Poor connectivity dampens supply chain management hits consumers hard
All roads connecting Kathmandu Valley, the nation’s capital, are in poor condition, with some undergoing maintenance. Temporary diversions had been created at several points along these vital highways to bypass landslides and major damage caused by floods and landslides during the erratic monsoon of September 2024. These temporary tracks may not be usable during the next rainy season.
“This has not only hindered the smooth movement of vehicles but also caused accidents and increased supply costs,” according to Dr Biswo Poudel, Former Vice Chairperson of the National Planning Commission. “Due to delays in timely road maintenance and the development of viable alternatives, we could face supply line disruptions and unimaginable mishaps.”
Late last September, Kathmandu was completely cut off by land routes for several days due to major highway damage in multiple sections caused by floods and landslides. Experts and climate scientists have stressed the need for preparedness to minimise such damage. (See Table 1)
According to an Asian Development Bank study, Kathmandu Valley accounts for 30% of the country’s gross domestic product and 50% of the total urban population, making it the nation’s single largest urban economy. A smooth supply system must be established between Kathmandu and the rest of the country, as well as improved cross-border land route connectivity. The Ministry of Physical Infrastructure and Transport (MoPIT) has directed the Department of Roads to accelerate maintenance work on vital highways, assuring the release of adequate resources. However, the work is progressing at a snail’s pace and could take years to complete.
Consumers paying the cost of supply side constraints
Supply-side constraints are driving inflation upward, forcing consumers to pay higher prices for daily essentials like food and vegetables. From mid-September to mid-October, inflation skyrocketed due to disruptions in the smooth supply of goods. Massive floods, landslides and inundation damaged vital roads and crops, exacerbating inflationary pressures. According to Nepal Rastra Bank, vegetable inflation reached 25% during that month. Floods and landslides disrupted road connectivity to Kathmandu Valley, effectively disconnecting it from the rest of the country. (See Table 2)
Consumers are reportedly paying higher prices due to increased logistics costs exacerbated by poor infrastructure, particularly road connectivity. While average inflation began 2025 at 6.05%, food inflation is nearly double-digit at 9.99%. As extreme weather events, such as erratic monsoons and other climate-induced disasters, become more frequent and intense, experts have emphasised the need for a comprehensive supply chain management strategy. Hyperinflation not only directly affects those impacted by these disasters but also poses prolonged challenges, severely impacting low- and middle-income families.
Nepal Rastra Bank Governor Maha Prasad Adhikari has stated that the central bank is not solely responsible for controlling inflation. “We (the central bank) can influence demand-side factors and money supply, but other variables, such as supply-side constraints and imported inflation, can hinder efforts to curb inflation,” Adhikari shared. Over the past three decades, the average inflation rate has been around 7%, and consumers are hit hard by double-digit inflation on daily essentials due to supply-side constraints.
Connectivity and impacts on trade
Due to the rugged terrain, it took the Government of Nepal years to achieve its goal of connecting all district headquarters with all-weather roads. This milestone was finally reached with the connection of Dolpa and Humla in 2018 and 2020, respectively. Rehabilitating these roads, frequently damaged by climate-induced disasters, has presented a herculean challenge. The poor road conditions have caused significant delays in transporting goods, leading to unpredictability and increased logistics costs. Experts have urged the adoption of viable options to enhance the resilience of these vital roads, such as rockfall netting combined with the planting of bamboo and other landslide-reducing vegetation.
“It is unfortunate that these vital roads operate as fair-weather roads due to maintenance delays,” said Prof Kushum Shakya, economist and former Dean of the Humanities and Social Sciences Department at Tribhuvan University. “The state must work in mission mode to restore/rehabilitate these crucial roads in a resilient manner.”
She further emphasised that smooth connectivity is a prerequisite for minimising trade logistics costs, enhancing supply predictability, and enabling markets to operate according to their values and order. Against this backdrop, climate-induced disasters disrupting the supply chain could lead to a crisis by exacerbating poverty, hunger, and social unrest, according to Prof Shakya.
“It is obvious that market prices are determined by supply and demand, however, distortions in market prices can be caused by hoarding, black marketeering, cartels, and other unethical practices. The rational intervention to curb such practices is maintaining a smooth supply of daily essentials and life-saving drugs by addressing all supply-side constraints, which is the primary responsibility of the state,” she stated.
“Climate shocks pose significant challenges to supply chain management in Nepal, particularly due to the country’s reliance on agriculture, fragile infrastructure, and limited adaptive capacity,” Prof Shakya emphasised. “However, proactive measures such as infrastructure development, technological adoption and policy support can help build resilience and mitigate these impacts.” She stressed that collaboration between the government, private sector and international organisations is essential to effectively address these challenges. Otherwise, there could be a rise in poverty and outmigration, and a drop in investor confidence due to the disaster-prone nature of Nepal’s geography, coupled with a lack of preparedness and response to minimise severe impacts.
Colossal loss of lives and properties
Heavy rains, floods, and landslides on September 27-28 of last year resulted in numerous fatalities along highways as vehicles were buried in landslides or swept away. Hundreds of passengers were trapped in traffic jams for hours due to Kathmandu’s connection being severed by road destruction, landslides and other obstructions. Compounding the problem, the lack of proper alternate evacuation routes forced many to walk to their destinations.
Dr Poudel warned the government about its lack of disaster preparedness, citing the government’s inability to locate two public buses that plunged into the Trishuli River near Simaltal in Chitwan district on July 12 of last year.
A study panel report revealed that sub-road sections constructed by local municipalities near hilltops contributed to the mudslide. No proper monitoring or alert mechanisms are in place to prevent such incidents. Saloni Pradhan Singh, a disaster management expert, stated that the flow of soil and minerals southward from steep hilly terrain during the rainy season is intensified by the rampant construction of local/rural roads. “Nepal’s crop yield will be adversely impacted, leading to food insecurity.”
Climate shocks, such as extreme weather events, unpredictable rainfall, temperature fluctuations, and natural disasters, significantly impact supply chain management in Nepal. Given the country’s geographical vulnerability, reliance on agriculture, and underdeveloped infrastructure, these shocks can disrupt supply chains in various ways.
Experts have advised focusing on diversifying supply sources, streamlining investment in climate-resilient infrastructure, adopting technology, and promoting sustainable practices such as climate-smart agriculture. Resilient infrastructure can enhance long-term supply chain sustainability.
