On Sept 8 last year, India banned the export of broken rice and imposed a 20 percent duty on exports of various grades of rice in a bid to boost local supply and control rising market prices.
The move, however, resulted in a spike in the price of key staple food in the Nepali market as the people in the country heavily rely on imported rice.
According to Nepal Rastra Bank (NRB), the prices of cereals including rice surged by 9.19 percent in mid-Nov 2022, a sharp jump of 2.08 percent from the same period in the previous year.
Though Nepal produces a roughly adequate quantity of rice, fine rice, which is in huge demand in the country, is insufficient.
According to the Ministry of Agriculture and Livestock Development, about 70 percent of Nepal’s total rice production comes under the category of mota chamal (rough rice) which is not a popular variety of rice to use as meals in the country.
With long-grain rice varieties increasingly becoming popular in the country basically due to the increase in income of ordinary Nepalis and the growing culture of consuming rice in daily meals, Nepal has increasingly relied on imported long-grain rice in the past two decades.
Amid this growing reliance, the market prices of rice have surged after India’s restrictions on rice exports.
However, officials and experts say that India’s restriction on export could be a blessing in disguise for Nepal to promote the consumption of domestic rice as well as other cereal products.
As a result of India’s restrictions, there has been a sharp drop in the imports of rice and overall cereal products. According to the Trade and Export Promotion Centre (TEPC), cereal imports during the first five months of the current fiscal year dropped by 40.2 percent to Rs 20.31bn during the first five months of the current fiscal year 2022/23.
According to Nepal Rastra Bank(NRB), imports of rice and paddy dropped by 49.7 percent to Rs 6.68bn during the first four months of the current fiscal year. In early November last year, India allowed the export of 600,000 tonnes of unmilled rice to Nepal. The southern neighbor, which is the largest exporter of rice in the world, said it would allow cargos of white and brown rice backed by letters of credit (LCs) issued before Sept 9 to be shipped overseas, a measure that provides some relief to exporters grappling with fresh government curbs.
Hikmat Kumar Shrestha, Senior Monitoring and Evaluation Officer at the Prime Minister Agriculture Modernization Programme under the Ministry of Agriculture, said reduction in imports should not worry Nepal about food security as the country has produced close to enough rice for the national population this fiscal year.
Official statistics show paddy production in the country in this fiscal year increased by 6.94 percent to 5.48m tonnes covering both productions of both rainy and dry seasons. In the last fiscal year, paddy production had dropped by 8.74 percent to 5.13m tonnes. “If all Nepalis consume rice only as their meals, we will have an inadequacy of only 550,000 tonnes of rice for the current fiscal year,” said Shrestha. “If we change our food habits by consuming other cereal products too as a staple food, there will be no food shortage in the country.”
But most of the rice produced in the country falls under the category of mota chamal (rough rice). Shrestha said farmers don’t like to cultivate long-grain or fine rice as their productivity is not as good as that of mota chamal. “That’s why the country has been increasingly importing fine rice from India for meals,” said Shrestha.
Lately, the government has been encouraging the cultivation of fine rice in the country through incentives.
According to Shrestha, as a result, the share of mota chamal production in the country has come down to 70 percent from around 90 percent just 5-7 years ago.
Most of the mota chamal is used for producing beaten rice, dry-fired grains, and other kinds of feed. There has also been an effort from the private sector to promote the cultivation of fine rice. For example, Buddha Air owner Birendra Bahadur Basnet has invested in paddy processing.
He has set up the Arju Rice Mill in Duhabi, Sunsari which promises to pay farmers the minimum support price (MSP) of paddy before they begin the transplantation. The company has also promised to harvest and collect the crop from the farmers’ fields.
The country spends a lot of money on importing agricultural products including rice though a lot of people are employed in the agriculture sector. According to a study conducted by the National Planning Commission, Nepal imported agricultural goods worth over Rs 200 billion in the fiscal year 2019/20, which could be produced within the country. The study titled Status of Export and Import of Agriculture Goods says most agricultural goods came from India. Massive imports in the last year resulted in fast depletion of foreign exchange reserves in the country raising concerns that Nepal could go the ‘Sri Lanka way’.
“Export restriction from India should be taken as an opportunity to increase and promote domestic products and production,” said a senior NRB official, adding, “We will not have to suffer from hunger due to the export restrictions as rice comes to Nepal also through informal channels. So, we should utilize this as an opportunity.”
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