National 2 (Spotlight Weekly)

Losses And Lessons

The five-day strike forced fruit and vegetables dealers and retailers to dump huge amounts of imports

By KESHAB POUDEL

The five-day Nepal bandh called by the Maoists proved costly for the country. With exports and imports at a virtual standstill at all customs offices along the southern border with India, revenue collections plummeted. As the state is struggling to mobilize all the financial resources it can draw to meet rising security expenses and maintain its drastically slashed development commitments, the shutdown could not have come at a worse time.

Vegetables and fruit traders in particular incurred huge losses because of the perishable nature of their goods. While many consumers responded by reducing their daily intake ó and some considered the period an opportunity for forced saving ó the strike proved disastrous for Indian farmers who meet a large share of the demand in Nepal.

"We are not self-reliant in vegetable and fruit production," said Bhola Man Singh Basnyat, senior information officer at the Nepal Agriculture Research Center. "Our output fulfills only 60 percent of the demand. If there is any disruption in the supply of vegetables and fruits from India, they become unaffordable to a large number of Nepalis."

Nepal produced 487,000 metric tons of fruits and 1.6 million tons of various kinds of vegetables in fiscal year 2000\2001. Although annual output has increased, it is in no position to substitute imports. Moreover, imported fruits and vegetables are still cheaper than local produce, despite the transport and storage costs involved.

The violence and anarchy of the last few months have created a palpable sense of confusion in the market. Because of deepening uncertainty, retailers have canceled consignment orders for fruits and vegetables worth more than Rs. 100 million in the last two months. "Because of the scarcity of goods, there has been a steep rise in prices," said Kanhaiya Lal Gupta. "The farmers in India and consumers in Nepal have to suffer from this uncertainty."

Whenever some group calls a strike, shopkeepers often comply because of intimidation. Most shops sell imported products. If they can sell more, their profit margin goes up. However, those who sell locally produced goods find themselves in a difficult situation. Moreover, dealers of perishable commodities like fruits and vegetables suffer the severest impact.

Export and import data of some agricultural commodities prepared by the Ministry of Agriculture provide a clear indication of how reliant the Nepalese market is on imports. In 2001, Nepal imported vegetables worth Rs. 900 million and milk products worth Rs. 500 million. Fruit imports during the year crossed the Rs. 300 million mark.

For people dealing in machinery products and other non-edible items, bandh create a less severe impact. Because their products are durable, such traders can hope to recoup their losses by selling them later. Since fresh fruits and vegetables cannot be stored for too long, traders are forced to dump them.

Although Nepal has made steady progress in vegetable and fruit production over the years, it is yet to attain self-sufficiency. Nepalese farmers produce apples, oranges, papayas and bananas in limited quantities. Whether it is a big supermarket or a small vendor, if a retailer does not get products from India in time, he or she would have to go out of business.

"We need to develop a long-term strategy to become self-reliant in vegetables," says a market analyst. "Of course, the annual volume of vegetable production has increased in the country, but it is still too little."

According to foreign trade statistics published by Department of Customs, Nepal imported vegetables worth Rs. 1 billion in fiscal year 1999\2000. These included cauliflower and headed broccoli, fresh chilled, Brussels sprouts, fresh or chilled, white and red carriage, cucumbers, carrots, radishes, edible roots, potatoes, garlic onions, seed potatoes, leeks, khohirabi, kale, sweet potatoes and Jerusalem artichokes.

Apart from beetle and bidi leaves, Nepal also imported water melons, fresh grapes, fresh and dried oranges, fresh and dried lemons and limes, citrus fruit, papayas, pears, cherries, plums, fresh apricots, peaches, fresh strawberries, guavas, mangoes, fresh and dried pineapples and bananas.

According to the Birgunj Customs Office, Nepalese imports from India and third countries fell drastically during the April 23-27 shutdown. The office usually collects revenue averaging Rs. 45 million a day in normal times. During the bandh, income plunged to Rs. 2 million. On April 23, the first day of the strike, the customs officers collected a mere Rs. 1.9 million. On subsequent days, the revenue was Rs. 2.6 million, Rs. 5 million, Rs. 1.8 million and Rs. 2.9 million respectively.

Revenue collections in other 21 customs points were similarly dismal. According to the Department of Customs, the revenue targeted for the coming fiscal year will be met.

Nepal imported Rs. 54.86 billion worth of goods from India in 2001. According to the Department of Customs, imports from third countries and Tibet stood at Rs. 55.58 billion and Rs. 4.25 billion respectively. Third-country goods were imported from Mechi, Birgunj, Bhairahawa, Tribhuvan International Airport, Nepalgunj and Biratnagar. The other points were used to import goods from India. Tatopani Customs Office was the only point through which Nepal imported goods from China.

As they come under agriculture products, dealers of Indian fruits and vegetables do not have to pay customs and other taxes. Because of this, there are no precise records of the business. The annual turnover of Nepal-India trade is much higher than the official figures. Nepalese exports to India were equivalent to Rs. 23.33 billion in 1999\2000, while exports to third countries and Tibet stood at Rs. 28.78 billion and Rs. 512 million respectively.

Indian fruits have a monopoly in the Nepalese market, as they do not have to compete with imports from other countries. From grapes to apples and oranges to bananas, prices in Nepalís wholesale and retail markets are determined by the arrival of such products from India.

Until a decade ago, Nepalis consumed very little fruits. That situation has changed dramatically. According to the fruit wholesale market in Kalimati, Kathmandu valley consumes mostly Indian fruit worth Rs. 10 million a day. If vegetables and other agriculture products are added, the value of imports from India goes higher.

The upsurge of violence and anarchy along major highways has disrupted the transportation of these products. Imports of fresh and dried fruits have also seen a drastic decline in recent times.

Although the Maoists had formally withdrawn at the last moment the five-day bandh they had called in March, much of the country was virtually in the grip of the strike. The bandh last month served to exacerbate market conditions. When it comes to perishable products, consumers feel an immediate impact. "Since vegetables and fruits are in short supply, the prices continue to rise," said a trader.

Nepalese consumers and farmers in India paid a heavy price during the five-day bandh. But the shutdown also taught a lesson to retailers that Nepalis could survive without imported products.