April 15: The government’s impractical and shortsighted decision to increase tax on import of sugar has not only affected the consumers and benefitted a handful of business persons but also cost millions of rupees in revenue to the state coffers.
The general public was forced to purchase sugar at high cost due to the deliberate decision of the government that also resulted in the increase in price of sugar, according to the available data. A report prepared by the Office of the Auditor General (OAG) states that the government’s delay in implementing an understanding reached with sugar producers to hike the tariff resulted in import of excessive sugar in the country. Despite having adequate stock, the consumers could not purchase sugar at reasonable price, the report says.
The Ministry of Finance had reached an understanding with sugar producers on December 26, 2017 to increase tax on import of sugar in order to protect the domestic sugar industries.
But the government increased the tax on import of sugar from 15 percent to 30 percent only on April 17, 2018. Due to the delay in implementing the decision by four months, the customs department incurred losses of Rs 530.66 million as the country imported 79,044 metric tons of sugar worth Rs 3.57 billion during the period, according to the OAG report.
According to the report, Nepal imported 71,000 metric tons of sugar in FY 2073/74. The import of sugar in FY 2074/75 was 234,000 metric tons, which is 3.3 times more than the import in the preceding year.
The country consumes 230,000 metric tons of sugar on an annual basis while the domestic production of sugar is 175,000 metric tons. The data of the OAG report clearly shows that the country imported sugar much more than Nepal’s consumption. This indicates that the excessive sugar was kept as stock. Despite having excessive stock of sugar, the consumers couldn’t purchase it at a reasonable price.
Meanwhile, the farmers have not been paid for their produce by the sugar industries. The sugar industries have reportedly withheld the due amount of the farmers stating that they have excessive stock of sugar. The industries have said that they will be able to pay the farmers only when they sell the stock.
The government’s decision to waive the customs duty for the state-owned Salt Trading Limited with the intention of bringing uniformity in the price of sugar has become useless due to the hike in customs duty.
The OAG report states that the sugar imported by Salt Trading at subsidized rate has been found to be much more that the sugar imported by other businessmen by paying the customs duty.
The report mentions that the Salt Trading had imported 37,508 metric tons of sugar in FY 2074/75 worth Rs 2.28 billion. The state-owned company had also received an exemption of Rs 387.6 million for Value Added Tax. Therefore, the cost per kg of sugar imported by Salt Trading was Rs 60. However, the report has found that other importers had brought sugar into the country at the cost of Rs 40 to 51 per kg despite paying 30 percent customs duty. Salt Trading, on the other hand, had paid only 1 percent customs duty. The cost of sugar imported by Salt Trading after including other taxes was Rs 69 per kg. Therefore, the government had fixed the price of sugar between Rs 65 to Rs 70 per kg.