"Dark Deals in White Sugar: Consumers Cheated by Government"

Rekha Shrestha-

Nepal’s major festivals like Dashain, Tihar, and Chhath approach, people gather to eat, drink, and celebrate together. It is a longstanding Nepali tradition to earn throughout the year and enjoy during these big festivals. With the start of the new fiscal year after the month of Shrawan, festivals like Teej and other main festivals for Nepalese begin.

During these major festivals, sugar consumption increases significantly. However, every year, citizens face the bitter issue of sugar shortages. As festivals approach, the topic of sugar comes into discussion once again. This year too, people are worried about a potential sugar shortage during the festive season. Keeping this in mind, the government is preparing to import sugar from India, a practice it has followed every year during the festival season.

How Much Sugar Is Being Imported?

This time, the government is set to import 19,000 tons of sugar specifically for the festival season. According to the Department of Commerce, Supplies, and Consumer Protection, this is based on the quota set by India for Nepal. The department has called for proposals from firms and companies interested in importing sugar.

The minimum quota for firms and companies eligible to receive import permits has been set at 2,600 tons, according to Rakesh Pandey, an information officer at the department. India’s deadline for importing the quota sugar is set for September 30. If the sugar is not imported within one month of receiving the permit, the permit will be canceled. Therefore, immediate action is required for the import of sugar.

Currently, more than 70 companies have applied for the import permit. The government has turned to private companies for sugar imports since the government-to-government (G2G) arrangement couldn’t be established. Last year, the Ministry of Industry, Commerce, and Supplies had assigned Food Management and Trading Company and Salt Trading Corporation to import 10,000 tons each to prevent shortages during the festival. However, they were unable to do so then and are unwilling now due to high costs.

"We have been advocating for the ministry to import sugar for a long time," says Sharmila Neupane Subedi, an information officer at the Food Management and Trading Company Limited. "However, the price was a bit high. Our intent was to sell at a price lower than what traders would sell here. But, this time, the price of sugar that the government proposed to purchase was high. If the price is higher than the local market price, what's the point of importing and selling it? That's why we didn't import this time." As a result, the government is proceeding with the importation of sugar through private companies.

The official mentioned that importing sugar from businesses would avoid shortages during the upcoming Dashain and Tihar festivals. The import permit from the department stipulates that the sugar must be sold at a price not exceeding the price set by the Salt Trading Corporation. According to him, the quality of the sugar must also meet the government standards. Additionally, the companies with import permits are required to submit weekly reports to the department detailing the stock, price, quality, and sales of the imported sugar.

If the businesses are unable to import the quota sugar from India, then the price of sugar during this year’s Dashain and Tihar is expected to be high. Currently, there is enough sugar in the Nepali market, but most of it has been smuggled in. This has resulted in losses for the state on one hand and forced consumers to pay high prices on the other. India had imposed a ban on sugar exports in June 2022, and that ban is still in effect.

Sugar Prices Are Already on the Rise!

Every year, sugar prices go up during the festival season. This year, as the festival season approaches, sugar prices have already started to increase. In the past three weeks, the price of sugar has increased by 10 rupees per kilo. Currently, people are paying 115 rupees per kilo for sugar, and the Retail Trade Association has indicated that this price will increase further by the time Dashain and Tihar arrive.

According to the Salt Trading Corporation, there is a stock of approximately 2,200 metric tons of sugar. This sugar was purchased from local traders. During Dashain and Tihar alone, there is a demand for about 30,000 to 35,000 metric tons of sugar at the corporation.

On Jestha 30, 2081 (June 13, 2024), the ministry had instructed the Department of Industry to initiate the process for the private sector. Accordingly, on Ashar 2 (June 16, 2024), the department issued a notice inviting applications from industries for sugar importation. Nine private companies had received import permits at that time. However, they were not given customs duty exemptions. Without customs exemptions, the import became expensive, and they didn’t bring in the sugar.

Now, the department has issued a notice targeting Nepali firms and companies for importing sugar for commercial purposes. They are also not granted customs exemptions. Importing sugar requires paying 30 percent customs duty and 13 percent VAT, making it certain that sugar prices will increase this year.

If sugar isn’t imported soon, there will be a shortage in the market, leading to increased black-market activities. If Salt and Food had imported sugar, they would have only needed to pay 15 percent customs duty, a 50 percent concession. This would have allowed the general public to access sugar at a lower price. Now, sugar price hikes and shortages seem inevitable.

 Why the Reliance on Imports Every Year?

Nepal does not have accurate data on the annual sugar consumption. The lack of data results in a mismatch between demand and imports every year, says Information Officer Pandey. "We do not have exact data on how much sugar is consumed in Nepal," he says. "The Sugar Producers Association might have data on sugar production. Customs data is available for imports. We don’t have exact figures." According to traders, the annual demand for sugar in Nepal is around 250,000 tons.

Sugarcane, required for sugar, is also produced in Nepal. However, every year, there is a shortage of sugar during festivals like Dashain. Therefore, the government is preparing to import sugar to address the shortage as festivals like Dashain, Tihar, and Chhath approach.

Last fiscal year, 2 million tons of sugarcane were crushed, resulting in 180,000 tons of sugar, according to the Sugar Industry Association. The association states that there are 14 sugar mills across the country. These mills have the capacity to meet domestic demand and even export. However, due to the inability of Nepal’s industries to produce sugar to their full capacity, shortages occur, and prices rise.

Because sugar mills have not paid sugarcane farmers on time, farmers are gradually moving away from sugarcane cultivation. Farmers are choosing alternative crops as they have been exploited by both the government and sugar mill owners.

 No Sugar in Fair Price Shops This Time!

Every year, the government operates fair price shops targeting the festival season. These shops are opened during Dashain and Tihar to provide some relief to the general public, ensuring consumers are not cheated during the festival shopping spree. These shops offer various food items, including sugar, at discounted prices.

However, this year, the possibility of getting sugar at fair price shops is very low. Every year, Salt Trading Corporation and the Food Management and Trading Company have imported sugar under the government quota and sold it at a discounted price through fair price shops. But this time, the importation of sugar through the G2G arrangement by the food and salt corporations has been deemed expensive, and thus, they have opted out. Consequently, preparations are underway to import sugar through the private sector.

Since the food and salt corporations have not imported sugar through the G2G arrangement, the likelihood of the general public getting sugar at discounted prices through fair price shops is minimal. However, information officer Pandey argues that no decision has been made on this matter yet. "No decision has been made on this matter yet. There is still time. Discussions will take place later," he says. If food and salt corporations do not sell sugar during the festival season, black-market activities will surely increase.