KATHMANDU, SEPTEMBER 26

Sugar prices have surged by more than 36 per cent in the domestic market, burning a bigger hole in consumers' wallets. The price of sugar which was retailed at Rs 110 per kg until a few weeks ago has soared to between Rs 130 and Rs 150 per kg at present.

'I bought a kilogram of sugar for Rs 110 just two weeks ago to make sweets at home. The price has surged to Rs 130 per kg at present and even higher in some shops,' Lal Singh Tamang, a resident of Boudhha, said.

According to Chandan Pandit, a retail shop owner, the prices of all commodities including sugar have increased in the local market.

'We are not aware of the reasons but have no option but to refill our depleting stocks. We sold sugar at Rs 105 per kg around the first week of the month, which has now increased to Rs 130 per kg,' he said.

Government apathy

Consumer rights activists and stakeholders blame the government's short-sightedness and lack of effective supply management policies alongside foul play by some traders to an increase in sugar prices in the domestic market, which is a recurring scenario as the festive season approaches.Market watchers have also blamed the government for failing to ensure adequate supply despite being aware of depleting stocks and the changing policies of India towards food exports in recent times. Industries that use sugar as raw material are also concerned about the sugar supply running out within a few days and having to shut production.

According to Prem Lal Maharjan, president of National Consumers Forum, the government's myopic vision, lax regulations, and failure to create a positive environment for sugarcane farmers and industries are the causes for the current scenario surrounding supply and hike of sugar prices.

'Moreover, the protectionist policies of the Indian government have also affected the prices of certain commodities in Nepal. Although the government was aware of the policy changes surrounding the export of agricultural products, the authorities did not heed to our warnings,' Maharjan informed THT.

However, India's export policy cannot be solely blamed for the price surge in the country, Maharjan explained. 'In India, it costs INR 43 for a kg of sugar, while it is being retailed at around Rs 130 per kg in the domestic market. The government has turned a blind eye to some industries involved in foul play, which has caused such activities to flourish,' he said.

Meanwhile, stakeholders of the food and beverage industries have also pointed out the government's failure to recognise the problem at hand despite several warnings and suggestions from the private sector.

Dwindling supply

According to Bikram Karmacharya, general secretary of the Nepal Chamber of Biscuit Industries, although the association has been holding discussions with the government for the past three months urging bilateral talks with India to export sugar to Nepal, the authorities have not taken it as a pressing issue.

He also said that India's decision to limit sugar exports has dwindled the supply of sugar for the past year-anda-half and intensified smuggling and grey market activities in the Nepali market.

'The country's annual sugar demand stands at around 300,000 metric tonnes, of which less than 50 per cent is met through domestic production.

Meanwhile, India has put a cap on exports of sugar citing food security and inflation reasons for the past few years, which has dwindled its supply in the domestic market. Last year, many traders smuggled sugar to fulfil the market's demand. However, the supply drought is expected to worsen after the government tightened border movements following increasing smuggling activities and low revenue collections.'

According to him, instead of blaming industries and traders, the government needs to step up and reach out to Indian authorities to allow the import of sugar into the country. At the same time, instead of sealing warehouses for having a stockpile of sugar, it should be disbursed in the market, he opined.

'Does sealing warehouses with sugar stocks ease or further disrupt the supply?'Karmacharya questioned.

Reuters reported that India is expected to ban mills from exporting sugar in the next season beginning October, halting shipments for the first time in seven years, as a lack of rain has cut cane yields, three government sources said.

'As the sugarcane crushing season begins only after Tihar, the country is likely to see a shortage of sugar for the next two months if the government does not intervene. The biscuit industry, which employs around 10,000 staff, will have no option but to shut down if that happens,' Karmacharya added.

Probe team formed

Meanwhile, Ananda Raj Pokharel, director and information officer of the Department of Commerce, Supplies and Consumer Protection, said that the department has formed a team to investigate the reason for increasing sugar prices and submit a report within a few days. The team will also collect data related to changes in the amount of production, imports, and local demands.

'We are tracking the reason for the price spike.

While a 20 per cent increase from wholesale price is understandable, further increase in prices is certainly an issue. We will have a clearer picture based on the report findings,' he said.

Pokharel also said that the government is making preparations to import 20,000 metric tonnes of sugar from India through two state-owned companies to curb the price rise.

Meanwhile, Maharjan said that the authorities have been confiscating smuggled and hoarded sugar in huge amounts in recent days. 'Knowing that large amounts of smuggled goods have flooded the market, the government should try and discourage smuggling by reducing customs and encouraging legal procedures to increase revenue collection.'

Meanwhile, Karmacharya said, 'The government should be serious about topics such as essential commodities and maintaining adequate stocks. At a time when the sugar mills are out of sugar, the government should reduce import duties to ensure supply and meet local demands.

Customs duties are not just a way to collect taxes but also a tool for controlling trade, taxes, and inflation and should be used accordingly.'

A version of this article appears in the print on September 27, 2023, of The Himalayan Times