Traders expect paddy prices to cool down after India cleared a shipment of 600,000 tonnes of duty-free paddy to Nepal, as the market has been up since the southern neighbour imposed export curbs nearly two months ago.

On September 9, India, the world's largest grain exporter, banned exports of broken rice and slapped a 20 percent customs duty on various types of rice, except parboiled and basmati rice. The move was intended to boost supplies and calm prices following below-average monsoon rains that curtailed planting.

The repercussions were felt immediately in Nepal. Retailers say the price of imported long grain and fine rice saw the single largest jump of Rs10 per kg.

Market insiders said costlier rice would batter household budgets, and the poor, in particular, would have a hard time.

Nepal’s paddy harvest has been expected to drop, resulting in greater pressure on prices in the coming months. In the last fiscal year, Nepal’s paddy harvest shrank to a five-year low of 5.13 million tonnes due to unseasonal rains in October.

Paddy is Nepal’s biggest earning farm commodity, with tens of thousands of farmers relying on it for their livelihood.

Nepali traders are elated that the Indian government has lifted restrictions.

“The latest decision of the Indian government has been a respite,” said Deepak Kumar Poudyal, general secretary of the Association of Nepalese Rice, Oil & Pulses Industry. “It will also help other industries which depend on the by-product of the rice industry to continue their operation.”

Despite being the harvest season, the price of paddy has increased by Rs10 per kg compared to last year, according to Poudyal. “The price of paddy has increased from Rs2,700 per quintal to Rs3,700 after India imposed restrictions.”

According to the association, a Nepali delegation had pleaded with the Indian government about the export duty as Nepal’s farm output was expected to drop.

Experts say Nepal’s paddy harvest is likely to fall in the current fiscal year due to a shortage of chemical fertiliser during the paddy transplantation period in June-July.

A subsequent drought-like situation hit key food producing districts.

In August, a heat wave spread over most of the southern Tarai, the country’s food basket, which scorched summer crops, particularly paddy, in the fields.

Rice prices started to increase sharply following the decision by India in early September. The export curbs also raised an existential threat for hundreds of rice mills across Nepal.

Subodh Kumar Gupta, president of the Association of Nepalese Rice, Oil and Pulses Industry, had told the Post in September that there were 2,500 big and small rice mills operating in the country employing 50,000 people.

Rice is the staple food of the Nepali people and domestic production is enough to feed the population, but demand for long grain and fine rice varieties has been growing in Nepal which is fulfilled by India.

In the last fiscal year, Nepal imported 550,000 tonnes of paddy, 520,000 tonnes of rice and 50,000 tonnes of broken rice, mainly from India, according to the Department of Customs.

In terms of value, rice and paddy imports were worth Rs29 billion and Rs16.99 billion respectively.

In the first three months of the current fiscal year, imports of rice and paddy amounted to Rs5.3 billion.

India has also said it will allow cargos of white and brown rice backed by letters of credit issued before September 9 to be shipped overseas, a measure that provides some relief to exporters grappling with fresh government curbs, according to reports.

Indian exporters were unable to transport nearly 1 million tonnes of rice, which had been in transit before the Indian government issued the ban, according to media reports.

India exports rice to more than 150 countries, and any reduction in its shipments would increase upward pressure on food prices, which are already rising because of drought, heat waves and Russia’s invasion of Ukraine.

Nepal’s consumer price index hit a 74-month high in September. Price rises in September more than doubled to 8.64 percent from 3.49 percent in the same month last year, according to Nepal Rastra Bank.

Reports say that heat waves have hit most nations in the world, and global output will shrink this year, stoking inflation and food insecurity in low-income countries like Nepal.

Experts say that Nepal needs to look for alternative sources for its rice needs like Thailand, Myanmar, Cambodia, Malaysia and other rice-producing countries.