Though the government started fixing the support price of paddy and sugarcane a few years ago to ensure that farmers get reasonable price for their produce, the government is yet to set the minimum rates of both crops for the ongoing fiscal. As a result, farmers across the country have been forced to sell paddy at considerably low rates, while sugarcane farmers have not yet started selling sugarcane to sugar factories.

Meanwhile, the government has started groundwork to increase import duty on sugar with an intention to support sugarcane farmers and sugar mills. Sujan Dhungana of The Himalayan Times spoke to Kashi Raj Dahal, joint secretary at the Ministry of Agricultural Development, to know about the delay in fixing the support price of paddy and sugarcane and the government’s preparation to jack up customs duty on sugar. Excerpts:

Why has the government not yet fixed the support price of paddy for this fiscal year?

It is true that paddy harvesting across the country has been completed and we are already late to fix the support price for paddy. However, it is also true that the government is doing its best to set the support price for paddy as soon as possible. A technical committee at the Ministry of Agricultural Development (MoAD) has been collecting the paddy production data and production cost of the crop from across the country. The data collection and fixing minimum purchase rate of paddy has been slightly affected this year as a majority of MoAD officials have been deployed for the upcoming elections. Following mechanisation, I believe that paddy harvesting is also completed quickly in recent years. Things have been delayed also because different procedures have to be completed to make Nepal Food Corporation ready to purchase paddy from farmers if they do not get the rates for their products as per the minimum support price fixed by the government. Meanwhile, fixing support price of paddy is not only in the hands of MoAD as we have to wait for recommendations from the Ministry of Supplies (MoS). We will soon recommend the support price of paddy and send it to MoS. MoS will then send the recommendation to the Cabinet for approval.

Not only paddy, the government is yet to fix the minimum support price of sugarcane too. Why is it so?

Firstly, we should be clear that it is the purchase price that the government sets for sugarcane not the support price. Fixation of sugarcane price is more dependent on sugarcane farmers and sugar mills than the government. If both sugarcane farmers and sugar mills agree on a common price, the government will not have to interfere. However, both the parties are often unable to set reasonable rates which is why the government is obliged to set the minimum purchase price of sugarcane. MoAD, in coordination with the Ministry of Industry (MoI), had to set minimum purchase rate of sugarcane last year after farmers and sugar mill owners could not come to a consensus on rates. Even this year, both parties have not been able to agree on a common rate for sugarcane. Farmers and mill owners are still at loggerheads on the price of sugarcane. While farmers are demanding higher price citing that production cost of sugarcane has surged, sugar mills are refusing to pay the amount that farmers are seeking citing the global fall in price of sugar. This means that the government has to likely intervene in the price fixing process soon. As farmers have already harvested sugarcane, it has become urgent to fix the minimum purchase rate of sugarcane.

MoAD is said to be gearing up to increase customs duty on sugar. Why is this required?

We recently sent a letter to the Ministry of Supplies and Ministry of Finance urging both to increase the customs duty on sugar. Nepal has been importing a large quantity of sugar from India and other countries to address the country’s demand for sugar. However, global price of sugar has been plummeting constantly in recent days. As a result of this, domestic farmers have been saying that the global decline in sugar price has been affecting farmers as production cost of sugarcane in the country is higher unlike other countries across the globe. However, sugar mills are saying that they are not in a position to pay high cost to sugarcane farmers following the global decline in price of sugar. Both farmers and sugar mills are saying that the global decline in sugar price will put their business at risk if the government does not adopt effective measures. Thus, MoAD felt it necessary to hike the import duty on sugar. Currently, the government has been levying 15 per cent customs duty on sugar while we have proposed to increase it to 50 per cent. Recently, India also increased the import duty on sugar to promote domestic sugar production.

As a major portion of the sugar demand in the country is met through imports, how relevant is hiking import duty on sugar since domestic production is unlikely to meet the country’s demand?

It is true that levying higher customs duty on sugar will create a lot of challenges even though the decision is in favour of both farmers and sugar factories. There are chances that domestic production of sugar will not be sufficient to meet the demand. Similarly, it is also true that though increasing import duty on sugar controls sugar price from falling significantly, it will slightly make sugar costlier in the domestic market compared to the global sugar price. Thus, it is necessary that the government takes effective measures to boost domestic production of sugar while increasing the import duty on sugar.

The cost of production of sugar in Nepal is much higher compared to other countries. MoAD and the other related ministries should gear up to reduce cost of production of sugar and increase sugar production in the country itself to maintain stability in price and ensure effective supply. Farmers should be encouraged with different subsidy packages so that sugarcane farming is done in a larger scale. They should be provided subsidies on seeds, irrigation and electricity.

Of late, the price of onion has skyrocketed in the domestic market especially after India tightened onion export. Does the government have any plans to control onion price?

As Nepal largely depends on India for onions due to low domestic production, it is quite difficult for the government to control the surging price of onion. The Indian government’s recent decision to impose minimum export price (MEP) on onions has made the commodity costlier in the domestic market. The Indian government is expected to impose MEP only till December-end, so we hope onion price will start falling in the domestic market from January. However, the government is aware that traders should not overcharge customers citing import restrictions. Different related agencies under MoAD have been monitoring the market. As the country has already adopted federalism, it is also necessary to manage markets for different agricultural goods under new federal structure.