Zero customs duty exports from Nepal will rise, and non-customs restrictions ought to be eliminated: industry

Entrepreneurs claim that it will be simpler to export refined cooking oil from Nepal to India now that India has raised the customs charge on the import of semi-processed and refined cooking oil. With effect from Friday, India has raised the customs charge on the import of such oil. Nonetheless, since refined oil from Nepal will not be subject to customs duties, the business owners anticipate a rise in exports from their country.

 India increased import taxes on semi-processed sunflower, soybean, and palm oils from 0% to 20% all at once. India will now levy a 27.5 percent tax on these oil imports in addition to paying development fees for agricultural infrastructure. The tax on refined oil has gone up from 12.5% to 32.5 %, according to the Indian media.

After being processed, Nepali industry exports semi-refined oil to India from third-world nations. Products exported from Nepal are exempt from the customs tariff hike implemented by the Indian government. The South Asian Free Trade Agreement allows Nepalese businesses to export edible oil to India duty-free (SAFTA).

The rate of customs duty on imports of crude oil is low in Nepal. Additionally, Nepali businessmen will profit if the oil is refined here and sent to India at a zero tariff rate. Taking advantage of this differential in customs rates, the export of such oil was recorded as the first export item a few years ago.

However, following an increase in the price of oil on the domestic market in tandem with a global price increase, India eliminated customs duties on the import of crude oil in September 2021. The refined oil that Nepal exported was impacted by this.

The Trade and Export Promotion Center reports that in the fiscal year 2077–2078, Nepal shipped 53.65 billion rupees worth of soybean oil to India, accounting for 38% of the country's overall exports. While palm oil was exported in smaller quantities, sunflower oil was exported for 2.24 billion.

48 billion rupees worth of soybean oil and 41 billion rupees worth of palm oil were shipped in 2078–2079, making them the top two export commodities. However, according to data from the Trade and Export Promotion Center, soybean oil was only exported for 90 million rupees last year, whereas palm oil was valued at 6.33 billion rupees. The value of sunflower oil exported was barely $16 million.

The proprietor of OCB Food, Suresh Rungta, states that Nepal's exports may rise as a result of India raising the customs charge on imports from other nations.

Nepali businessmen imported semi-processed sunflower, soybean, and palm oil from Malaysia, Indonesia, and the Ukraine and exported it to India during the period when import duties on oil were 40%. The export has now stopped after the duty was reduced there. According to businessman Rungta, exporting would now be simpler because India has lowered the duty.

When importing semi-refined oil, domestic industries pay 10% in value-added tax and customs duties. Owner of Annapurna Vegetable Products Prabhudayal Aggarwal claims that exporting is feasible since, upon exporting to India, all customs fees paid are refunded, and exporting requires only 5% of India's goods and services tax.

The increase in import duties in India has made exports from Nepal easier, since just a 5 percent goods and services tax is levied on imports from these countries.

More than a dozen industries in Nepal used to export when exporting was simple. Investment in these industries has surged as well, with a focus on the Indian market. Owner of the Narayani Oil Refinery in Birganj, Nikhil Chachan, believes that the current Indian policy will probably put a stop to this dilemma for the time being because the investment of Rs. 

Previously, the government granted the domestic business a 90% customs duty discount; however, that concession was abolished last year after exports to India came to a complete halt and the industry was shut down.

Customs obstacles

The food exporters have reported that there has been a non-customs barrier on the Indian side of the Birganj-Raxaul border for the last two months. The business owners have complained that their cars had to be stopped at Raxaul for ten or fifteen days in order to assess the quality of the food. They also insist that in order to facilitate oil exports, these non-customs restrictions be taken down.

With an eye toward the 2024 Lok Sabha elections, the Indian government has eliminated the agricultural infrastructure development tax from zero customs charge in an effort to regulate costs. Following the election, India modified its strategy. India has continued to regulate the export of goods including sugar, wheat, and rice.