Nepal’s exports to India continue to grow thanks to soybean oil
Nepal’s exports to India surged sharply in Q1 FY 2025-26, rising 137.9% to ₹59.12 billion, driven mainly by processed vegetable oils. Soybean oil led with ₹30.69 billion in exports, supported by SAFTA duty-free access. However, this boom is heavily dependent on tariff differentials, making Nepal vulnerable to any policy shifts by India.
In the first quarter of the 2025-2026 fiscal year, Nepal continues to demonstrate an impressive surge in exports. According to the Ministry of Commerce, exports to India, the country’s main trading partner, grew by a record 137.9%. While last year’s exports totaled 24.85 billion Nepalese rupees in the first three months, this year’s figure has risen to 59.12 billion, Lines Live reports.
The main contributor to this surge was the trade in processed vegetable oil. Soybean oil led the way, reaching 30.69 billion rupees in exports, accounting for more than half of all exports to India. Sunflower oil (2.13 billion rupees) and palm oil (1.73 billion rupees) also showed significant growth, despite their minimal exports last year.
This breakthrough was made possible by the duty-free trade regime within the South Asian Free Trade Area (SAFTA). While India imposes high duties on imported vegetable oils from other countries (up to 35.75% on refined oils), Nepalese goods enjoy preferential market access. This has created a unique business model: Nepal purchases crude oil from around the world, processes it locally, and then re-exports the finished product to India duty-free.
Despite the impressive figures, this model has a weak point. Experts note that the export boom is fueled by tariff differentials. Any significant tariff reduction by India on third-party oil could immediately undermine Nepal’s competitiveness and wipe out up to 50% of its exports to India.
Statistics also document the Nepalese economy’s growing dependence on the Indian market. India’s share of Nepal’s total exports reached 81.23% in the quarter, while shipments to its northern neighbor, China, remained negligible—a mere 186.42 million rupees. This mono-dependency remains a source of serious concern for Nepalese politicians and economists, highlighting the need to diversify foreign trade ties.
Last financial year, Nepal’s soybean oil exports to India increased 90-fold, thanks to the tariff-bypassing scheme, while sunflower oil exports increased 62-fold.
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Source : Ukr Agro Consult
