Kathmandu, June 1: India has slashed the import duty on crude edible oil, a move that is expected to impact Nepal’s refined oil exports significantly. Effective from last Friday, India reduced the basic customs duty on crude palm, soybean, and sunflower oil from 20% to 10%.
This also brought down the total import tax (including agriculture infrastructure and development cess and social welfare surcharge) from 27.5% to 16.5%. However, refined edible oils still carry a higher tax of 35.25%. This reduction will remain in effect for one year.
Impact on Nepali industries
India had increased edible oil import duty by 20% in Bhadra 2081 (mid-2024), raising crude oil duties to 27.5%. Now, with the fresh duty cut, India’s edible oil refining industry will benefit by getting cheaper raw materials, while Nepal’s refined oil exports are expected to decline.
According to the Nepal–India trade treaty, Nepal’s refined oil exports to India are duty-free. However, with India now being able to refine oil more cheaply domestically, demand for Nepal’s oil is likely to fall.
Current state of Nepal’s edible oil export
* In the first 10 months of FY 2081/82 (2024–25), edible oil constituted nearly 50% of Nepal’s total exports worth Rs 225 billion. Nepal exported soybean oil worth Rs 78.75 billion, sunflower oil worth Rs 10.09 billion, palm oil worth Rs 1 billion.
Nepal does not grow these oilseeds commercially. It imports crude oil from countries like Argentina, Brazil, and Ukraine, refines it domestically, and exports it to India.
So far, Nepal has imported crude soybean oil worth Rs 81.89 billion and sunflower oil worth Rs 24.64 billion in this fiscal year.
Dependency on Indian market
Nepal’s oil refining industry consists of about 30 factories with a combined capacity of 2.5 million tons annually. However, only 500,000 tons are consumed domestically, meaning 2 million tons rely on Indian demand. This heavy reliance now faces risk due to India’s policy shift.
Bivor Agrawal, member of Nepal Rice, Oil & Pulses Industry Association said, “Indian oil refiners lobbied their government to reduce import duties, citing inability to compete with cheaper Nepali refined oil. The duty cut will make Indian oil cheaper, reducing the price gap and hurting Nepal’s competitiveness.” He warned that oil exports from Nepal will likely decline in the coming months, as prices in India drop and demand for Nepali oil contracts.
Nikhil Chachan, Secretary-General of the Nepal Vanaspati Ghee and Oil Producers Association further said, “Most industries already have large stocks (150,000–200,000 tons) of refined oil ready for export. This sudden policy shift means they now need to reconsider their strategy and explore alternative markets.”
Economist Keshav Acharya argues that Nepali refined oil can no longer compete in India. With the profit margin reduced from 20% to 10%, Nepal’s comparative advantage vanishes. India’s superior production scale, infrastructure, and lower electricity costs further disadvantage Nepali exporters. Nepal’s failure to diversify exports or invest in high-value products makes its economy vulnerable to such shocks.
India’s Edible Oil Market
* India consumes 23–25 million tons of edible oil annually.
* It imports 14–15 million tons, making it one of the largest global importers.
* In FY 2023, India imported 16.5 million tons of edible oil.
Recent trends (April 2025):
* Palm oil imports fell 53% year-over-year to 321,000 tons.
* Crude palm oil dropped 55% to 241,000 tons.
* Sunflower oil imports down 23% to 180,000 tons.
* Soybean oil down 20% to 360,000 tons.
* Shift in market share:
* Palm oil fell from 60% to 42%
* Soft oils (soy/sunflower) rose from 40% to 58%
Major suppliers:
* Palm oil: Indonesia, Malaysia
* Soybean oil: Argentina, Brazil, Russia
* Sunflower oil: Russia, Ukraine
India is the 5th largest oilseed producer globally, but domestic production cannot keep up with rising demand, which has grown from 2.9 kg per capita in 1950 to nearly 20 kg now.
India’s decision to reduce crude edible oil import duties will lower edible oil prices in its domestic market, help control inflation, strengthen its refining industry and significantly weaken Nepal’s oil export prospects. #nepal #oil #oilseed
