KATHMANDU, June 30: Nepal in the current fiscal year has got some respite from the ever-worsening trade position with the country being able to narrow down the trade deficit to some extent and one-third export earnings of the country coming from palm oil and soybean oil.  

The decline in trade deficit however is backed by a nominal rise in export earnings. Of the total export earnings, a major share is held by just two items - palm oil and soybean oil, according to the statistics maintained by the Trade and Export Promotion Center (TEPC). As per the 11 months’ data of TEPC, Nepal was able to raise its export earnings by mere 0.2 percent to Rs 88 billion. Of the total export value, palm oil and soybean oil share 32.3 percent.

In the review period, the export of palm oil increased more than double to Rs 18.31 billion. Similarly, the export of soybean oil rose almost five times to Rs 10.12 billion. India is the main market for these agro products processed by landlocked Nepal. 

Utilizing the provisions under the South Asian Free Trade Area (SAFTA), Nepali traders have been exporting these products mainly to India. The SAFTA agreement provisioned for zero tariffs on goods exported from underdeveloped countries like Nepal, given that the exportable goods have value addition of at least 30 percent inside the country. Nepali traders have been importing crude palm oil from other countries, paying minimum tariffs and then exporting the finished products to India with zero tariffs.

While crude palm oil is not produced in Nepal, there is very nominal production of raw material of soybean oil. The import figures show that Nepal purchases the raw materials of these two oils in notable quantities from abroad. In the review period, the import of crude palm oil was up by 66.6 percent to Rs 17.55 billion while that of crude soybean oil rose 33.2 percent to Rs 16.16 billion.  

However, India from time to time has been imposing trade restrictions on the palm oil exported from Nepal, violating the measures in the multilateral trade agreement. In a recent development, India since last month has stopped importing refined palm oil and tea from Nepal. 

The southern neighbor has appeared even sterner on the landlocked country, following Nepal's objection to the road inauguration by the Indian government through the Lipu Lekh Pass and officially unveiling the country’s new political map. Despite Nepal’s repeated requests to lift the ban, India has not responded positively. 

Apart from these two items, only felt products and articles of silver jewelry posted growth in their exports. The decline in exports to third countries has been attributed to the lockdown imposed to curb the spread of coronavirus. 

According to the TEPC statistics, Nepal’s import expense fell 15.3 percent to Rs 1.1 trillion during mid July 2019 to mid June 2020. With the fall in economic activities because of the lockdown, there has been a huge drop in the import of petroleum products and iron and steel products, which are among the top imported goods.  

 
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