Nepal Taps on Zero Tariffs of Soybean Oil Exports


Apr 10, 2023 | Agricultural Markets News

Reading time: 2 minutes

Nepal’s Soybean Oil exports to India hit a staggering Rs42.34 billion ($359 million) in the first 11 months of the fiscal year 2020/2021 (mid-July 2020 to mid-June 2021), a four-fold jump from Rs10.12 billion in the same period in the previous year, making it the country’s number one export commodity.

Experts say shipments could reach Rs50 billion by the end of the fiscal year 2020/2021 due to the rent-seeking mentality of Nepali traders and the eagerness of the government to amass revenue, which has allowed exporters to exploit loopholes in the zero-tariff privilege given to Nepal as a least developed country.

Despite the impressive export statistics, the Soybean Oil trade contributes very little to the economy and provides few jobs to the Nepali people, say economists. Nepal produces very little Soybean Oil of its own, just 31,567 tons of raw Soybean annually, which is insufficient to meet the requirement of even a fraction of its population. But it exported 246,376 tons of processed Soybean Oil in the same period. How does it do that?

Nepal imported crude Soybean Oil valued at Rs45.60 billion and re-exported processed Oil worth Rs42.34 billion to India during the first 11 months of the fiscal year 2020/2021, according to the Department of Customs. Tariff exemptions on Nepali exports to India under the South Asian Free Trade Area (SAFTA) agreement give domestic traders an advantage. Countries outside of South Asia are slapped with tariffs of 45 percent on Soybean Oil.

Trade experts said that importing crude Oil with zero tariff privilege and exporting it to India with zero traffic privilege enables Nepali traders to enjoy a net profit of 45 percent, excluding other profits.

Nepali Economist’s View on Soybean Oil Trade

Trade economist Posh Raj Pandey said Nepali exporters need to fulfill the 30 percent value addition criteria to enjoy the zero-tariff privilege, but this is not reflected in the Soybean trade. Nepal imported 401,418 tons of Soybean Oil, mainly from Argentina, Brazil, Egypt, Paraguay, and Ukraine, while it exported 246,376 tons of refined Soybean Oil to India. The import allowed the Government to collect revenue worth Rs4.26 billion from the Soybean Oil trade in the first 11 months of the fiscal.

In March, following a massive increase in exports of refined Soybean Oil from Nepal, the Indian government wrote to Nepal’s Ministry of Foreign Affairs to “confirm the genuineness and authenticity” of the product originating criteria or the certificate of origin issued by Nepali authorities for the export of edible Oil to India under SAFTA.

Dinesh Bhattarai, secretary of the Ministry of Industry, Commerce and Supplies, said that the ministry had replied to all the issues raised by the Indian government, mainly regarding the authenticity of the certificate of origin of the product through the Foreign Ministry.

With massive imports of Soybean Oil from Nepal hurting refiners in eastern and northern India and Indian farmers and also incurring a loss of revenue to the government, the Solvent Extractors’ Association of India, one of the oldest organizations of vegetable Oil and trade, has been asking the Indian Government to fix quotas on imports, saying that Soybean Oil has become Nepal’s top export commodity even though the country does not produce it commercially.

“India can anytime restrict the import of refined Soybean Oil or can investigate how Nepal is making value addition,” Pandey said. “So, this type of product should not be promoted. It neither generates employment nor revenue to the government,” he said. Nepal’s imports of crude Sunflower Oil totaled Rs14 billion, but exports amounted to only Rs2 billion as most of the processed product is consumed in the country.

Other sources: KATHMAN DU POST

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