In a significant setback for Nepali traders, the Indian government on Friday, May 30, decided to slash the basic import duty on crude edible oils by 10 percentage points, reducing it to 10 percent—a move widely reported by Indian media as part of efforts to rein in soaring prices of oils and fats.
Following this decision, the effective import duty on crude palm, soybean, and sunflower oils has dropped from 27.5 percent to 16.5 percent, once the Agriculture Infrastructure and Development levy is factored in, said the media reports .
Read: India’s Decision to Hike Import Duty on Edible Oil Elates Nepali Traders
This marks a major policy reversal from September 2024, when India hiked import duties on both crude and refined edible oils by 20 percentage points in an effort to shield domestic producers. That move had raised the effective duty on crude oils from 5.5 percent to 27.5 percent, and on refined oils from 13.75 percent to 35.75 percent.
Prior to the September hike, no import duty was levied on crude palm, soybean, or sunflower oil.
Read: Palm Oil Worth Rs 4 Billion Held Up at Indian Port
Nepali exporters swiftly took advantage of the September tariff hike.
Under the South Asian Free Trade Area (SAFTA) agreement, which allows for duty-free exports of finished goods among SAARC nations, Nepali firms began importing semi-processed or crude edible oils from countries like Malaysia, Indonesia, and Ukraine at minimal tariffs. These oils were processed in Nepal and then exported to India.
Read: Nepal's Edible Oil Industry Faces Challenges from External Markets and Policy Shifts
Nepali processors pay 10 percent customs duty and 13 percent VAT on imports of crude or semi-processed oils. However, customs duties are refunded upon export under SAFTA provisions, and the finished goods face only a 5 percent Goods and Services Tax (GST) in India.
This trade model significantly boosted Nepal’s exports. According to the Department of Customs, exports jumped by 72.71 percent year-on-year in the first ten months of the current fiscal year 2024/25, largely driven by refined edible oils.
Read: Exports of Refined Vegetable Oil Continue Surge Exponentially
From mid-July 2024 to mid-May 2025, Nepal exported goods worth Rs 217.91 billion. Of this, refined soybean oil topped the list, with exports worth Rs 78.75 billion, followed by sunflower oil at Rs 10.09 billion.
The latest duty cut follows strong lobbying by the Solvent Extractors’ Association of India (SEA), which urged the government to regulate imports from Nepal and other SAARC nations to protect domestic farmers and refineries.
SEA accused regional exporters of circumventing the “rules of origin” provisions under SAFTA.
Read: Industrialists Fear Halt to Refined Edible Oil Exports to India
The development has again underscored the fragility of Nepal’s edible oil industry, which is heavily dependent on external markets and foreign trade policies.
Speaking with New Business Age earlier this year in March, Subodh Kumar Gupta, immediate past president of the Association of Nepali Rice, Oil, and Pulse Industries, had said that capacity utilization of Nepal’s edible oil industry depends on India’s policies.
Read: Oil Export Woes: Indian Entrepreneurs' Move Raises Concerns in Nepal
“Only three or four refineries out of about 20 operating in Nepal can meet domestic demand,” Gupta said. “Our industrial capacity has been scaled up primarily for the Indian market. When India allocates an import quota, our capacity utilization improves. Otherwise, it drops to just 20 percent.”
