Economists and consumer rights activists have criticised the government’s recent decision to impose quantitative restrictions on sugar imports. Quotas could lead to a shortage besides promoting a black market in sugar on the eve of the festival season when demand for the sweetener soars, they said.

The government has imposed quantitative restrictions on sugar imports in a bid to protect domestic sugar manufacturers who have been complaining of surplus stocks piling up in their warehouses due to cheaper imports. Sugar manufacturers blame low customs duty on imported sugar for the glut in the market.

Prime Minister KP Sharma Oli on Sunday directed the concerned government authority to impose an import quota on sugar of 100,000 tonnes annually. The government came up with the decision following pressure from sugar producers.

“The government’s move has raised the risk of a hike in the price of sugar with possible shortages and smuggling from India where the farm product is available at a cheaper rate,” said economist and former vice-chairman of the National Planning Commission Jagadish Chandra Pokharel.

“Although the World Trade Organisation has provisioned for imposing quotas on a selected range of products as part of protectionism, Nepal is likely to face a large volume of illegal trade as it shares an open border with India.”

Pokharel said that the government should have subsidised sugar in order to regulate supply. “Quota restrictions might not be a great help to regulate supply when there is a huge price difference of sugar between India and the domestic market,” Pokharel said.

Secretary of the Ministry of Industry, Commerce and Supplies Chandra Kumar Ghimire said the government had imposed the quantitative restriction to protect domestic industry. “The government’s move is in line with international practices,” Ghimire said. 

There are 13 sugar mills in the country. According to the Sugar Producers Association, they have a combined stock of 108,000 tonnes of sugar valued at around Rs8.7 billion piled up in their warehouses.

Bowing to pressure from private sugar mills, the government raised the import duty on sugar to 30 percent from 15 percent in the last fiscal year. Mill owners had been urging the government to raise the customs duty to at least 50 percent saying that they were being priced out of the market.

President of the association Shashi Kant Agrawal hailed the government move. Agrawal said traders held another 100,000 tonnes of sugar apart from the stocks held by sugar plants. “Around 100,000 tonnes of sugar will be consumed by the time the crushing season begins in the next couple of months, and the country will still have 100,000 tonnes in stock,” Agrawal said.

Ruling out the possibility of sugar producers forming a cartel, Agrawal said that imposing restrictions on sugar imports is expected to help sugar manufacturers minimise their losses. “We have expressed our commitment that we will not hike the market price of sugar even after the government imposes import quotas.”

Nepal’s sugar requirement amounts to 250,000 tonnes annually. Salt Trading Corporation (STC) imports 25,000-30,000 tonnes of sugar annually. According to the state-owned enterprise, it expects to import 5,000 tonnes this year and sell its old stock of 15,000 tonnes during the upcoming festivals. Consumer rights activists doubt sugar traders will not raise prices during the festivals.

“Although 220,000 tonnes of domestically produced and imported sugar will hit the market, there is still a shortfall of 30,000-40,000 tonnes. In this regard, domestic traders are likely to form a cartel to hike the market price,” said Prem Lal Maharjan, president of the National Consumer Forum.

The government said the price of sugar would not increase during the upcoming festival season. Commerce Secretary Ghimire said the ministry would maintain a close watch on the supply and price. “If any fraudulent practice is observed in the market, the government will revise the current policy to correct the situation,” Ghimire said.