Palm oil and soybean oil, which had been giving Nepal a notable amount of export earnings for the past few years, witnessed a sharp decline in exports in the first four months of the current fiscal year.
According to the four months’ macroeconomic report of Nepal Rastra Bank (NRB), exports of palm oil plunged 47.3 percent and that of soybean oil declined 79.8 percent during mid-July to mid-November compared to the same period of last year. In the review period, exports of palm oil went down to Rs 10.02 billion from Rs 19.02 billion, while exports of soybean oil also fell to Rs 5.32 billion from Rs 26.40 billion.
Sandeep Gadiya, president of Nepal Ghee and Oil Manufacturers’ Association, said the heavy decline in exports was due to a drop in demand for edible oil in the international market.
Exports of palm oil started to jump from the fiscal year 2018/19 when the product secured earnings of Rs 10.33 billion for the country. Similarly, Nepali soybean oil expanded its foreign market notably only from 2019/20, with the product earning Rs 12.69 billion for the country. Each of these products had been securing more than 20 percent share in the country’s total export earnings.
Taking advantage of a clause in the South Asian Free Trade Area (SAFTA), Nepali traders have been exporting these oils to India. As the SAFTA agreement provisions zero tariffs on goods exported from underdeveloped countries like Nepal, Nepali traders have been importing crude palm oil from other countries paying minimum tariffs and then exporting the finished product to India with zero tariffs.
The traders import crude palm oil primarily from Indonesia, followed by Argentina, Malaysia and Singapore. Similarly, the raw material of soybean oil is mainly imported from Ukraine, Brazil and Argentina. The traders process and package these products and sell them in Indian markets.
Few months ago, the Indian government was reported to have increased the duty on these edible oils imported from Nepal. This had made Nepali traders worry about possible fall in their business. So far, the southern neighbor has not taken any action in the line.
