More than 80 percent of the rice mills in the eastern Tarai have shut down in recent years, largely due to having to operate at below capacity. The mills are unable to compete with ballooning imports of Indian rice through the open border, forcing them to cut production. 

There are around 300 rice mills across the country, half of which are located in Parsa, Bara and Rautahat districts in the Tarai. Rice traders said that Nepali rice was being replaced by cheaper rice 

and paddy from Bihar and Uttar Pradesh in India flooding the market.

A large quantity of Indian rice began to be imported into Nepal after the Indian government on Sept 9, 2011 lifted the ban on exports of rice to 

Saarc countries. India had imposed export restrictions on rice following a shortfall in production. 

It lifted the ban after bumper harvests led to adequate rice stocks. The impact of India’s ample stocks was visible in Nepal as Nepali producers were unable to compete with heavily subsidized Indian products. 

“Local mills have the capacity to fulfil 70 percent of the country’s requirement,” said Om Prakash Jaiswal, a local rice trader. 

“However, ballooning imports from India have hit the mills as well as farmers,” he said. Traders said that it was easier importing rice from India and selling it in the Nepali market due to its cheaper rates compared to local produce.  

Subodh Kumar Gupta, vice-president of the Birgunj Chamber of Commerce and Industry, said that rice from India was cheaper compared to rice produced by local mills. Gupta said that the operating cost of rice mills was very high, and that it had resulted in traders turning to cheaper imports from India. 

“Due to the government’s unclear policy on the rice industry, farmers and entrepreneurs have been hit hard,” he said. 

“There is no clear policy to promote domestic products and substitute imports.” 

The country’s rice mills have a combined investment of Rs 15 billion, and they used to pay Rs 250 million to the government in taxes annually. Rice mills in the Tarai region used to provide direct employment to 25,000 people three years ago. But the employment scenario looks different nowadays, Gupta said. 

Nepal’s rice import bill jumped to an alarming Rs 13.67 billion in 2012-13, as the country’s output failed to meet growing rice demand. According to the Trade and Export Promotion Centre (TEPC), the rice import bill soared by 47 percent. 

As per the TEPC’s statistics, the country imported 493,291 tonnes of rice in the last fiscal year, up from 398,482 tonnes in the previous year. 

Of the total imports, semi- and wholly-milled rice amounted to Rs 8.66 billion while imports of rice in the husk stood at Rs 4.66 billion.