Decline in edible oil exports drags down Nepal’s overall export

In the last 2-3 years, Nepal’s export figure has largely been dominated by two products—palm oil and soyabean oil, which are basically not produced in Nepal. The edible oils are brought in crude form and refined in Nepal-based refineries and exported to India. Industry insiders say many producers do not even refine the oils as they import refined oils, repackage and label the products and export them to India which results in no to little value addition.

Aided by the ballooning export of edible oils, Nepal’s overall exports touched the Rs 200 billion mark for the first time in history in FY 2021/22. The contribution of edible oils to the country’s overall export was Rs 93.69 billion. Nepal export palm oil and soyabean oil worth Rs 89.18 billion in the last fiscal year which accounts for around 45 percent of Nepal’s total exports.

However, the exports of edible oils have slumped massively in the first half of FY 2022/23. The exports of palm oil slumped to Rs 13.08 billion from Rs 31.97 billion, according to data from the Department of Customs and the Trade and Export Promotion Center (TEPC). Likewise, exports of soyabean oil also dipped to Rs 8 billion in the first six months of this fiscal from Rs 34.26 billion in the same period last fiscal year. Official data shows that there has not been a significant drop in other products which are exported on a large scale.

The country’s exports of these products suffered after India lowered its customs tariff to help tame the rising inflation rate in October 2021. In fact, the import duty on crude varieties of palm oil, soybean oil, and sunflower oil is currently zero. However, after taking into account the 5 percent agri cess and 10 percent social welfare cess, the effective duty on crude forms of these three types of edible oil is at 5.5 percent.

At the start of 2021, effective customs duty on palm, soybean and sunflower oils reached as high as 35.75 percent. With the Indian government removing the import duty on these edible oils, the duty differential advantage Nepali exporters had was gone.

Nepal currently levies a one percent customs duty and a 13 percent VAT on the import of these three types of edible oil, according to Bipin Kabra, owner of Quality Refinery, one of the leading exporters of vegetable and palm oil to India. “The Indian government’s decision to abolish customs duty on raw soybean oil and palm oil has badly affected our exports,” he said.

According to Kabra, his firm currently exports these oil products only one-fifth of what it used to export until India abolished the import duty. “In order to restore the exports, either India should hike the import duty again or the Nepal government should give us export subsidies,” he said.

India will not be hiking duty on the import of these products anytime soon. In late December last year, the Indian government extended the policy of keeping lower tariffs on vegetable oil till March 2024. These products also don’t qualify to get the export subsidies that the government announced through the budget for the current fiscal year.

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