Nepal's $1.1 billion edible oil exports to India face scrutiny over tariff advantage

Nepal's edible oil exports to India, valued at Rs146 billion ($1.1 billion) in the last fiscal year, are under scrutiny for exploiting tariff advantages rather than generating genuine domestic value. The country imported crude oils from various nations, refined them, and then exported the products duty-free to India under trade agreements.

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the recent surge in duty-free refined edible oil imports, particularly from Nepal, exposed a failure of India's preferential trade arrangements.

This practice has sparked concerns in both Nepal and India. While Nepal earns Indian rupees, it spends dollars on importing crude oil. Indian vegetable oil producers contend that these duty-free imports are harming their domestic industry. The Indian Vegetable Oil Producers' Association (IVPA) has formally raised this issue, calling it a failure of India's preferential trade arrangements.

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the value added in converting crude oil into refined oil is only 5 to 7 percent.

Industry groups in India argue that the actual local value addition in Nepal is only about 5-7%, falling short of the 30% domestic value-addition requirement under the South Asian Free Trade Area (SAFTA). Sudhakar Desai, president of the IVPA, stated that the preferential treatment has led to a sharp increase in imports, making Indian refiners vulnerable. Reports have questioned the economic benefits for Nepal, citing limited value addition and low employment generation. Officials from the Nepal Vegetable Ghee and Oil Manufacturers Association defend the industry, noting that domestic consumption is insufficient to absorb production, making exports essential.

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If exports are halted, many factories