Edible oil fuels Nepal’s export growth
Nepal’s exports jumped 89% in the first two months of FY2024-25 to Rs 47.32bn, driven mainly by refined edible oils to India. Soybean oil made up nearly half the earnings, followed by sunflower and palm oil. Experts warn Nepal’s re-export model is risky, hinging on India’s trade policies.
Nepal’s exports surged by nearly 89 percent in the first two months of the current fiscal year, but the sharp rise has once again exposed the country’s growing overdependence on refined edible oil shipments to India.
According to the Department of Customs, Nepal exported goods worth Rs 47.32bn during mid-July to mid-September, compared to Rs 25.09bn in the same period of last fiscal year. Nearly half of the export earnings came from soybean oil alone, while sunflower oil and palm oil took the second and third spots, respectively.
In just two months, Nepal exported 509,962 tons of soybean oil worth Rs 20.42bn (509,962 tons) to India. Sunflower oil followed with Rs 1.38bn (35.2m liters) in exports, also to India. Refined palm oil, which ranked low in last year’s list, jumped to third place with Rs 1.31bn (7.4m liters) in shipments.
Nepal’s edible oil trade with India has flourished largely because of a loophole in regional trade agreements. Under the South Asian Free Trade Area (SAFTA) and the bilateral India-Nepal Trade Treaty, Nepali exports to India enjoy zero-duty access. In contrast, exporters outside South Asia face a 35 percent tariff on soybean oil exports to India. This makes Nepali refined oil significantly cheaper for Indian buyers.
Nepal imports almost all of its crude soybean oil from countries such as Argentina, Brazil, China, Iraq, Thailand, and Ukraine, refines it, and re-exports it to India. Domestic production of soybean, which was just 36,671 tons in 2023, is insufficient even to meet local demand.
Experts say this re-export model leaves Nepal highly vulnerable to Indian policy changes. Indian refiners, led by the Solvent Extractors’ Association of India (SEA), have long complained that cheaper Nepali oil has been affecting their business. Earlier this year, SEA urged the Indian government to regulate edible oil imports from Nepal and other SAARC countries.
If India were to curb these imports, Nepal’s export earnings would collapse overnight. This will put investments made in refining plants at serious risk.
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Source : The Annapurna Express
