Vegetable inflation increased by 16.99 percent in mid-April compared to the same period last year which traders attributed mainly due to changes in vegetable export policy by India, new taxes imposed by the Nepal’s government this year, poor rainfall affecting the production, and rise in the prices of agricultural inputs.

The country’s inflation moderated to 4.61 percent in mid-April compared to 7.76 percent in the same period a year ago, according to the latest macroeconomics update issued by the Nepal Rastra Bank. However, vegetable prices, as measured by the consumer price index (CPI)-weighted basis, are up 16.99 percent in mid-April, after rising by 14.07 percent in mid-March.

“As Nepal is dependent on vegetable products from India like onion, potato, and lemon, as well as other green vegetables to fulfil the demand, certain changes in export policy by the Indian government affect the prices here,” said Binay Shrestha, information officer at the Kalimati Fruits and Vegetables Market Development Board.

India restricted the export of onion for a few months and also introduced export duty and minimum export price and these drove up onion prices and contributed to inflation in this major kitchen staple, Shrestha said.

The price of a kilo of onion nearly doubled to Rs200 in retail in the Nepali market from Rs120 per kilo after India’s export ban in December last year.

Vegetable traders said that as the government imposed tax on potatoes, onions and other vegetables, as well as fruits and food items, it also contributed to vegetable inflation this year.

Potatoes, onions and other daily consumable farm products are exempt from VAT under the Value Added Tax Act of 1996. But this fiscal year the government amended the law through the Financial Bill 2023, removing 170 goods from the tax-free list.

Taxes totalling 23.5 percent are charged on potatoes, onions and other vegetables, fruits and food items—9 percent agriculture service charge, 1.5 percent advance tax and 13 percent VAT.

The climate factor plays a major role in the production of vegetables as the agriculture system in the country is dependent on rainfall due to insufficient irrigation system, traders said.

The less than average rainfall for a prolonged period impacted winter and rainy season vegetable production, Shrestha said.

The price rise in other inputs like fertiliser, seeds, labour and agricultural equipment have also directly affected vegetable prices, Shrestha said. The price of all the agricultural inputs has increased in recent times, he said.

Labour shortages in farm areas, especially in rural areas, have hit production as youths are leaving the country as migrant workers, severely impacting production, Shrestha said.

The price of essential kitchen staples like tomato, potato and onion has increased within a month.

According to the Kalimati Fruits and Vegetable Market Development Board, the wholesale price of local small tomatoes has increased by 62.63 percent within a month to Rs45 per kg on Tuesday, while Indian tomatoes saw an increase of 2.57 percent, and now costs Rs66.67 per kg. Also, the price of tomato small (tarai) has increased by 11.11 percent to Rs50 per kg. The price of tomato big (Nepali) has declined by 30.77 percent to Rs45 per kg.

The wholesale price of potato red has increased by 14.54 percent within a month to Rs54.60 per kg while the price of potato (white) increased by 19.23 percent to Rs46.50 per kg. The price of potato red (Indian) has fallen marginally by 1.41 percent to Rs47 per kg.

The wholesale price of onion dry (Indian) has increased by 22.65 percent to Rs83 per kg within a month.

On May 4, India lifted the ban on onion export after nearly five months but imposed a minimum export tariff of $550 per tonne.

The wholesale price of other vegetables like cabbage, cauliflower, eggplant, green peas, bottle gourd, squash, green vegetables, chilli, green coriander and garlic have gone up within a month.

The wholesale price of cabbage increased by 22.44 percent to Rs40 per kg and cauliflower by 2.57 percent to Rs66.67 per kg within a month. Eggplant became dearer by 40 percent to Rs35 per kg in a month.

Green peas became expensive by 100 percent to Rs170 per kg during the review period while bottle gourd price went up by 57.14 percent to Rs55 per kg.

Similarly, the price of squash increased by 20 percent to Rs30 per kg in a month. The price of green leafy vegetables like spinach and cress increased by 17.34 percent to Rs146.67 per kg within a month.

The wholesale price of broccoli increased by 72.73 percent to Rs95 per kg.

The wholesale price of chilli increased by 54.55 percent to Rs85 per kg while garlic dry (Nepali) price increased by 22.58 percent to Rs190 per kg within a month.

Although it is the rainy season and peak vegetable season, prices have not dropped due to low rainfall, which has affected production, Shrestha said.

Both the production and timely arrival of vegetables have suffered from lack of rain, leading to higher prices, he said.

“Kalimati fruits and vegetable market used to receive 700-800 tonnes of vegetables daily during this season in past years, but now we are receiving 600-700 tonnes. The imbalance between supply and demand has ultimately driven up prices,” Shrestha said.