Neighbours get hurt in India`s war on inflation

The curbs have also hit Sri Lanka, Bangladesh and Bhutan, all members of the South Asian Association for Regional Cooperation (SAARC). The situation is alarming and poses a threat to India's economic diplomacy and political clout in the region.

Nepal's incumbent government has already asked India to relax the ban on cement exports. The country is at a politically crucial juncture, with the incoming Maoists-led government saying it wants to scrap the 58-year-old Indo-Nepal Peace and Friendship Treaty.

Imposed on April 11, the ban on cement exports is aimed at augmenting the domestic availability of the commodity. The ban, however, has pushed nearly 40 cement manufacturing units in Nepal to the verge of closure as they are unable to procure clinkers, a key manufacturing ingredient from India. Over 80 per cent of Nepal's cement requirement and its entire requirement of clinkers is met by India. In 2006-07, India exported cement worth $44 million to Nepal.

"Prices of cement in Nepal have increased by Rs 100 and are hovering around Rs 650 per 50-kg bag since the ban was enforced. All cement manufacturing units in Nepal are currently closed," said Manik Ratna Tuladhar, president, Construction Material Dealers Association, Kathmandu.

Besides Nepal, Sri Lanka, Bhutan and Bangladesh have also demanded that India relax the ban on export of non-basmati rice. Bhutan has, in fact, asked for a complete lifting of the ban on the export of both rice and cement.

According to Nepal-based commodity traders, India meets 40-50 per cent of the country's rice requirement. "Prices of rice have increased by Rs 200 per quintal since the ban. For the past one month, Nepal has not been getting rice from India under the Food Aid Programme, on which the ban is not applicable," said Kumud Kumar Dugar, president, Association of Nepalese Rice, Oil and Pulses Industry.

Sri Lanka is also reeling under the shortage of rice, especially as floods have destroyed the paddy crop over large tracts of land. As a result of the ban and the floods, the price of rice there has increased from nearly Rs 60 per kg to over Rs 100 per kg recently. Bangladesh is also in dire need of rice, especially as its stocks were devastated in the November 2007 cyclone.

The Maldives has not been impacted by the ban due to a provision in the bilateral trade agreement between both the countries which keeps the island nation out of the purview of such measures taken by India. However, similar bilateral trade agreements with Sri Lanka, Nepal and Bhutan as well as the South Asian Free Trade Agreement (SAFTA) do not have such a clause.

A senior Indian government official said the requests were being considered. Since they are on account of the consumption requirements of these countries, India, the biggest economy in the region, should not have a problem in meeting them. "A final decision will be taken after inter-ministerial consultations," said the official.

India has already allowed export of around 500,000 tonnes non-basmati rice to Bangladesh and 20,000 tonnes to Sri Lanka, without lifting the ban, which was imposed on March 31 this year.

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