The market prices of basmati rice and onions in Nepal are expected to fall as India has recently removed the Minimum Export Price (MEP) on these commodities. This comes just in time for Dashain, providing some relief to Nepali consumers.

In addition to removing the MEP, India has also reduced the export duty on onions from 40% to 20% and completely eliminated export duties on Bangalore rose onions. Nepal is largely dependent on Indian imports for both basmati rice and onions.

India had previously set an MEP of USD 950 per metric ton for basmati rice and USD 550 per metric ton for onions. The decision to reduce the export duty on onion by half is anticipated to benefit Nepali importers, traders, and consumers.

Baburam Adhikari, joint secretary at the Ministry of Industry, Commerce, and Supplies, noted that while Nepal had requested the removal of the 20% export duty on coarse rice (other than basmati), India has only lifted the MEP for basmati rice. Although the export ban on coarse rice remains, India has allowed exports to Nepal through a quota system.

With the removal of the MEP, Adhikari estimates that the prices of basmati rice and onions would likely decrease in Nepal. India had previously banned onion exports due to fears of a domestic shortage stemming from poor monsoon conditions, but the ban was extended multiple times. While India had approved some export quotas based on diplomatic efforts, the ban remained largely in place until the recent decision.

Bibhor Agrawal, a member of the Association of Nepalese Rice, Oil, and Pulses Industry, believes the Indian government’s latest move will lower basmati rice prices in Nepal. Currently, basmati rice is priced at Rs 160 per kg, and coarse rice is priced at Rs 100 per kg. Agrawal mentioned that while a price reduction in basmati rice would help, it would be more beneficial if the export price of coarse rice were also adjusted, as this variety is consumed more widely by the general public. He added that India's strategy might be to reduce its stock of basmati rice following an increase in domestic supply.

According to data from the Department of Customs, Nepal imported 407,000 metric tons of paddy and rice worth Rs 21.34 billion in the last fiscal year ( FY 2023/27) including 48,987 metric tons of basmati rice worth Rs 6.234 billion. Though India continues its ban on coarse rice exports, it had previously allowed 95,000 metric tons for export to Nepal under a special quota. However, Nepali importers have found it costly due to the 20% export duty imposed on these imports.

The Kalimati Fruit and Vegetable Market Development Committee’s daily price list shows that the wholesale price of onions is Rs 112 per kg, with the retail prices have reached up to Rs 150 per kg. Binaya Shrestha, an official from the committee, said that about 99% of the onions imported into Kalimati come from India. Experts predict that onion prices in Nepal will fall following the reduction in export duty, although it may take a few days for the effects to be seen in the market. The price drop will benefit consumers, especially during the festive season when onion consumption rises significantly.

Dependence on Indian Onions

Nepal’s heavy reliance on Indian onions stems from its inability to meet domestic demand through local production. Government officials attribute this dependency to the failure of the Onion Mission program, launched 16 years ago to achieve self-sufficiency in onion production.

The Onion Mission, initiated in FY 2007/08 with an investment of Rs 50 million, aimed to boost production in various districts. However, irregularities in procuring and distributing materials led to its failure. A new potato and onion mission was launched in 2019/20, but it too remained largely ineffective. According to Hari Bahadur KC, spokesperson for the Ministry of Agriculture and Livestock Development, the country remains reliant on India for its onion supply due to the shortcomings of these past initiatives. Presently, onion cultivation in Nepal covers only about 20,000 hectares.

In a recent notification, India’s Directorate General of Foreign Trade (DGFT) stated that the removal of export duties would benefit Indian farmers. Piyush Goyal, India’s Commerce Minister, said on social media that this decision is aimed at increasing agricultural exports and boosting farmers’ incomes.