddy growth, which could affect production.

“Nepal imports rice in large quantities from neighboring India, and if it decides to restrict rice exports, the situation will be difficult,” Upadhya said.

During the last fiscal year, Nepal imported 550,000 tons of paddy, 520,000 tons of rice and 50,000 tons of broken rice, mostly from India, according to the Customs Department.

In terms of value, Nepal imported rice worth 29 billion rupees and paddy shipments amounted to 16.99 billion rupees.

India has imposed trade restrictions on products one by one, which trade experts say violates the free trade agreement.

“We have a preferential trade agreement with India, and this rule does not allow blanket restrictions,” said Purushottam Ojha, former commerce secretary.

“In this context, the Nepalese government should request the Indian government to allow the export of rice and grains without additional duties,” Ojha said.

“Issues must be resolved through talks between governments, which is important at this time. There is a provision in the bilateral trade agreement that a waiver can be granted on goods at the request of partner countries” , did he declare. .

The extra duties will make rice, Nepal’s staple food, more expensive for consumers who have faced high inflation for nearly a year.

Experts say Nepal needs to look for alternative markets to import rice like Thailand, Myanmar, Cambodia, Malaysia and other rice producing countries.

But reports say the heat wave has hit most countries around the world and global production will be lower this year, fueling inflation and food insecurity in low-income countries like Nepal.

Inflation in Nepal was recorded at 8.08% in July at the end of the fiscal year, double the figure of last year. But economists say the official inflation rate does not even fully reflect the gravity of the situation.

Sanjay Kumar Phuyal, owner of Asma Enterprises, Balaju, wholesaler of rice, lentils and edible oil, said the additional duty could raise the price of rice by around Rs 4 per kg.

Phuyal said with the harvest season about two months away, prices may not rise further.

Some agro-experts say the Indian move is positive as it will encourage sales of local produce.