Crude palm oil en route to Nepal has been halted at an Indian port after the Government of Nepal instructed customs officials to categorise it under finished goods. As a result, palm oil worth approximately Rs 4 billion is currently stuck at Kolkata Port in India, according to industry insiders.
Entrepreneurs have been importing such oil from countries like Indonesia and Malaysia, processing it locally, and exporting it to India. While there are no issues with sunflower or soybean oil, the import of palm oil has come to a standstill.
Importers declared the oil as crude, intending to process it domestically, but customs offices insisted it was refined oil and required clearance under that classification. As a result, the oil could not be brought into Nepal and had to be stored at the Indian port, said trader Narayan Rungta.
According to Rungta, 24,000 tonnes of palm oil are currently stranded at Kolkata Port. After India raised import duties on edible oils eight months ago, Nepal began exporting refined oil to India under the SAFTA provision at zero customs duty. However, oil classified as refined oil cannot be re-exported to India, prompting importers to hold the stock in India itself.
Palm oil, which used to top Nepal's export charts in recent years, could not be exported this year due to import restrictions, stated Nikhil Chachan, operator of Narayani Oil Refinery.
The Department of Customs had issued instructions to subordinate customs offices to classify the oil as finished since it “did not possess the characteristics of raw material”, despite importers declaring it as crude. Once cleared as finished goods, it becomes ineligible for export to India.
To be eligible for export, crude oil must undergo at least 30% value addition. “As the oil was classified as finished, we were unable to export it to India and had no option but to store it at the port,” Rungta said. “The government is categorising crude oil as finished simply to increase revenue. We comply with all food technology and quality standards and even obtain the necessary recommendations. But when one government body calls it crude and another calls it finished, it threatens the entire industry.”
Crude oil attracts 10% customs duty, while those classified as refined oil requires payment of 15%.
According to customs officials, the imported palm oil does not qualify as crude, nor does it fully qualify as finished good.
A senior official at the Department of Customs said there are plans to introduce a separate HS code for this category and to address the policy gap through the budget for the upcoming fiscal year 2025/26.
However, entrepreneurs are demanding immediate relief. “Billions of rupees' worth of raw material is lying idle at the port. Penalties are mounting, and bank interest is increasing daily. Yet, the government says it will only address this through next year’s budget. This reflects the government’s apathy towards trade and enterprise,” said one entrepreneur.
