Lower price helps flourish informal trade

Kathmandu, May 2: A recent study has shown that information trade of chemical fertilizers, specially DAP, is flourishing in the villages adjacent to the Nepal-India border as it comes at a price about 20 per cent cheaper than in the Nepalese market.

The study jointly conducted by the South Asia Watch on Trade, Economics and Environment (SAWTEE) concluded that a kilogram of fertilizer that came through formal channel cost Rs. 48 and Rs. 46 in Giddha of Dhanusha and Kaptangunj of Sunsari respectively would cost only Rs. 36 to 38 while bought via informal channel.

"Farmers in Nepal are highly dependent on India for fertilizer as domestic supply is sporadic and unreliable," said Diksha Singh, researcher at the SAWTEE.

Likewise, Nepalese farmers buy potato and vegetable seeds as well as paddy seeds from the markets in India as it cost at least Rs. 3 cheaper.

As the price is almost half in India than in Nepal, small machineries, such as power sprayer, are bought from across the border, said the study.

The study has concluded that easy accessibility across border, lower price, low transportation cost, productivity, absence of formal border point, proximity of local party, and cultural, social and ethnic relations are the major drivers of informal trade.

Chairperson of SAWTEE Dr. Posh Raj Pandey said that according to the rough estimates there could be Rs. 1 billion informal trade of seeds alone.

"While informal trade offers lower price, better quality and no bureaucratic hassles, it can be resulted in harassment at the border, seizure of goods and bribery," he said.

Joint secretary at the Ministry of Agricultural Development (MoAD) Dr. Yogendra Karki said that seeds and pesticides are goods that were mostly traded informally.

"The informal trade is flourishing because there is not supply of goods as per the demand. Farmers are ready to pay the price for quality goods," he maintained.

Joint secretary of the Ministry of Commerce Rabi Sainju stressed on the need of coordination among the ministry, Agriculture Research Council, universities and other stakeholders.

Trade expert Purushottam Ojha said that there should be subsidy provision for basic agricultural goods and equipment.

He stated that non-tariff measures were also the reasons for informal trade.

Suvayan Neogi, research associate of CUTS International presented the findings of the research on informal trade of wheat seed from Nepal to India.