India's decision to slash custum duty on the import of edible oil from third countries could hurt Nepal’s export earnings

Published On: October 14, 2021 06:31 AM NPT By: Republica  | @RepublicaNepal

Nepal’s edible oils are on top list of the country’s major exportable goods for the past few years

KATHMANDU, OCT 14: Export of Nepali edible oil is likely to be affected after India reduced duties on the products imported also from other countries than its northern neighbor.

According to the Indian media, the Indian government on Wednesday scrapped basic customs duty on crude varieties of palm, sunflower and soybean oils as well as slash duties on refined edible oils. “The basic custom duty on refined varieties of sunflower, soyabean, palmolein and palm oil has been slashed to 17.5 percent each from 32.5 percent,” The Tribune Daily reported on Wednesday.

Edible oil prices in the Indian retail markets are reported to have shot up sharply by up to 46.15 percent in the last one year, which has been attributed to global factors and tight supply locally. As per the media, the Indian government has taken the step to ease retail prices of cooking oils and provide relief to consumers during the festive season.

While the Indian government has been allowing duty free entry to Nepali products as per the arrangement made by South Asian Free Trade Area (SAFTA), it charges high import duties on the products from the third countries. Nepal has been enjoying the benefits of minimizing its trade deficit through the exports of edible oil in recent years.

The records with the Department of Customs show that in 2020/21, Nepal exported goods worth Rs 141.12 billion that included edible oil exports worth Rs 55.95 billion, the largest of all. In 2018/19, the export of palm oil alone to India stood over Rs 10 billion while in 2019/20, the export of palm oil surged to more than Rs 18 billion.

As the SAFTA agreement provisions zero tariffs on goods exported from underdeveloped countries like Nepal, Nepali traders have been importing crude palm oil from other countries paying minimum tariffs and then exporting the finished product to India with zero tariffs. However, the recent move of the Indian government could affect exports of Nepali products as the domestic products will now have to compete with the similar third country products in terms of prices, traders said. 

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