October 4: Edible oil industries opened in the border areas targeting the Indian market are now forced to sell oil at throw-away prices. The industrialists are worried that their investment of Rs 15 billion in the oil industry is in peril.
The industrialists say that about two dozen industries will be closed if the government does not provide immediate policy protection. According to an industrialist, the production of one litre of oil currently costs Rs 190.
Industrialists are selling oil at Rs 170 a litre from the factory.
In the past, when India imposed a high rate of customs duty on the import of oil, the industries of Nepal made good income from oil exports taking advantage of the concessions given to Nepal. But now, those industries are on the brink of collapse after India lowered the customs duty. Previously, India used to charge up to 40 per cent duty on oil imported from other countries but only zero to 5 per cent for oil supplied by Nepali industries under SAFTA concession.
Earlier, the export used to be more profitable as the duty paid to the local customs and value-added tax was also refunded.
Suresh Rungta, the owner of OCB Food, said that after India adopted a zero-duty policy on imports to control the price of oil in its domestic market, exports from Nepal have come to a standstill. He said that they were forced to sell oil at a loss because it was essential to meet the expenses of the industry.
At present, the retail price of cooking oil in the border Indian market is Rs 178 per litre. Industrialists added that the cost of transporting raw materials from Kolkata to Birgunj is Rs 7 per litre. They say that if the processing cost is added, the production cost of one litre of oil will reach Rs 190. Industries of Nepal have been bringing semi-refined oil from Ukraine, Indonesia and Malaysia and processing it here. The industry of Nepal refines sunflower, soybean, palm oil and mustard oil and used to exports them, mostly to India until recently.
But now, since the export to India is not possible, there is fierce competition between more than two dozen industries in the domestic market.
Prabhu Dayal Aggarwal, the owner of Annapurna Vegetable Products, said that he had to do a 'push sale' after the sale stopped.
"Now, there is fierce competition in the domestic market. Oil has to be sold at a lower price than the cost. If the situation like this persists, we will not be able to sustain any longer,'' Agarwal shared.
Currently, 22 industries produce oil. At a time when exports were easy to India, most of the industries expanded their investments. Some new industries were also added. Among them, 14 are based in the Bara-Parsa corridor, and others are in Biratnagar and Bhairahawa. The annual production capacity of such industries is 2.5 million tons. Industrialists say that the domestic market consumption is only 500,000 tons.
Nikhil Chauhan, the owner of Narayani Oil Refinery, shared that this wide gap between production and the market has led to fierce competition.
It is said that the Indian government is keeping the interest of the common consumer at the forefront, considering the Lok Sabha elections to be held in 2024.
India is making many policy changes to make food supply easier and cheaper. There is also control over the export of essential grains like paddy, rice, wheat and sugar.
In the context of Nepal, the government had reduced the customs duty on the import of raw materials to 1 per cent last year to save the oil industry from the crisis. Chauhan said that the current year's budget has removed this concession and brought it back to 10 per cent.
Agarwal demanded that the government should protect the investment of the domestic oil industry as a matter of policy.
Chachan also agrees to this demand. He added that if there is a policy of reducing the tariff on the import of raw materials to 1 per cent and giving at least a 10 per cent subsidy on exports, the oil industry can be protected from the current crisis.
