Nepal weighs easing dairy import ban amid India’s push

INDIA – Nepal is facing a difficult situation following India’s request to lift restrictions on dairy imports. 

During a recent meeting of the Nepal-India Inter-Governmental Committee (IGC) on Trade, Transit, and Cooperation to Combat Unauthorised Trade in Kathmandu, India raised concerns over the ban on its milk exports to Nepal. 

In response, Nepal agreed to consider allowing the import of certain dairy products like whey and cheese, which are not sufficiently produced domestically. 

The discussion has sparked debate, as dairy remains a politically sensitive sector in Nepal, and any move to facilitate imports could lead to public backlash.

Nepali officials appear divided on the issue. Reports indicate that no formal meetings have been held since the conclusion of the IGC meeting. 

Mahanand Joshi, information officer at the Ministry of Agriculture and Livestock Development, stated that no specific details have been received from the industry ministry to initiate discussions. 

Another official from the industry ministry, who requested anonymity, confirmed that the matter has not been discussed internally. 

The government has defended its decision to impose a blanket ban on dairy imports, arguing that domestic production of buttermilk, cheese, butter, pasteurized milk, and other dairy products is sufficient to meet national demand. 

The policy aims to protect local farmers and processors, particularly as the country grapples with declining dairy consumption.

Reports indicate that Nepal’s dairy sector is in the midst of a recession. Although milk production has been increasing, demand has fallen due to economic challenges faced by consumers. 

The price of milk has risen significantly in recent years, making it less accessible to the population. Declining sales have led to large stocks of unsold butter and powdered milk, creating financial difficulties for dairy companies. 

The state-run Dairy Development Corporation (DDC) owes significant amounts to farmers, prompting the government to provide a Rs600 million credit facility to address the debt.

Trade experts argue that a complete ban on dairy imports may not be a viable long-term solution. 

Former commerce secretary Purushottam Ojha pointed out that such restrictions contradict the principles of the Nepal-India trade treaty, which stipulates that import bans should only be imposed following proper investigation. 

Despite this, both countries have unilaterally enforced trade restrictions without adhering to treaty provisions. India has historically imposed bans on various agricultural products, and Nepal has responded with similar measures.

Nepal has long depended on imports to supplement domestic dairy production. Reports indicate that in 2017, the country imported milk worth US$18.7 million, with approximately 80% coming from India. 

The porous border between the two nations has facilitated both official and unofficial trade in dairy products. 

Despite bans, processors in Nepal have continued to rely on imports of powdered milk to meet demand, particularly during lean production periods. 

The temporary closure of Chitwan’s major milk powder plant after the 2015 earthquake further exacerbated the country’s reliance on imports. 

Although the plant was later refurbished and resumed operations, Nepal continued to experience shortages, prompting authorities to lift and reimpose import bans depending on market conditions.

The dairy sector has also sought alternative markets, with reports indicating that Nepal exports small quantities of butter and ghee to India and other countries, including the United States. 

The traditional Nepali milk derivative ‘chhurpi’ has also found demand in the US as a dog chew product. 

However, overall exports remain inconsistent, and Nepal’s domestic dairy industry continues to face fluctuations in supply and demand.

Recent developments highlight the ongoing struggles of Nepal’s dairy industry. The DDC has signed an agreement to supply raw cheese to a private company in a bid to generate cash amid financial difficulties.

 Additionally, the corporation is planning to sell butter in China as part of efforts to stabilize its operations. 

Dairy remains a crucial industry in Nepal, employing approximately 130,000 people and contributing nine percent to the country’s GDP. 

However, unresolved trade issues with India and internal market challenges continue to pose significant obstacles to the sector’s stability.