Kathmandu/ Dhangadhi: Nepal found itself at the receiving end when India imposed a ban on wheat exports last May after unseasonably hot weather hit the harvest there. The embargo caused 80-85% of Nepali flour mills to shut down, and was eventually lifted in December.
This was followed by a quota system in Indian wheat exports which resulted in reduced supply and higher prices in Nepal.
Unfortunately, it appears there is more bad news for Nepal.
Heatwaves in northern and central India during the crop ripening period are threatening to dent its wheat production for the second straight year, according to Reuters.
The higher temperatures in March have been estimated to trim wheat output by 4 to 5 million tonnes in India, the report said.
In March 2022, a heatwave curtailed India’s wheat production to 100 million tonnes against local consumption of 103.6 million tonnes.
The potential drop in wheat output in India has made the Nepali flour industry nervous.
“We are greatly worried. If India ends the quota system under the pretext of declined output, flour prices will go through the roof,” said Dinesh Kumar Agrawal, senior vice-president of the Nepal Flour Mills Association.
India has set a quota of 50,000 tonnes of wheat for Nepal.
“We have received 33,000 tonnes out of this quota. We are not sure whether the remaining 17,000 tonnes will be shipped to Nepal,” said Agrawal.
The 17,000 tonnes of wheat has to be imported by March 31.
Nepali flour producers have been urging the government to request India to provide 200,000 tonnes of wheat.
Manoj Agrawal, vice-president of the Kailali Chamber of Commerce and Industry, said the quota of 50,000 tonnes of Indian wheat had provided some relief.
“The price of flour dropped immediately after the mills began receiving wheat from India,” he said.
The quota was distributed among 40 flour mills across the country. The government approved import quotas based on the production capacity of the flour mills last year. Among them, 13 mills failed to file import applications on time.
The flour mill association said the 40 flour mills require around 1,000 tonnes to operate in a full-fledged manner.
“The allocated quota is very small, but it has helped reduce the price of flour by Rs 5-7 per kilogram,” said Manoj Agrawal. “The government should request the Indian government to provide at least 200,000 tonnes of wheat for this year.”
The flour producers’ association had planned to meet the industry and foreign ministers and apprise them of the problems facing the sector, but the government is yet to appoint the new ministers.
Shankar Bogati, president of the Sudurpaschim Chamber of Commerce and Industry and managing director of Bageshwar Flour Mill in Dhangadhi, said the problem would not be resolved permanently unless the government requested India to lift the ban.
“The quota system will affect domestic flour mills,” he said. “It is important to increase domestic production. But since the domestic wheat output is not enough to fulfil the mills’ requirement for five months, the government should do homework and request India for a long-term deal to export wheat to Nepal, ” he said.
According to the association, Kathmandu consumes 2,100 tonnes of flour daily.
The flour mills supply refined flour as raw material for factories making biscuits, noodles and bread. Each flour mill has an investment of around Rs 600 million and provides employment to 50-60 people.
Nepal has been importing wheat mainly from India as it is cheaper compared to other countries.
According to trade economist Posh Raj Pandey, there is a provision in the bilateral trade agreement between Nepal and India which says that if India imposes a ban on exports globally, it can make an exception for Nepal considering it a niche market.
“During the 2007 food crisis, India had banned the export of rice globally. But following Nepal’s request, it lifted the ban for Nepal within 2-3 weeks,” said Pandey.
“Nepal has been given special treatment in the past. The government should hold diplomatic talks with India considering the country’s food security seriously,” he said.
Experts say that even if the related ministries are headless, the issue can be handled at the bureaucratic level.
Pandey, who is also executive director of the South Asia Watch on Trade, Economics and Environment (SAWTEE), a think tank, says many countries have started treating food security as national security.
“Food security is the most neglected issue in Nepal,” he said.
Before India slapped restrictions last May, a 50-kg bag of refined flour used to cost Rs 3,200 to Rs 3,300. After the ban, the price jumped to Rs 4,800 to Rs 5,000.
The retail price is almost double that.
Retailers say prices have cooled to some extent after India set a quota of 50,000 tonnes for Nepal.
In the last fiscal year, Nepal’s wheat harvest rose by less than 1 percent to 2.02 million tonnes. This fiscal year, experts say that due to the late winter rainfall, which is good for the wheat crop, output may go up. Wheat is sowed in December and harvested in March.
“The price of refined flour has doubled,” said Pandey. “Government intervention in this issue is required because it may fuel food insecurity.”
This article was originally published on The Kathmandu Post.