The rise in the price of sugar has hit the customers hard. Just two weeks ago, sugar was available in the market at Rs 105 per kilogram, but it has now skyrocketed to Rs 140. Moreover, sugar has become scarce in stores, resulting to black marketing.
The Department of Commerce has sealed the largest sugar warehouse in Kathmandu over alleged black marketing activities.
The warehouse belonged to Griheshwori Tradelink, and it had been storing sugar under artificial storage with unclear labeling.
Anandraj Pokhrel, information officer at the department, confirmed the warehouse’s closure and said that the sugar was sent for quality testing.
A complaint was filed with the department, accusing the businessperson, Santosh Khetan, of buying sugar at a low price from industries and selling it at a higher price in Kathmandu without proper invoices. Khetan was allegedly billing the sugar at only Rs 105 per kilogram after selling it at Rs 127 per kilogram wholesale.
“The report submitted by the Department of Food Technology and Quality Control states that the quality of the sugar has no problem. But as there are no packaging details, we have sent a letter to the producers asking for clarification,” said Pokharel.
Rajeev Shrestha, a tea shop owner, has not seen such a rise in sugar prices. He said that he had been paying Rs 25 extra for sugar because of the price hike. “Despite the price hike, I have to run the business in order to get by,” he said.
Sugar ban likely
India is expected to ban sugar mills from exporting from October, making the first halt in export in seven years. The decision is led by a lack of rain that has cut cane yields, according to Reuters.
India allowed mills to export only 6.1m tons of sugar during the current season to Sept 30, after letting them sell a record 11.1m tons last season. India’s sugar production could fall 3.3 percent to 31.7m tons in the 2023/24 season, as per Reuters.
In India, sugar prices rose by more than three percent in a fortnight. Monsoon rains in the top cane growing districts of the western state of Maharashtra and the southern state of Karnataka—which together account for more than half of India’s total sugar output—have been as much as 50 percent below average so far this year. Patchy rains would cut sugar output in the 2023/24 season and even reduce planting for the 2024/25 season.
Trading Economics, an IT service and IT consulting service provider based in New York, reports that insufficient rainfall in India’s key producing states exacerbated poor growing conditions for next season’s crop. The current drought added to concerns that El Nino will extend dryness for a prolonged period, driving cane yields to slump and potentially prompting the Indian government to limit sugar exports for the upcoming season, as it attempts to contain elevated food inflation in the country.
Rising demand of sugar
As the Dashain and Tihar festivals are approaching, the demand for sugar has started increasing. The consumption of sugar increases for households and industries ahead of the festival.
Therefore, in view of the upcoming festivals, the Ministry of Industry, Commerce and Supplies has asked the Finance Ministry to waive customs for importing 60,000 tons of sugar to meet the demand. The finance ministry has, however, given permission to import only 20,000 tons for the time being.
Salt Trading Corporation (STC) and Food Management and Trading Company are set to import 10,000 tons of sugar each for the upcoming festival season. Pokhrel said the procurement process has already started.
Nepal’s domestic demand for sugar stands at 300,000 tons and it needs to import a huge quantity of sugar mainly from India. There are 12 sugar factories in Nepal that produce around 100,000 tons of sugar.
The country immediately has 188,000 tons of sugar in stores. The government has slashed the import duty by half to provide relief to consumers. The usual import duty on sugar is 30 percent and there is another 13 percent VAT.
Decline in sugarcane production
There has been a continuous decline in sugarcane production in the country. As per Statistical Information on Nepalese Agriculture published by the Ministry of Agriculture and Livestock Department, the production of sugar has been constantly declining over the past four years.
The ministry says production has been falling due to high costs and increasing market risk. Difficulties in getting payment from the mills and chemical fertilizer have discouraged farmers from planting the cash crop. Heat waves, untimely rains and depleting water level have also affected the sugarcane production, leading to disruption in demand and supply curve.
A host of factors such as weather, supply and demand, health concerns and consumer preferences affects the price of sugar.
Jyoti Baniya, a leading consumer rights activist, said the surge in sugar price has affected businesses and households alike. “As the festivals are nearing, the rise in sugar price and its shortage will make it difficult for people to purchase this essential item,”
The Consumer Protection Act 2018 states that every consumer has the right of easy access to goods or services and has the right to choose quality goods or services at the fair competitive price. But the access to sugar consumption is not so.
If the government fails to inspect and meet the demand and supply of sugar, it is likely that the price will continue to rise.
