Nepal's Areca Nut Imports Surge After Quota Removal Amid Smuggling Concerns

Kathmandu. Following the removal of quotas on areca nuts, which have long been mired in controversy and allegations of smuggling, imports have increased.

Customs Department statistics show that in the first six months of the current fiscal year, 3,164.21 metric tons of areca nuts, valued at 635.794 million rupees, were imported.

While this volume represents a modest increase compared to the same period last year, it marks a significant jump compared to the period before the quota was lifted. In the corresponding period of the fiscal year 2080/81, 2,011 metric tons of areca nuts, worth 457.846 million rupees, were imported. 

The government lifted the import quota on areca nuts last year, opening imports for industrial use. Areca nuts, which were banned in 2076 BS, were allowed for import via quota in 2077 BS. Since last year, the quota has been removed, allowing imports for industrial purposes.  

The government had banned the import of areca nuts, peas, black pepper, and dried dates on Chaitra 24, 2076 BS, citing increased smuggling, under Section 3(1) of the Export and Import (Control) Act, 2013. However, on Chaitra 9, 2077 BS, the government led by then-Prime Minister KP Sharma Oli removed the full ban by publishing a notice in the Nepal Gazette and set quotas for the import of these items. Subsequently, imports were conducted through quotas until 2081 BS, when the Oli government decided to remove the quotas for areca nuts, black pepper, and peas.

Furthermore, the interim government has continued the decision made by the Oli government by opening up imports. The government under Prime Minister Sushila Karki published a notice in the Nepal Gazette on Poush 28 of the current fiscal year 2082/83, allowing the import of areca nuts, peas, and black pepper as raw materials required by manufacturing industries. 

Additionally, the import value of areca nuts has seen a major surge this fiscal year. Last year, 3,160.96 metric tons of areca nuts, valued at 417.77 million rupees, were imported. This means that in the first six months of the current fiscal year, areca nuts worth approximately 218 million rupees more have been brought in.

According to statistics, revenue collected from areca nut imports in the first six months of the current fiscal year amounted to 790.447 million rupees, compared to 777.888 million rupees collected in the same period last year.

• Is Domestic Production Sufficient for Demand?

According to the Areca Nut Producers Association, areca nuts are cultivated in five districts of Eastern Terai in Nepal. Commercial cultivation is conducted on 2,765 hectares in Jhapa, 140 hectares in Sunsari, 905 hectares in Morang, 207 hectares in Ilam, and 35 hectares in Udayapur. The association's statistics indicate that these districts produce 15,000 metric tons of areca nuts.

It is estimated that gutkha industries in Nepal consume approximately 6,000 to 7,000 metric tons of areca nuts annually. Total consumption in Nepal for other purposes is estimated to be between 8,000 and 10,000 metric tons. One areca nut producer states that the domestically produced areca nuts are sufficient for industrial use, yet imports continue. While the Customs Department mentions import statistics, export statistics are not recorded. Stakeholders suggest that smuggling occurs under the guise of areca nut imports.

Shyam Prasad Bhandari, the Chief of the Customs Department, claims that imports are strictly for industrial purposes.

“Only industrialists are allowed to import areca nuts. Import for commercial purposes is not permitted. This imported areca nut is solely for industrial use,” Bhandari stated. “We are tightening measures at customs to prevent smuggling and illegal exports. However, due to the open border, we lack the capacity to control everything.”

• Pea Imports Increase, Black Pepper Decreases  

The import of peas under HS Code 0713.10.10, which the government opened for industrial use, has also increased. Until Poush of the fiscal year 2082/83, 158.32 metric tons of peas, valued at 40.136 million rupees, were imported.

In the fiscal year 2081/82, 23.725 metric tons of peas, worth 21.622 million rupees, were imported. In the fiscal year 2080/81, 20.66 metric tons of peas, valued at 6.428 million rupees, were imported.

Furthermore, the Customs Department's statistics indicate that green peas under HS Code 0713.10.90 are also being imported. In the first six months of the current fiscal year, 133.42 metric tons of these peas, valued at 36.878 million rupees, were imported.

Black pepper imports, however, have decreased. In the first six months of the current year, 13 metric tons of white pepper, worth 12.835 million rupees, were imported, and 41.919 million rupees worth of black pepper were imported.

In the corresponding period of the previous fiscal year 2081/82, 14.47 metric tons of white pepper, valued at 16.41 million rupees, and 268.19 metric tons of black pepper, valued at 231.229 million rupees, were imported.

• Import Criteria

The Ministry of Industry, Commerce, and Supply published in the Nepal Gazette on Poush 28 that industries are permitted to import areca nuts, peas, and black pepper only for use as raw materials. The system allows the import of peas under HS Code 0713.10.10, areca nuts under Code 0802.80.00, white pepper under Code 0904.11.20, and black pepper under Code 0904.11.30.

The government has established strict administrative procedures to prevent potential misuse of these imports. Before granting import permits, the Department of Industry will conduct a detailed investigation into the needs, justification, and existing raw material inventory of the concerned industry. Only after the Department confirms the industry's actual production capacity and the required raw material quantity will it recommend the import to the Department of Commerce, Supply, and Consumer Protection.

There is a condition that the imported raw material must be utilized solely for industrial purposes and not resold elsewhere by the industry.

Furthermore, new industries applying for import permits are required to submit copies of the industry registration certificate, VAT or PAN registration, production capacity, approved scheme copy, and a self-declaration of the production target for the current fiscal year. In contrast, existing industries must submit their industry registration and company updated certificate, along with the tax clearance certificate for the last fiscal year, and details of production capacity and operational status. Operating industries are also required to disclose the quantity of raw materials imported in the previous fiscal year, their utilization, and the remaining stock.