Steady increase in agricultural imports has set off alarm bells

Nepal’s steadily rising agricultural imports hit the 400 billion rupee mark in the last financial year ended July 16, prompting experts to warn that an agricultural country becoming so dependent on imported food signals a real emergency. .

In 2001, the value of India’s food and agricultural imports was just $11.84 million. In the last fiscal year, 20 years later, the figure had swelled to $3.2 billion.

According to statistics from the Customs Department released on Monday, agricultural imports accounted for a fifth of the country’s total annual imports, worth 1.92 trillion rupees.

During the last fiscal year, Nepal recorded a 23% year-on-year increase in agricultural imports. Imports of agricultural products in the financial year 2019-20 were valued at just over Rs 250 billion.

The import bill soared mainly due to increased purchases of edible oils, including soybean oil, grains, feedstuffs and oilseeds.

In just one year, imports of edible oil rose from 82.90 billion rupees to 120.46 billion rupees, with imports of crude palm oil and soybeans reaching almost 100 billion rupees.

India has expressed concern over Nepal’s trade policy which allows import and export under a duty-free quota system.

Last year, the Solvent Extractors Association of India wrote to the Indian central government claiming that palm oil and soybean oil from various countries were flowing to India via Nepal to take advantage of the zero duty privilege. granted to Nepalese exports.

Nepal imported crude soybean oil worth Rs 56.18 billion. The country produces very little raw soy itself – in fact, only 31,567 tons a year, which is not enough to meet the needs of a fraction of its own population.

The import of crude palm oil amounted to 39.31 billion rupees while the import of crude sunflower oil amounted to 18.10 billion rupees.

While the South Asian Free Trade Area (SAFTA) agreement provides zero tariffs on goods exported from underdeveloped countries like Nepal, Nepalese traders have been importing soybeans and oil from raw palm from other countries by paying minimum tariffs and then re-exporting the finished product to India with zero customs duties.

Trade experts claim that importing crude oil without tariff privilege and re-exporting it to India without traffic privilege allows traders in Nepal to enjoy a net profit of 45%, excluding other profits.

Nepal’s second largest agricultural import after edible oil is grain.

Despite a slight drop, cereal imports amounted to Rs 74.28 billion. In the last financial year, grain imports totaled Rs 79 billion. Nepal started importing grain 10 years ago, according to government statistics.

Grain imports fell in the last fiscal year because India imposed restrictions on a number of grains, saying the world could face a food crisis due to the unavailability of chemical fertilizers.

Out of the total grain imports, shipments of rice and paddy amounted to Rs 29 billion and Rs 16.99 billion, respectively.

Maize and wheat imports amounted to Rs 19.64 billion and Rs 5.66 billion respectively. Wheat imports fell from 12 billion rupees a year earlier after India tightened wheat exports.

“Imports of fine rice and maize have increased at an alarming rate due to their growing preference,” former agriculture secretary Yogendra Kumar Karki said. “Nepal imports fine varieties of rice mainly due to the growing population of middle-income Nepalese who prefer to eat basmati rice, and the country does not grow such fine rice in sufficient quantities.

According to Karki, the high demand for fine and aromatic varieties means that Nepal must cultivate these varieties to stop imports.

“Apart from increasing the production of fine rice, Nepal should focus on exporting crops like ginger, big cardamom and tea on a large scale to reduce the trade deficit,” Karki said.

Experts warn that due to a global shortage of chemical fertilizers, many countries will face food shortages or prices will rise sharply, putting food out of reach for many.

“Obviously the food import figure is frightening. This not only indicates a trend of growing dependency, but also signals a potential threat to food security,” trade expert Purushottam Ojha told The Post in a recent interview. “For a country like Nepal, a currency crisis can occur at any time. Remittances, which finance consumption, may also decline. How will you pay for food if you don’t produce it? It is an emerging threat.

“We have already seen the 2015 blockade when India cut off our fuel supply, for which we are totally dependent on imports,” he added.

Experts say the import of agricultural products has increased for consumption and largely supported a ballooning trade deficit.

The persistence of an inflated trade deficit over time can pose a risk to the country’s economy. While imports soared to 1,920 billion rupees, exports remained at only 200 billion rupees. The trade deficit increased by 23% over one year.

The import bill for agricultural products in 2009-2010 amounted to 44.43 billion rupees. He grew nine times in 11 years.

“We have a huge amount of funds flowing in to finance consumption, so we import,” said economist Bishwambher Pyakuryal. “The government’s import-oriented policy should focus on production-oriented policy if we are to prevent future economic risk.”

Import figures have long sounded alarm bells.

The government is fully aware of these import statistics. Therefore, the government introduced the Prime Minister’s Agriculture Modernization Plan in 2016 to make the country self-sufficient in some major agricultural products within seven years. But some experts say the project has yielded no results.

This year again, the government failed to provide chemical fertilizers to farmers during the crucial planting season.

Economist Keshav Acharya says the soaring agricultural import bill is a real emergency for a country like Nepal as it not only drains foreign exchange reserves but also cripples the production cycle when trade dominates it .

“Traders have overwhelmed our economy,” he said. “Trade has become such a profitable activity that no one wants to produce anything because it is painful, especially in the agricultural sector”.

Acharya said Nepal’s agricultural sector has underperformed.

“Trading is so easy and has a higher profit margin. So why would people spend time and money on production?” Acharya wondered. “For example, in just two years, imports of edible oil like palm and soybean have crossed the Rs 100 billion mark due to high profits. But over several decades, if all of Nepal’s exportable crops are added up, they have no combined value. turnover of 50 billion rupees.

“The government needs to understand business and production cycles,” he said, “before it’s too late.”

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