OPINION | The Price of Crossing: How India-Nepal Tariffs Are Making Everyday Life More Expensive

by Ashu Mann

Nepal’s deep dependence on imports from India has turned tariff increases into an almost immediate burden for consumers, with households across the country paying more for food, fuel, and basic materials as levies at border entry points like Birgunj and Raxaul raise the landed cost of essential goods entering from India. The chain reaction moves quickly: wholesalers factor in the added levy, transporters revise freight rates, and retailers adjust shelf prices, shrinking the gap between a policy decision in Kathmandu and a price hike at a market stall in Dharan or Bhairahawa.

Fuel sits at the center of this transmission. Nepal imports all of its petroleum products from India, and when tariffs raise the cost of petrol and diesel at the border, the effects spread across every sector dependent on transportation. Trucks carrying rice and pulses, tempos transporting construction materials, and cargo vehicles linking Kathmandu to the hills all calculate their operating costs around fuel prices, and those increases are eventually passed on to businesses and households at the end of the supply chain.

Nepal’s geography makes the situation significantly worse.

The roads connecting Terai border towns to mid-hill and mountain districts are long, slow, and fuel-intensive. A 10 percent rise in diesel costs at Raxaul translates into a proportionally larger increase in delivered prices by the time goods reach Dolpa or Mustang. The steeper the terrain, the more a fuel price shock compounds before it reaches the final consumer.

Tariffs on agricultural inputs create another layer of pressure. Fertilizers, pesticides, and hybrid seeds come predominantly from India, and when import costs rise, farmers in the Terai and mid-hills face higher production expenses heading into each planting season. That drives food prices upward from both sides: higher production costs force farmers to charge more, while reduced input use, when farmers cut back or substitute because of rising prices, lowers output and tightens supply.

Small traders and informal market vendors absorb some of the increase, at least temporarily.

A kirana shop owner in Pokhara or a roadside stall vendor in Birgunj typically operates on limited working capital and maintains inventory for only a few weeks. When import costs rise, the calculation becomes straightforward: raise prices and risk losing customers, keep prices stable and erode margins, or source goods from cheaper and sometimes informal channels. Most increase prices quickly because the alternatives threaten the capital needed to keep the business operating.

India supplies roughly two-thirds of Nepal’s total imports by value, including fuel, food commodities, medicines, construction materials, and agricultural supplies. Nepal does not currently have a domestic production base capable of replacing these categories at competitive prices in the short term. Chinese imports have expanded, particularly in electronics and consumer goods, but logistics costs through Tibet keep them uncompetitive for bulk staples and petroleum products.

Low- and middle-income households spend a disproportionately large share of their income on food and fuel. When tariff-driven inflation pushes prices higher in these categories, the burden falls most heavily on people with the least capacity to adapt. The resulting cutbacks are not marginal; they affect essentials, reducing meal frequency, delaying medical treatment, and postponing small but important household purchases.

Nepal experienced an acute version of this vulnerability in 2015, when a four-and-a-half-month disruption in the flow of Indian goods, which India attributed to protest-related safety concerns on the Nepalese side of the border rather than a deliberate embargo, triggered fuel shortages, a sharp inflation spike that reached 12 percent by early 2016, and near economic stagnation, with GDP growth falling to 0.6 percent.

Tariff-driven price pressures move more slowly and without the visibility of a major crisis. But the underlying vulnerability remains the same: Nepal’s consumer prices are structurally tied to the Indian border, and no short-term domestic policy instrument can easily change that.

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About the Author

Ashu Mann is an Associate Fellow at the Centre for Land Warfare Studies. He was awarded the Vice Chief of the Army Staff Commendation card on Army Day 2025. He is pursuing a PhD from Amity University, Noida, in Defence and Strategic Studies. His research focuses include the India-China territorial dispute, great power rivalry, and Chinese foreign policy.

Disclaimer: This article represents the author’s independent analysis and perspective based on publicly available information. It does not constitute official guidance, intelligence assessment, or policy recommendation, and does not reflect the positions of Access Hub or any affiliated entities.