For the past nine months, five-star hotels in Nepal have struggled to meet the culinary expectations of foreign tourists following a government ban on the import of nine types of dairy products. Hoteliers report that while these banned products are accessible through the grey market, the quality remains questionable, and prices are higher.  

Luxury hotels typically rely on high-quality butter, mozzarella, and French cheeses for their menus. "Since imports have stopped, we are using local products as an alternative," said Jibesh Pokhrel, executive chef of Chandragiri Hills Resort. "However, the quality of local products does not match what we used before."

Pokhrel emphasised that the lack of premium ingredients has made it difficult to meet tourists' demands, particularly for items like pizza. Although some Nepali dairies can produce high-quality products, they struggle to meet the required demand.  

"The dairy industry’s production capacity is limited, and they lack the resources to increase supply," Pokhrel explained. He noted that products of the Dairy Development Corporation (DDC) are good, but the absence of a loan system for private suppliers hinders effective production and distribution. Chandragiri Hills consumes about 10 kilograms of butter daily, underscoring the scale of the demand.  

On February 22, 2024, the government imposed the ban, halting the import of nine types of dairy products identified by their respective HS codes. The banned items include skimmed milk, skimmed milk powder (SMP), whole milk powder (WMP), whey and modified whey (frozen or unfrozen, sweetened or unsweetened), butter, ghee, and cheeses (including hardened, processed, shredded, unshredded, powdered, non-powdered, etc.)

Despite the ban, Pokhrel mentioned that banned products are still available in the market at inflated prices. For example, the cost of Amul butter rose from NPR 1,200 to NPR 1,600 per kilogram in the grey market. According to the data of the Department of Customs, the import of Indian dairy products, including those from Amul, has significantly declined since the ban.   

Although imports are prohibited, customs data shows that some items have still entered Nepal in small quantities after clearing formalities. Officials from the Department of Food Technology and Quality Control explained that while large-scale imports are blocked, products in quantities ranging from 100 grams to 1 kilogram are still being allowed.  

The import ban has also led to diplomatic tensions with India. In retaliation for Nepal's dairy import restrictions, India has delayed issuing quality certificates for Nepali exports, such as cement, plywood, and zinc sheets. The impact on Nepal’s cement industry has been severe, with exports plummeting from 155,248 tons in the first quarter of the previous fiscal year to just 18,308 tons in the corresponding period this year.  

Government officials revealed that India has repeatedly requested Nepal to lift the dairy import ban. In response to growing trade barriers, Nepal has begun the process of reconsidering the ban. The initial aim of the restriction was to protect Nepal’s domestic dairy industry, which is struggling with financial challenges.  

Hotel owners argue that providing quality dairy products is essential to attract foreign tourists. Shashikant Agarwal, the owner of Marriott Kathmandu, highlighted that while Nepal produces some cheese, it cannot replicate specialty products like Italian or French cheeses, which are popular among international visitors.

"We can offer local cheese as an alternative, but it’s not always acceptable to tourists who expect the best cuisine," Agarwal said.  

Nepal previously banned other foreign products, including liquor, vehicles, and expensive mobile phones. However, hoteliers argue that such restrictions do more harm than good. Agarwal suggested that raising customs duties—rather than imposing outright bans—would better protect domestic industries. "Increasing customs duties by 10, 15, or 20 percent would offer more support to local producers than halting imports entirely," he argued.  

Despite the challenges, the Hotel Association Nepal (HAN) has not formally raised the issue with the government. General Secretary of HAN, Sajan Shakya said, "There have been informal complaints from hoteliers, but we haven't yet discussed how to address the matter officially.”