Tremendous increase in import of soybean oil from Nepal

17-Feb-2025 11:32 AM

The significant rise in soybean oil imports from Nepal to India during the period of April-November 2024 has raised several concerns, especially regarding the economic impact on India’s domestic market and the implications for trade policies.

Here's a breakdown of the key points:

  1. Tremendous Increase in Imports: The data reveals that the import of soybean oil from Nepal has surged dramatically, increasing by about 14 times compared to the same period in 2023. This rise has contributed to a total soybean oil import expenditure of about $3 billion, which is 19% higher than the previous year.

  2. Low Soybean Production in Nepal: While soybean oil imports from Nepal have spiked, Nepal itself has limited domestic production of soybean, leading to the conclusion that the country is likely importing soybean oil from abroad, refining it, and then re-exporting it to India. This practice has raised concerns, especially considering that products imported from Nepal under the South Asia Free Trade Agreement (SAFTA) are duty-free if the product is manufactured in Nepal.

  3. Concerns of Industry Stakeholders: Indian industry bodies have raised alarms about this situation. They are urging the Indian government to take steps to regulate these imports, which they believe could be undermining domestic industries and potentially violating the spirit of SAFTA. The call is to strengthen the rules around the origin of goods being exported from Nepal to ensure that only products manufactured there qualify for the duty exemption.

  4. Indian Investment in Nepal’s Refineries: Interestingly, the rise in soybean oil imports also ties into the investments made by Indian businesses in refineries in Nepal. This allows these businesses to take advantage of the SAFTA provisions and export the oil to India, benefiting from the duty-free status.

This issue presents a complex situation for Indian policymakers, balancing trade relations with Nepal and the need to protect domestic industries.

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