India’s decision to hike the import duty on edible oil by 20 percent has made Nepali traders happy.

The move, aimed to support domestic producers, came into effect on Friday (September 13).

The import duty on crude palm, soya bean and sunflower oil has been raised to 20 percent and that on refined oils to 32.5 percent from 12.5 percent, reported The Times of India. Prior to the hike, no import duty was levied on the crude palm, soya bean and sunflower oil.

However, the effective duty on these crude and refined oils would increase from 5.5 to 27.5 percent and 13.75 to 35.75 percent, respectively, as the Indian government also imposes agriculture infrastructure and development tax on the oils. 

Nepali traders import crude or half-processed oils from third countries such as Malaysia, Indonesia and Ukraine paying a minimum tariff, process them and export to India, taking advantage of zero tariff provision on the export of finished goods under the South Asian Free Trade Area (SAFTA), a free trade arrangement among the SAARC countries.

We faced difficulties to export oils to India after it had slashed the import duty, but it will ease now, said Suresh Roongta, director at OCB Foods, a Birgunj-based oil producing company. 

Domestic firms are charged 10 percent customs duty and 13 percent VAT on the import of semi-processed oils. 

But they get the customs duty, levied during export of the processed oils to India, returned, under the SAFTA provision. They are only charged a 5 percent Goods and Services Tax (GST). 

“This provision has made the export of refined oils from Nepal to India possible,” said Prabhu Dayal Agrawal, director at Annapurna Vegetable Products. 

Nikhil Chachan, director at Birgunj-based Narayani Oil Refinery, claimed that investment worth Rs 15 billion on oil refineries has been at risk after the drop in export for the last two years. The latest Indian government’s decision could provide us a temporary respite, Chachan said. 

The Government of Nepal had given domestic traders a 90% exemption on customs duty after the disruption in oil exports to India. But, the provision was removed last year.