Nepal’s edible oil exports raise trade manipulation concerns
This loophole has prompted accusations of trade distortion, with Indian processors and farmers facing unfair competition.
NEPAL – Nepal’s unprecedented surge in edible oil exports has raised alarms across South Asia, with trade experts and Indian industry groups warning of potential manipulation under the South Asian Free Trade Area (SAFTA) framework.
In the first 10 months of the current fiscal year, Nepal’s exports rose by 72.71%, reaching US$1.55 billion (NPR 217.91 billion).
A staggering portion of this growth stems from re-exports of soybean, sunflower, and palm oils, products Nepal imports in bulk due to insufficient domestic production.
Soybean oil exports alone jumped 90-fold to US$0.56 billion, while imports of crude soybean oil amounted to US$0.58 billion (539,549 tonnes).
Additionally, sunflower oil exports increased 62-fold to USD 71.19 million, while crude sunflower oil imports were US$0.18 billion (166,527 tonnes).
Palm oil exports were US$8.26 million, while crude palm oil imports were USD 32.75 million (32,318 tonnes) from Indonesia and Thailand.
The oils are primarily imported from Argentina, Brazil, Ukraine, and Indonesia, then re-exported to India, which offers duty-free access to Nepalese goods under SAFTA.
This loophole has prompted accusations of trade distortion, with Indian processors and farmers facing unfair competition.
India imposes a 45% import duty on oilseeds from non-SAFTA countries, incentivising traders to reroute shipments through Nepal.
In response, India tightened import protocols in March, replacing the certificate of origin with a more stringent proof of origin requirement.
The Solvent Extractors’ Association of India has called for further regulation, citing underutilised domestic refining capacity and falling farm-gate prices.
Trade expert Rabi Shankar Sainju noted that many re-exported oils fail to meet the required 30% value addition threshold, often involving mere repackaging.
While economist Paras Harel argues the trade is legitimate if it complies with SAFTA rules, he supports a formal investigation into the practice’s sustainability and legality.
Though the boom has boosted Nepal’s export figures, critics warn it may not reflect genuine economic growth.
As scrutiny intensifies, both governments face pressure to balance regional trade benefits with fair market practices.
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