Nepal’s export of refined soybean oil and fractions surged in the first seven months of FY25, reaching Rs 32.41 billion—an exponential increase from Rs 541.48 million in the same period last fiscal year, according to the Department of Customs.

Nepali traders exported approximately 158.13 million kg of refined soybean oil and fractions by mid-February, a sharp rise from just 2.58 million kg in the corresponding period last fiscal, making it the country’s top export commodity in terms of value.

The surge in exports is largely due to India’s decision in September last year to raise import duties on edible oils, which created an opportunity for Nepali traders to capitalize on the duty-free provision under the South Asian Free Trade Area (SAFTA) agreement. Under this arrangement, finished goods exported from Nepal to India are exempt from tariffs.

Nepali traders import crude or semi-processed edible oils from countries such as Malaysia, Indonesia, and Ukraine at minimal tariffs, refine them, and then export the final product to India.

Five months ago, the Indian government increased the import duty on crude palm, soybean, and sunflower oil to 20%, while refined oils are now taxed at 32.5%, up from 12.5% previously. Additionally, the Agriculture Infrastructure and Development Tax has further increased the effective duty on crude and refined oils to 27.5% and 35.75%, respectively.

According to data from the Department of Customs, Nepal exported soybean oil and fractions worth Rs 8.36 billion in the first five months of the current fiscal year (mid-July to mid-December 2024), a significant increase from Rs 363.1 million in the same period last year. By mid-January 2025, exports had surged to Rs 18.91 billion, compared to just Rs 415.1 million in the corresponding period of the previous year.

The sharp rise in refined vegetable oil exports from Nepal has triggered concerns among Indian refining industry operators, who have urged Prime Minister Narendra Modi’s government to impose restrictions.

Indian media reports suggest that industry representatives argue the duty-free provisions under SAFTA have adversely impacted domestic refiners, farmers, and government revenues.

However, some industry leaders in Nepal dismiss these concerns, contending that Nepal’s production capacity is too small to meet the demand of even a single Indian state.

In addition to refined soybean oil, Nepal’s other top exports until mid-February included sunflower-seed, refined sunflower oil and its fractions, wool and fine animal hair carpets and floor coverings, big cardamom, and black tea.

Though petroleum products continued to dominate Nepal’s imports, crude soybean oil ranked as the second-largest import after diesel in terms of value.

Key import bills in the first seven months of FY25 included diesel (Rs 66.48 billion), petrol (Rs 37.64 billion), liquefied petroleum gas (LPG) (Rs 35.47 billion).

Approximately 259.29 million litres of crude soybean oil worth Rs 38.29 billion was imported in the period, generating Rs 1.85 billion in revenue.

Other major imports included ferrous products from direct iron ore reduction, smartphones, hot-rolled and flat iron and steel, and crude sunflower oil.

Despite a significant 46.5% rise in exports, Nepal’s trade deficit expanded by 6.2% year-on-year in the first seven months of FY25.

Total foreign trade grew by 13.3% to Rs 1,115.79 billion by mid-February 2025, up from Rs 984.77 billion in the same period last year. Imports rose by 10.09% to Rs 988.58 billion, while exports increased to Rs 127.2 billion from Rs 86.83 billion.

As a result, Nepal’s trade deficit widened to Rs 861.38 billion, compared to Rs 811.11 billion in the same period last fiscal year.