India's restriction on palm oil import to hurt export figure of Nepal; 24.19% of total exports of Nepal coming from Palm oil

The foreign trade statistics till the fifth month of FY 2076/77 have reported 4.24% decline in imports and a 26.97% rise in exports. As good as these figures look, the inside story is not that attractive. Our export figure is being driven by Palm oil which accounts for 24.19% of the total exports. During the five months, we have exported goods worth Rs 47.61 arba, of which Rs 11.52 arba is coming from Palm oil.

This is especially attention-worthy because Nepal doesn't have Palm fields. We are importing crude palm oil worth Rs 9.94 Arba, processing it and then exporting it. Therefore, given the value addition that happens in our country, the net earnings seem rather gloomy.

The focus on palm oil processing started when India slapped a tariff of 40% on crude palm oil and 50% on refined palm oil imports. This tariff discouraged the prime exporters of palm oil to India vis-a-vis Malaysia and Indonesia. Taking the advantage of open border, Nepali merchants decided to take advantage. This was all well and good, but only till the Indian government decided to do something about it.

On January 01, 2020, the Indian government reduced the tariff on crude palm oil and refined palm oil to 37.5% and 45% respectively but later added the product to the restricted list. As a result, Indians importing palm oil will require an import license to do so. This requirement creates a tight bottleneck for palm oil refiners of Nepal, which may result in slower growth of export that is being driven by the Palm oil industry.