West Asia Conflict Impacts Nepali Market, Fuel Price Hikes Raise Fears of Food Shortages

Kathmandu. The ongoing conflict in West Asia is beginning to have a direct impact on the Nepali market. Due to supply issues and rising prices of petroleum products caused by the conflict, consumers have started purchasing and stocking up on excessive amounts of food due to fears that a crisis in food grains might occur.

Businessmen have stated that consumers are engaging in unusually high purchasing due to fears that the prices of essential items such as rice, oil, sugar, and lentils will increase and shortages may occur, as fuel price hikes will inevitably lead to increased fares for transportation and shipping costs.

 Meanwhile, as petroleum prices rise, transport entrepreneurs have begun lobbying for an increase in fares for public transport and freight vehicles, and the government is also preparing to adjust the fare rates. Stakeholders have indicated that the prices of all commodities will increase once the fares are raised.

•  ‘No need to panic over food grains, oil prices continue to rise’

 According to Pavitra Bajracharya, President of the Nepal Retail Trade Association, while no major immediate impact is visible on other food grains, an increase in transport fares will raise shipping costs, leading to price increases for all imported goods.

 ‘So far, no major impact has been seen on food grains, but the price of edible oil has started to increase,’ Bajracharya said, adding, ‘When petrol prices rise, transportation costs increase, and this affects the price of every product slightly.’

 According to him, since most food grains in Nepal are imported from India, the problem of price increases in food grains has not been significant yet. However, raw materials for edible oil and some finished oils are sourced from European countries. He noted a tendency among Nepali traders to raise prices due to international market volatility and potential shortages in India.

 He argued that further price increases are indicated due to rising freight rates for the transportation of edible oil raw materials in the international market. The price of edible oil has recently increased by up to 50 rupees per liter.

 President Bajracharya stated, ‘The price of edible oil in the market has started to rise now. If the government does not intervene in time to control the market and price hikes, consumers may have to pay up to three hundred and fifty rupees per liter for edible oil,’ he said.

He clarified that as of now, there is no problem with the stock and supply of food grains. Since food grains come from India, there is no supply issue, but he noted that the price of all consumer goods in the market will be pressured as soon as transportation costs increase. He also urged relevant bodies to remain vigilant.

•  What is the current price of food grains?

There is no system in Nepal to fix the price of food grains. Therefore, the price of the same item varies in the market. However, the Retail Trade Association publishes a price list. Traders affiliated with that association are found to sell retail goods in the market according to that price. Furthermore, the association determines and publishes a price list every 15 days.

According to the price list last published by the association (on 2082 Chaitra 1), Trishuli Pokhreli rice is set at 120 rupees per kilogram, while Steam Jira Masino rice will be available at two rates of 95 and 75 rupees. Long Grain Basmati rice is listed at 180 rupees. The price for Steam Sona rice is set at 75 rupees, and sugar at 100 rupees per kilogram.

For lentils, Khosta Moong is available at 220 and 190 rupees per kilogram, while Masoor dal is available at 190 and 140 rupees per kilogram. Moong Geda is set at 200, Moong Khosta at 220, Arhar at 215, and Chana at 155 rupees per kilogram.

 The price of roasted mustard oil is 440 rupees per liter. The price of raw mustard oil is set at 375 rupees per liter, and sunflower oil is 295 rupees per liter. Vegetable ghee is 255 rupees, and Nepali ghee is set at 1400 rupees per kilogram.

 How much food grain is in government stock?

 The Food Management and Trading Company Limited has stated that the government's food storage currently holds 33 thousand metric tons of food grains. Ramesh Acharya, the Chief Executive Officer (CEO) of the company, stated that the 33 thousand metric tons of food grains held by the company will control artificial shortages and price hikes that might occur in the market.

 ‘We are required to maintain a stock of 33 thousand metric tons in the SAARC Food Bank and the National Food Security Reserve, and we currently have approximately that much stock,’ Acharya said, adding, ‘We have purchased paddy worth 51 crore rupees. When converted to rice at a 65 percent ratio, this rice will further strengthen our buffer stock.’

CEO Acharya clarified that this quantity of food grains accounts for only about 1.5 to 2 percent of the country's total demand. He informed that this stock is kept as a 'buffer stock' not to fulfill long-term food requirements but to control undesirable activities in the market.

 ‘This 33 thousand metric tons of food grain is hardly 1.5 to 2 percent compared to the total demand across the country,’ Acharya said, ‘Its main objective is to 'buffer' the market. If the private sector attempts to unnecessarily raise prices, hoard food grains, or create artificial shortages, we will immediately release this stock into the market.’

 According to him, the 'threat' that the government has food grain stock in its warehouses compels the private sector to keep prices and supply balanced. He claimed this stock plays a strategic role in disciplining the market and protecting consumers from fraud.

 Furthermore, various branches of the Food Company primarily hold stocks of rice, lentils, sugar, oil, ghee, and other food items. Among these, Koshi Province has 410.43 metric tons, Madhesh Province has 753.04 metric tons, Bagmati has 422.74 metric tons, Gandaki has 112.78 metric tons, Lumbini has 845.02 metric tons, Karnali has 413.84 metric tons, and Sudur Paschim has 647.49 metric tons in stock.

 The company has also stated that it is continuously monitoring the current status and stock of food grains and is prepared to address future challenges.

 The Food Management and Trading Company Limited has stated that there will be no shortage of food grains in Nepal despite the increase in the price of fuel and plastic materials due to the escalating conflict in West Asia. Ramesh Acharya, the Chief Executive Officer of the company, stated that consumers have no reason to panic as there is sufficient food grain stock in the government reserves.

 According to CEO Acharya, the international conflict has primarily affected two sectors: petroleum products and packaging materials. He admitted that the price of food grains sold in small 2-3 kg packets has increased slightly due to rising transportation costs from fuel price hikes and increased prices for plastic used in packaging. However, he stated that no shortage of food grains is visible in the market as the import of food grains from India, Nepal's main supply source, is proceeding regularly.