October 10: Export of cooking oil from Nepal took a nosedive after India reduced the customs duty on oil imports to control the market price of edible oil. According to the industrialists of Nepal, investment worth Rs 15 billion of 30 oil industries is in crisis.

When India imposed a customs duty of up to 40 percent on the import of semi-refined oil, the industries of Nepal brought such oil from third countries, processed it and exported the processed oil to India. The oil industries of Nepal used to bring semi-refined oil from Ukraine, Indonesia and Malaysia, and made profit by taking advantage of the difference in import duty and export concession between Nepal and India. Such industries have been exporting goods to India under the South Asian Free Trade Area (SAFTA) concessions by paying zero to 5 percent customs duty. After exporting the products, the industrialists used to get refunds up to 10 percent for customs duty and Value Added Tax on raw materials required to prepare refined oil.

Nikhil Chachan, the owner of Narayani Oil Refinery, said that the export from Nepal has been affected after India took strategic measures while considering the impact of Covid-19 pandemic, Russia-Ukraine war and the possible food crisis.

Most of the industries expanded their capacity when exports to India were easy. In the meantime, some new industries were established to take advantage of the situation. At present, the production capacity of the domestic oil industry is around 2.5 million tons a year. About 500,000 tons of oil is consumed in the country. Now the export is becoming difficult and production has shrunk. Entrepreneurs say that now such industries are running at 15 to 20 percent of their total capacity.

India reduced the import duty to 2.5 percent to reduce the market price of oil. In addition to this, the import and agricultural infrastructure development tax on 2 million metric tons each of semi-refined soybean and sunflower oil for the current fiscal year (FY) 2022/23 and the next fiscal year 2023/24 has been completely removed. In these two fiscal years, 5 million tons of semi-refined oil will be imported into India at zero customs duty.

Suresh Rungata, owner of OCB Foods, said that its direct impact is seen in the export of oil from Nepal. According to Birgunj customs office, the export of refined oil decreased significantly in the first two months of the current fiscal year as compared to the same period last year.

Refined palm oil was exported in July and August last year to the extent of 29.5 million liters. This year only 9.6 million liters have been exported during the same period.

In the first two months of last fiscal year, 4.7 million kilograms of soybean oil was exported, which is only 3.5 million kilograms this year. Similarly, last year 5,796,000 liters of sunflower oil was sold in the Indian market, but only 199,000 liters have been sold during the first two months of this year. Since oil was the main contributor to Nepal's export trade, Rungta claimed that the trade deficit will increase as oil exports have been affected.