Nepal’s edible oil industry is facing a sharp downturn after India reduced customs duties on raw oil imports by 10 percentage points. The tariff cut from 27 percent to 17 percent has significantly undercut the price competitiveness of Nepali exports in the Indian market, leading to a reported 50 percent drop in production across domestic oil factories.

India has long been the primary export market for Nepal’s refined edible oils. Previously, Nepali producers benefitted from the South Asian Free Trade Area (SAFTA) agreement, which allowed duty-free exports to India. At the time, India imposed a 27 percent duty on crude oil imports from other countries, giving Nepal a comparative advantage. However, the recent reduction in Indian tariffs has eroded that edge, making domestically produced Indian oil cheaper than Nepali exports.

Nepal has 27 operational edible oil manufacturing plants. The customs duty cut was announced on May 31, 2025, by India’s Central Board of Indirect Taxes and Customs under the Ministry of Finance. It reversed a September 2024 decision that had raised duties to 27 percent to protect Indian oilseed farmers.

Industry leaders in Nepal say the new policy shift has severely impacted profitability, forcing producers to scale back operations. Nand Kishor Rathi, chairman of the Chamber of Industries Morang and Director of Bagmati Oil Industries, said manufacturers are now diverting their existing raw stock toward Nepal’s domestic market instead of exporting to India. “We cannot return the imported raw material, so we will process it for internal consumption. However, for future imports, we plan to reduce volumes,” he said.

Rathi also noted that the price differential caused by India’s tariff reduction has made Nepali oil 8 to 9 rupees per liter more expensive than Indian alternatives, effectively pricing it out of the Indian market.

Amit Sarada, Director of Pashupati Edible Oil and Secretary of the Morang Chamber of Commerce and Industry, echoed these concerns. He confirmed that overall production in Nepal’s edible oil sector has dropped by half. “There’s a seasonal decline in domestic demand from mid-June to mid-August, which coincides with a sharp drop in Indian demand. This has put the industry under double pressure,” he said.

Sarada added that edible oil consumption in Nepal tends to fall during the summer fruit season, especially when mangoes dominate household consumption. The complete halt of exports to India, combined with falling local demand, has left producers struggling with excess capacity and declining margins.

Industry stakeholders say their only hope lies in either India reinstating the higher import duty to protect its domestic oilseed farmers or a significant global decline in crude oil prices, which would help Nepali oil regain competitiveness. Without such changes, Nepal’s edible oil exports are unlikely to recover their previous market share in India.