According to the association, there are 26 refineries with a fixed and movable capital investment of Rs 100bn. Nepal does not produce raw palm and soybean oils and the oils are imported. Then, they are processed and packaged before selling in the Indian market. The government’s decision to hike the import duty on raw palm and vegetable oils has come at a time exports of their finished items have slumped compared to last fiscal year. Along with the Indian government’s decision to lower duty on the imported raw palm and soybean oils last year, Nepal’s exports of processed vegetable oil faced a setback.
According to the Trade and Export Promotion Centre, Nepal’s export of palm oil as of the 10 months of the current fiscal year 2022/23 stood at Rs 18.44bn against Rs 37.94bn during the same period last fiscal year 2021/22. In the last fiscal year, Nepal’s overall export of palm oil was worth Rs 41.06bn. The country exported soybean oil worth Rs 8.46bn in the 10 months of the current fiscal year compared to Rs 45.32bn during the same period last fiscal year, a drop of 81.3 percent. In the last fiscal year, Nepal exported soybean oil worth Rs 48.12bn. Because of the slump in the export of these items, Nepal’s overall export dropped to Rs 130.90bn as of 10 months of this fiscal compared to Rs 173.34bn during the same period of the last fiscal year. The country’s exports of palm and soybean oils suffered ever since India, the main export destination of these two products, lowered tariffs to help tame rising inflation in October 2021. In India, the import duty on crude varieties of palm oil, soybean oil, and sunflower oil is currently zero. However, after taking into account the five percent agri cess and 10 percent social welfare cess, the effective duty on crude varieties of these three edible oils is 5.5 percent. At the start of 2021, effective customs duty on these edible oils was as high as 35.75 percent. Ever since the Indian government removed the import duty on these three types of oil, the tariff advantage Nepali exporters were receiving was gone. In an interview with ApEx in January, Bipin Kabra, owner of Quality Refinery, one of the leading exporters of vegetable and palm oil to India, said Nepal was required to give additional concession to Nepali exporters to outcompete Indian refineries after Nepal lost tariff advantage against India. “In order to restore exports, either India should hike the import duty again or the Nepal government should give us export subsidies,” he had said. India will not be hiking duty on the import of raw soybean and palm oil anytime soon. In late December last year, the Indian government extended the policy of keeping lower tariffs on vegetable oil till March 2024. Government officials and experts say that vegetable oil and palm oil have very low-value additions among Nepali products. But Kabra claimed that there is a value of the addition of as much as 25 percent. “There is a value addition during the refining and packaging process,” he said. “This has helped to grow the packaging industry in Nepal.”
