Nepali industrialists have raised concerns after Indian entrepreneurs urged their government to restrict the import of refined oil from Nepal, claiming that the low-priced imports were hurting their businesses.
Indian entrepreneurs have alleged that Nepali industries are importing crude oil—mainly soybean and sunflower oil—from Indonesia, Malaysia, and other countries, refining it in Nepal, and exporting it to India at significantly cheaper rates under the South Asian Free Trade Area (SAFTA) agreement. Under SAFTA, exports from Nepal to India are subject to zero to 5 percent customs duty, making refined edible oil one of Nepal’s key export items.
While previous attempts by Indian industrialists to block these imports had limited effect, domestic producers say the pressure is now mounting. “Indian industrialists have repeatedly pushed for restrictions. Although it hasn't led to immediate bans, it’s creating growing unease for us,” said Nikhil Chachan, operator of Narayani Oil Refinery.
Nepal benefits from a provision that allows the export of goods—such as refined oil—to India with concessional tariffs under SAFTA, provided the product includes at least 30 percent value addition after processing in Nepal. India, on the other hand, imposes high customs duties on direct imports of refined oil from other countries. Nepali exporters are leveraging this tariff differential to access the Indian market.
Suresh Rungta, director of OCB Food, claimed that Indian lobbying efforts intensified as soon as oil exports from Nepal resumed. “It’s not new. Two years ago, India imposed a quota on palm oil imports from Nepal at the request of its domestic industry,” he said.
According to Indian media reports, the Indian Vegetable Oil Producers Association has asked the Indian government to impose quantitative restrictions on refined oil imports from Nepal and to raise the agricultural infrastructure and development fee to 10–15 percent.
In response, Prabhudayal Agrawal, director of Annapurna Vegetable Products, stressed the need for government-to-government (G2G) coordination. “Since Nepal’s oil exports are minimal compared to India’s market size, the Government of Nepal should formally engage with Indian authorities to ensure continued trade,” he said.
Oil exports from Nepal resumed in the past six months after being nearly halted when India temporarily allowed duty-free imports from all countries. Even after India reimposed tariffs six months ago, it took domestic industries three more months to source raw materials and restart shipments. Entrepreneurs estimate that around 300,000 tons of soybean and sunflower oil have been exported to India in the past three months.
Palm oil, however, is no longer being exported. This is because Indian customs began classifying palm oil imports—previously declared as crude oil—as refined, which disqualifies them from SAFTA benefits. As a result, over 24,000 tons of palm oil worth Rs 4 billion, imported from third countries, are now stranded at the Kolkata port.
