With food prices rocketing into the stratosphere due to tax hikes and shrinking domestic production, the upcoming festival season is poised to strain household budgets.

Traders said that people will have to dig deep into their pockets when they do their festival shopping for the impending Dashain, Tihar and Chhath, the most widely observed celebrations in Nepal. Vegetables, fruits, dried fruits, meat, edible oil, sugar, legumes, flour and rice have all become dearer, and prices are expected to increase further, they said.

The government has increased the customs duty on foreign farm and industrial products in a bid to hold down imports and trim the ballooning trade deficit.

The higher tariffs have pushed up food prices. Traders and consumer rights activists said that prices of daily essentials started rising immediately after the budget statement for this fiscal year was released on May 29.

“Traders have started hiking the price of food items as the festivals are drawing closer,” said Prem Lal Maharjan, president of the National Consumer Forum. “The government is unable to regulate the market.”

As per the Department of Commerce, Supply and Consumer Protection Management, prices of food items such as rice, beaten rice, lentils, spices, sugar, beans and flour have bloated by more than 22 percent after the budget.

Raj Kumar Shrestha, president of the Nepal Retailers’ Association, said that food prices may increase by 10-15 percent this festive season mainly due to a hike in the customs duty and transportation costs after the government enforced the vehicle consignment tracking system.

Opportunist traders may engage in price gouging during festival time by creating artificial shortages or hoarding goods if the market is not properly monitored, association members said.

Nabin Jha, a consumer from Balkhu, told the Post that Dashain was a special festival for traders as they are free to spike prices of essentials. “Every year, during the festivals, the price increases and the quality decreases,” he said.

Shrestha said that the government should conduct effective price and quality inspections starting now in order to check the festival market.

Rajan Sharma, former president of the Nepal Freight Forwarders' Association, said that Dashain shoppers may have to fork out 10-15 percent more due to higher transportation costs and poor distribution systems.

“Our production and distribution mechanism is not good. And the government has jacked up the customs duty as part of its ambitious policy to curb imports which has resulted in a steep price hike. As demand soars during Dashain, market prices can go out of control.”

The price of mutton increased to Rs1,300 per kg after the government made it mandatory for traders to produce a quarantine certificate for live goats imported from India, traders said. During the same period last year, the price of goat meat was Rs900 per kg.

Anil Khadgi, former vice-chairman of the Nepal Fish and Meat Sellers Association, said that it wouldn’t be a surprise if the price of mutton reaches Rs1,500 per kg this Dashain. “This is because of a drop in domestic output. As imports of live goats from India could be limited this Dashain due to quarantine hassles, prices may increase sharply.”

The government has also started charging a 5 percent customs duty on livestock imported from India.

Devendra Bhakta Shrestha, president of the Wholesalers’ Association, said that prices went up after the government imposed 13 percent value added tax on imported wheat flour. The price of rice has also swelled by Rs30-40 per sack.

Middlemen and traders spike prices during festivals because of loose market inspection, consumers complained. The government launches schemes to regularise supply and stabilise prices of daily consumable food items during festivals, but in limited places and for a few items.

Yogendra Gauchan, director general of the Department of Commerce, Supply and Consumer Protection Management, said during a recent interaction that the government planned to regularise supply by collaborating with the provincial and local governments this year.

Economist Kesab Acharya said that imposition of value added tax in the transportation sector this year had automatically hiked market prices. “The festival season is going to be expensive this year—as priced of food and meat items have already increased.”

He said that the government was preparing to increase the price of milk as well by Rs10 per litre on the eve of the festival season.

“Consumers stock goods during festival time assuming that prices will increase, and this creates a scarcity and a run on the market. “The government's taxation policy this year has directly impacted consumers.” He said that neither the budget nor the monetary policy had addressed consumer woes.

The government's reluctance to take strict action against middlemen and traders has also encouraged artificial price hikes, he said. “Traders are allowed to add a markup of 20 percent, but they make 200 percent profit, and this irregularity has been prevailing in the market for a long time.

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