Traders have increased the price arbitrarily  

KATHMANDU, Aug 21: In addition to the 40 percent export tax, customs offices in Nepal levy 1.5 percent Agricultural Infrastructure Tax (AIT) and 9 percent Agricultural Reform Tax and Value Added Tax (VAT) of 13 percent. These additional taxes contribute to a total increase of around Rs 24 per kilogram for onions. 

With India's recent announcement of imposing a 40 percent export tax on onions, the price of onion in the Nepali market has seen a sharp rise, making kitchen expenses further expensive. This move by India has had a direct impact on the Nepali market.

The Ministry of Finance of India issued a public notice and announced that the export tax will be 40 percent. With the Indian announcement, the price of onion increased by Rs 25 per kilogram in the Nepali market on Sunday. Even though it was purchased at the old price, the dealers increased the price overnight after the announcement.

Prakash Gajurel, general secretary of the Nepal Agricultural Produce and Potato, Onion Import Export and Wholesalers Association, said that since Nepali kitchens are dependent on onions imported from India, the decision to impose tax by the southern neighbor has contributed to the price surge. 

"India’s 40 percent export tax is intended to curb its own onion exports," he said, adding, "But its consequences are directly affecting Nepal's market." International media reported that India has decided to impose a tax to reduce exports after a decline in onion production.

Dal Prasad Pudasaini, executive director of Kalimati Fruits and Vegetables Market Development Committee, said that the high export tax was introduced by India with its domestic market in mind. He stated, "India imposed a tax to stop the export of onion as its consumers will not be able to buy it, unfortunately this has had negative consequences for Nepali customers.”

In addition to the 40 percent export tax, customs offices in Nepal levy 1.5 percent Agricultural Infrastructure Tax (AIT) and 9 percent Agricultural Reform Tax and Value Added Tax (VAT) of 13 percent. These additional taxes contribute to a total increase of around Rs 24 per kilogram for onions. For example, a 40 percent tax on onion priced at INR 100 (approximately Rs 160) adds Rs 64 to the cost. Based on this calculation, the cost price of onions in Nepal reaches Rs 224 per kg.

India’s decision to increase the tax will result in a decline in supply of onions to Nepal. As there will be a shortage of onions in the Nepali market, the price is likely to further increase.

Since the production of onions in the country is very low, Nepal heavily relies on onions imported from India. According to Pudasaini, executive director of the Kalimati Fruit and Vegetable Market Development Committee, 99 percent of onions used in Kathmandu Valley are imported from India. "Domestic production of onion is negligible," he said, "When India imposes high tax on exports, Nepali consumers are the ones to face the burden."

More than 95 percent of onions used by consumers across the country are imported from India. In the fiscal year 2022/23, about 180 million kilograms of onions worth Rs 6.75 billion were imported from India. India stands as the world’s leading exporter of onions.

Onions, which were sold at Rs 62 per kg in Kalimati Fruit and Vegetable Market on Sunday morning, were sold at Rs 85 to Rs 90 in the retail markets of the valley in the afternoon. Consumer rights activist Madhav Timilsina said that the price of onions has increased by Rs 25 per kilo in a single day.

"As soon as India published the notice of taxation, the traders increased the price of onion," he said, "It is certain that it will increase further when new lots of onions arrive from India." According to him, the traders have increased the price arbitrarily. Consumers will have to buy onions at more expensive prices when the new tax is paid. Timilsina said that efforts should be made to remove the tax imposed on onions through diplomatic initiatives with India. "The government should take diplomatic initiatives to provide relief to the consumers," he said.

At a time when the government is being criticized for imposing VAT on import of onions without a plan to increase production, India has also increased the export tax. With India raising taxes to discourage exports, voices are being raised that Nepal should start a strategy to increase production.

Although the government had conducted the mission onion campaign in the past to increase onion production, it was not effective. The mission onion campaign conducted in the districts of Siraha, Saptari, Sarlahi, Bara, Rupandehi, Dhanusha, Dang, Parsa, Banke, Bardia etc, was not fruitful due to irregularities.

India had previously banned onion exports at different periods. India has said that the current export tax will be applicable till December. 

 
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