Soyabean oil imports saw a sharp 14-fold surge from neighbouring Nepal during the April to November period in 2024 compared to the previous year, even as Kathmandu remains a marginal producer of the commodity, an analysis of data from the Commerce and Industry Ministry has shown.
This comes as overall soyabean oil imports in India are showing a rising trend, with a 19 per cent overall surge in the April to November 2024 period to nearly $3 billion compared to $2.5 billion in 2023. However, during the comparable period, Brazil — one of the top producers of the commodity — registered a drop in exports.
The import surge has triggered some concerns in India’s policy circles, with trade experts maintaining that the trend could be a result of the possible flouting of rules of origin by Nepal and the tariff arbitrage that the country enjoys due to zero-duty access for its products into India under the Nepal-India Treaty of Trade signed in 2009.
Data suggests that there is over 30 per cent tariff advantage that Nepal enjoys.
“A number of Customs officials have visited Nepal in the last seven years to check breaches of the rules of origin. Nepalese industries, which are primarily composed of Indian businesses, have set up refining industries there, but the low Nepalese consumption vis-à-vis its imports suggests that the industry largely exists to take advantage of the FTA duty structure with India,” a person aware of the issue said.
Notably, refined palm oil, refined soya oil, and refined sunflower oil attract a duty as high as 35.75 per cent.
New Delhi had raised the basic customs duty on these items by 20 per cent in September last year to protect Indian oil seed farmers. The duty prior to the change was still high at 13.75 per cent.
The steep revision in duty in September last year is one of the reasons why soyabean oil imports skyrocketed in November 2024 to $23.46 million compared to $1.42 million in November 2023. During the April to November period, imports cumulatively surged to $38.15 million compared to just $2.81 million in the previous year.
The data further showed that imports from a large producer, Brazil, slipped to $549 million in the April to November period compared to $849.19 million in the previous year. Meanwhile, China, one of the largest exporters of soyabean oil, does not export to India directly.
An International Food Policy Research Institute (IFPRI) report in 2023 suggested that Nepal’s edible oil imports consist primarily of crude edible oil from producing countries (98 per cent of imports) and that Nepal refines the crude oil domestically before exporting it to India.
“Interestingly, when examining the import profiles of both countries, it becomes clear that they share the same major suppliers of crude edible oil. This is likely because Nepal imposes lower tariffs on major edible oils than India, with duty differentials ranging from 22.5 per cent to 30 per cent in 2021,” the study said.
Under the Nepal-India Treaty of Trade signed in 2009, duty-free access into the Indian market for all Nepali-manufactured goods is provided on a non-reciprocal basis, except for a short negative list (including cigarettes, alcohol, and cosmetics).
Annual quotas had been prescribed only for duty-free exports to India for four sensitive items – vegetable fats (100,000 metric tonnes), acrylic yarn (10,000 metric tonnes), copper products (10,000 metric tonnes), and zinc oxide (2,500 metric tonnes).
Incidentally, India-Nepal bilateral trade takes place in Indian rupees. Nepal’s central bank also maintains a list of items that can be imported from India in dollars using a Letter of Credit. The Indian rupee is convertible in all banks and financial institutions in Nepal. The exchange rate has been maintained at NRs.1.6 per Indian rupee.
A query email to the Commerce and Industry Ministry remained unanswered till press time
