Traders in Nepal have decided to halt the import of onions, potatoes, and other vegetables from India in response to the government’s recent imposition of a substantial 13 percent Value-Added Tax (VAT) on these commodities. This decision was made by the traders on Tuesday.
Opposition lawmakers have denounced the Nepal government’s action, asserting that it would leave low-income families susceptible to food insecurity and intensify the suffering of individuals already burdened by skyrocketing inflation.
As per the financial bill presented in Parliament on May 29, imported onions, potatoes, and other vegetables and fruits will now be subject to a 13 percent value-added tax (VAT).
Finance Minister Prakash Sharan Mahat has defended the move, asserting that it was intended to protect local farmers and trim imports.
The majority of Nepal’s onion supply is sourced from its neighboring country, India.
In the previous year, Nepal imported a total of 173,829 tonnes of onions from India.
Approximately 60 percent of the local demand for potatoes in Nepal is fulfilled by domestic cultivation, while the remaining portion is met through imports from India.
The finance minister’s assertion of protecting local farmers has faced strong criticism from opposition lawmakers who argue that Nepal’s heavy reliance on India for its onion supply undermines the merit of his argument.
Keshav Upreti, a wholesaler at Kalimati Fruits and Vegetable Market, sai, “Before the government introduced VAT, Kathmandu Valley would see anywhere between 700 to 1,000 tonnes of onions being imported from India on a daily basis.”
“In the last 10 days, onions have stopped coming from India,” he said.
Upreti highlighted the presence of legal complications associated with importing vegetables from India and the requirement to pay VAT.
As expected, the scarcity of these essential vegetables has led to a significant increase in prices.
Onion prices, which used to cost INR 50 per kg till last month, have now nearly doubled due to the acute scarcity.
The prices of potatoes have also surged by around 25 per cent, according to local traders in Kathmandu.
According to Prakash Gajurel, General Secretary of the traders association, the Nepal government presently imposes a 9 percent agricultural service tax and a 5 percent advance income tax.
Adding 13 per cent VAT on top of these taxes will make kitchen ingredients very expensive, Gajurel was quoted as saying by The Kathmandu Post newspaper.
Besides onions and potatoes, Nepal also imports brinjals, peas, garlic, beans and spinach from India.
Similarly, it also imports fruits such as avocado, apples, apricot, cherries, raspberries, cranberries, kiwis and mangoes from India.
The year-on-year price inflation touched 7.41 per cent in May, according to Nepal’s central bank.
This stubborn and higher-than-expected inflation level, together with the imposition of VAT, has further eroded household’s purchasing power and dragged growth in Nepal.