Government officials say feasibility of importing sugar from third country being explored


The domestic sugar market is likely to be affected with the recent decision of India to impose restrictions on export of sugar.

President of Nepal Sugar Mills Association (NSMA) Sashikant Agrawal said the move by India - a sign of growing protectionism around the world - will promote black marketing and price gouging due to tight supply.

"The sugar export restrictions by India will cause its price to surge as the local production is insufficient to cater to the domestic demand," said Agrawal.

Economist Dilliraj Acharya also said the restrictions will exacerbate the woes of Nepali consumers and industrialists grappling with soaring inflation due to the Ukraine-Russia war. "Sugar is one of the staple commodities in Nepali Kitchens and also one of the major raw materials for some industries.

India's partial export ban will affect the supply chain of sugar market in Nepal resulting in its price to go up," Acharya told The Himalayan Times.

On Tuesday, India's central government decided to impose a partial ban on the export of sugar, effective from June 1, in a bid to control the surge in local price.

India - the world's biggest producer of sugar and the second largest exporter after Brazil - will only allow the sale of sugar up to 10 million tonnes in international markets with a view to maintain domestic availability and price stability during the sugar season 2021- 22 (October to September), the Economic Times reported.

However, according to Indian media reports, these restrictions won't apply to sugar being exported to the EU and the US under CXL and TRQ quotas.

Recently, India also put restrictions on wheat exports.

According to NSMA, 270,000 metric tonnes of sugar have been annually consumed in Nepal, while domestic production only stands at 130,000 tonnes. The rest of the domestic demand of the sugar is fulfilled by India.

Until nine years ago, Nepal used to produce 280,000 tonnes of sugar annually. At that time, a single industry used to produce up to 100,000 tonnes of sugar. However, sugar production has been affected as sugarcane cultivation continues to decline.

"The current domestic production of sugar is sufficient to fulfil only half of the demand,"

Agrawal said, further explaining that the recurring payment disputes between the sugarcane farmers and mill operators have prompted many farmers to abandon sugarcane farming for other crops.

The government officials, however, claim the local market will not be affected by India's export restrictions.

Urmila KC, undersecretary at the Ministry of Industry, Commerce and Supplies (MoICS), informed the government is exploring alternative markets for sugar imports.

"We are looking into the feasibility of buying sugar from other neighbouring countries like Pakistan and Bangladesh to ensure its smooth supply and keep its price in check in the domestic market," KC told THT.

However, NSMA President Agrawal claimed importing sugar from other source countries will be infeasible due to logistics cost. "The government should utilise diplomatic channels to request India to allow export of 25,000 to 30,000 tonnes of sugar to Nepal," he said, adding he was optimistic about the southern neighbour's compliance due to cordial bilateral relations between the two countries.

Meanwhile, Govinda Bahadur Karki, joint secretary at the MoICS, opined that India's decision to restrict sugar exports could be an opportunity for Nepal. "Nepal has the potential to ramp up sugarcane production and be self-sufficient in sugar. But it will take a long time due to our own shortcomings."

A version of this article appears in the print on May 26, 2022, of The Himalayan Times