Sugar smuggling through Biratnagar customs point is on the rise, thanks to lax revenue administration and weak border security.  A number of importers have been found evading taxes by importing sugar declaring the produce as rice at the customs office. The office, however, has denied such misconduct by importers. 

Importers of sugar need to pay 15 percent customs duty and an additional 13 percent VAT. However, rice import is charged only 8 percent as agriculture service charge. Due to the lower customs duty tax on rice, importers have been found declaring sugar as rice. 

Krishna Bahadur Basnet, chief of Biratnagar Customs Office, said they had not found such cases. 

The office record shows that in the last fiscal year, 32,625 tonnes of rice worth Rs107.1 million were imported through the customs. In the first nine months of the current fiscal year, 30,377 tonnes of rice worth Rs99.3 million have been imported.

Similarly, traders imported 264 tonnes of sugar that was valued at Rs1.22 million last year. In the first nine months of the current fiscal year, 269 tonnes of sugar worth Rs3.29 million have been imported. 

Sugar smuggling has increased due to low domestic production which is unable to sustain the growing demand in Nepal. Illegal trading has thrived due to price differences in Nepal and India. The price of sugar in local market is Rs85 per kg, as compared to Rs65 per kg in the Indian market. 

The security force is also lenient towards the people transporting 10-20 kg of sugar for household use. Sandeep Bhandari, chief of District Police Office in Morang, said they have not bothered people carrying sugar in small quantities. Taking undue advantage of the situation, opportunist traders at the bordering areas have been discovered to have a hand in illegal sugar smuggling. An estimated 225,000 tonnes of sugar is consumed in Nepali market annually. With low domestic production, Salt Trading Corporation has been importing sugar from Indian market. About 30,000 tonnes of sugar is illegally imported through the open border, according to one record. 

There are 13 sugar mills in operation. They produce 105,000 tonnes of sugar annually. Everest Sugar Mill has the largest capacity of producing 255,000 tonnes of sugar annually. Similarly, Indu Shankar Sugar Mill produces 25,000 tonnes and Himalaya 

Sugar Mill and Shree Ram Sugar Mill each produces 50,000 tonnes of sugar. 

Likewise, Lumbini Sugar Mill has a production capacity of 38,000 tonnes, Annapurna Sugar Mill has 85,000 tonnes, Indira Sugar Mill has 35,000, Eastern Sugar Mill has 75,000 tonnes and Reliance Mill produces 18,000 tonnes of sugar annually. 

In recent years, sugar production has been on a declining trend due to inadequate supply of the raw material. The combination of the government failing to fix the support price of sugarcane and delayed payments has been affecting the sugarcane production.  The government statistics shows that Nepal produced 147,000 tonnes of sugar in 2015-16.