Nepali traders make global shocks from Iran conflict a pretext to jack up prices

Follow our live coverage here.

KATHMANDU - Rising tensions and conflict in the Middle East, particularly around the Strait of Hormuz, have disrupted energy supplies, significantly increasing global food costs.

Attacks on vessels and broader regional instability are pushing up fuel, chemical fertiliser and shipping costs -pressures that are already being passed on to consumers.

Although Nepal imports most of its food from India and edible oil from South-east Asia, the rise in the US dollar and transportation costs has also begun to affect Nepali consumers.

Nepal has not yet felt the full impact. However, as a country heavily dependent on imported food, fuel and fertilisers, analysts warn it is particularly vulnerable to global price shocks in the coming days.

Market analysts say the stronger dollar and higher transport costs are key drivers behind rising prices, but market anomalies are also emerging, with traders taking advantage of the situation to hike rates.

According to traders, the price of rice - particularly fine varieties imported from India - has increased by around 100 rupees (S$1.35) per sack. The price of edible oil, especially sunflower oil imported from Argentina, Malaysia and Ukraine, has jumped by 80 rupees per litre, reaching as high as 300.rupees.

Nepal imported 76,120 tonnes of sunflower oil worth 11.99 billion rupees in the first eight months of the current fiscal year. Of this, 56,908 tonnes worth 6.2 billion rupees were re-exported to India.

Likewise, Nepal imported 508,850 tonnes of crude soybean worth 81.18 billion rupees and re-exported 366,527 tonnes of processed soybean oil worth 75.77 billion rupees to India.

Nepali households mainly consume sunflower and mustard oil.

According to the Department of Customs, Nepal imported 640,964 tonnes of crude soybean, palm and sunflower oil worth 101.71 billion rupees during the review period. Re-exports of refined soybean, palm and sunflower oil reached 447,795 tonnes worth 86.87 billion rupees.

Rice imports from India stood at 182,810 tonnes worth 14 billion rupees, while paddy imports totalled 384,842 tonnes, also valued at 14 billion rupees.

Mr Devendra Bhakta Shrestha, president of the Nepal Wholesalers Association, said the rise in edible oil prices in Nepal is not directly linked to tensions in West Asia and the Middle East but rather to the appreciation of the dollar.

“The price of edible oil, especially soybean and sunflower oil, started rising even before the recent tensions,” he said.

“Sunflower oil, which used to cost 200 to 220 rupees per litre, now sells for 280 to 300 rupees.” He added that supply remains adequate and there is no shortage in the market.

However, the Association of Nepalese Rice, Oil and Pulses Industry disputes claims of a sharp rise in rice prices.

Mr Rahul Agrawal, the association’s vice president, said rice prices have increased by only 10 to 25 rupees per 25kg sack.

“Prices began rising about 20 days ago as consumers started hoarding rice. Since tensions in the Middle East escalated on Feb 28, there has been a trend of households buying two to three sacks at a time,” he said. He also cited higher transport fares as a contributing factor.

In the domestic market, the full impact of fuel price hikes has yet to be reflected. Traders say the government has not adjusted transportation or cargo fares accordingly.

On March 15, Nepal Oil Corporation increased petrol and diesel prices by 15 rupees and 10 rupees per litre, bringing them to 172 rupees and 152 rupees respectively.

Traders warn that once cargo fares are revised, the cost of most household goods could rise again.

Mr Amul Kaji Tuladhar, general secretary of the Nepal Retailers Association, said the current price hike is not normal.

“New stock has not yet arrived—it takes about a month—but large wholesalers and manufacturers have already raised prices, especially for edible oil and rice. Retailers are being forced to follow suit,” he said.

Retailers say price gouging began after the announcement of the midterm election on March 5.

According to the Department of Supplies, the price of jeera masino rice rose by 18 rupees per kg to 88 rupees per kg ahead of the election. Flour prices increased by 18 rupees per kg to 80 rupees, while lentils rose by 55 rupees per kg to 185 rupees.

Consumer rights activists argue that there is no justification for the rise in essential food prices, as supply chains remain unaffected by the Middle East tensions.

“Opportunistic traders and manufacturers are creating artificial shortages, taking advantage of the interim government. There is no reason to raise prices when supply has not been disrupted,” said Mr Bishnu Prasad Timilsina, general secretary of the Forum for Protection of Consumer Rights-Nepal.

He described the price hikes as unlawful and exploitative, accusing authorities of failing to enforce market regulation.

“The hike in edible oil prices began even before fuel prices rose. This is a direct exploitation of consumers,” Mr Timilsina said, adding that the absence of price stability mechanisms and effective monitoring has allowed arbitrary hikes.

If tensions escalate further and fuel prices remain high, the consequences could extend far beyond Nepal.

An analysis by the World Food Programme warns that rising food and fuel costs, combined with supply chain disruptions, could push an additional 45 million people into acute hunger - bringing the global total to a record 363 million. THE KATHMANDU POST/ ASIA NEWS NETWORK