June 3:  Nepal’s sugar mills have increased the prices of sugar arbitrarily after India announced a ban on sugar exports.  A year ago, the factory price of sugar was Rs 85 per kg including value added tax (VAT). Today, the factory price has been raised to Rs 90 per kg. 

Birendra Kumar Sah, the marketing manager of Eastern Sugar Mill, said that currently they are selling sugar at Rs 90 per kg including VAT. Sah further added that a year ago the factory price of sugar was Rs 85 per kg but depending on the market conditions, the prices may fluctuate. 

The Government of Nepal had banned Letter of Credit (LC) for sugar imports after the emergence of domestic sugar industries. India, on the other hand, has decided to ban sugar exports to Nepal for two months for food security reasons. Sugar importers have accused the sugar mills of increasing the price of sugar by Rs 5 per kg after India imposed such ban.

They accused the government of giving undue favour to the sugar mills. They further claimed that the government had fixed the price of sugarcane but did not fix the price of sugar. This has given opportunity to the sugar mills to form a cartel depending on the market conditions. 

Navratan Luniya, a sugar importer who has been working in the sugar industry for two decades, warned that the price of sugar would go up to Rs 100 per kg after July as the government did not allow him to open an LC to import sugar.  Nepal's production is enough to sustaine the local demand for only five months and the rest has to be imported, he further added. 

Additionally, Luniya claimed that the government had stopped opening LC for importing sugar, but there is still a large quantity of sugar being smuggled into Nepal.  In India, sugar is available for Rs 56 per kg.  The retail price of sugar in Nepal is Rs 90.  As the margin of profit per kg of sugar is Rs 34 per kg, a large quantity of sugar is entering Nepal illegally through the open border, said Luniya. 

Another businessman, Jeevan Rijal, said that the government has been unjust to the consumers by allowing the industrialists to do whatever they want. "By opening an LC and bringing sugar, consumers would get sugar at around Rs 10 less than what the sugar mills are currently offering." At present, the industrialists have set their own prices, added Rijal.

The annual consumption of sugar in Nepal is 250,000 tons. Domestic industries produce 100,000 tons. The remaining 150,000 tonnes of sugar is supplied through imports. The production of Nepal's industries lasts about 5 months. Rijal said that they have to meet the demand for the remaining seven months through imports.