Nepal's soyoil exports to India jump tenfold on duty free access
Nepal's soybean oil exports to India surged more than tenfold in 2025, reaching 694,153 metric tonnes — up from just 65,138 tonnes in the prior year — primarily due to duty-free access under SAFTA (South Asian Free Trade Agreement).
Soybean oil exports worth over $1 billion helped Nepal's total goods exports to India nearly double to $2 billion in 2025.
Nepal's share of India's soybean oil imports rose to 12.3% in 2025, making it the third-largest exporter after Argentina and Brazil.
The mechanism: Nepali refiners import crude soybean oil from Brazil and Argentina, process it locally (achieving the required value-addition for SAFTA rules of origin), and export refined soybean oil to India duty-free — while non-South Asian exporters face a 45% Indian tariff on refined oil.
Indian edible oil refiners, who pay import duties on crude oil, cannot compete with Nepal's cheaper refined oil — generating pressure from the Indian industry.
In response, India reduced the basic customs duty on crude soybean oil from 20% to 10% to narrow the gap — partially addressing the competitiveness concern.
Nepal's soybean oil exports to India surged more than tenfold in 2025, reaching 694,153 metric tonnes — up from just 65,138 tonnes the previous year.
Nepali refiners import crude soybean oil from Brazil and Argentina, process it locally, and export refined oil to India duty-free under SAFTA — while non-South Asian origins face a 45% Indian tariff on refined soybean oil.
This allowed Nepal to double its total exports to India to approximately $2 billion in 2025.
Indian edible oil refiners — who pay import duties — faced competition from Nepal's duty-free refined imports, prompting industry lobbying for restrictions.
India responded by cutting the basic customs duty on crude soybean oil from 20% to 10%, reducing the processing cost advantage for Nepali refiners.
Nepal's share of India's 5.6 million-ton soybean oil imports reached 12.3% in 2025, making Nepal the third-largest source after Argentina and Brazil.
South Asian Free Trade Agreement (SAFTA)
SAFTA is a regional trade agreement among the eight SAARC member states, signed in January 2004 (entered into force January 2006). It establishes a framework for progressive tariff reduction among South Asian economies with the goal of creating a free trade area in the region.
Key Details
- Full name: SAARC Agreement on a South Asian Free Trade Area
- Signed: January 2004 at the 12th SAARC Summit (Islamabad); entered into force: January 2006
- Members: India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives, Afghanistan (8 SAARC members)
- Framework: Progressive tariff reduction to 0-5% over defined timelines for developing countries; Nepal and Bhutan (LDCs) got faster timelines
- Rules of origin: To qualify for preferential tariff treatment, goods must meet value-addition criteria — typically 30% value addition in the exporting country and/or a change in tariff heading — preventing "screwdriver assembly" or simple reprocessing
- Sensitive lists: Each member maintains a "Sensitive List" of products excluded from SAFTA preferential tariff cuts
Nepal's soybean oil exports exploit SAFTA's duty-free access for goods meeting the 30% value-addition threshold. By refining crude oil imported from Brazil/Argentina into refined oil, Nepali processors achieve the value addition required to qualify as Nepali-origin goods for SAFTA purposes.
India-Nepal Bilateral Trade Treaty
Beyond SAFTA, India and Nepal have a bilateral trade treaty that provides preferential access for Nepali goods to India — with a long history predating SAFTA.
Key Details
- Current Treaty: India-Nepal Treaty of Trade (most recently renewed/updated) — provides duty-free, quota-free access for manufactured goods from Nepal to India
- Rules of origin (post-2002): At least 30% value addition in Nepal + change in tariff heading at HS 4-digit level — introduced after the liberal 1996 treaty allowed re-export abuse
- Original 1996 treaty: Duty-free access for all Nepali manufactured goods with no value-addition criteria — led to transit trade concerns
- 2002 amendment: Introduced value-addition norm and tariff heading change requirement to ensure goods are genuinely made in Nepal
- India-Nepal total trade (2025): Nepal's total exports to India ~$2 billion; India's exports to Nepal much larger (Nepal has a large deficit)
Nepal's soybean oil trade is a textbook case of treaty-rule optimisation — refiners precisely achieve the 30% value-addition threshold to qualify for duty-free access, creating a structurally advantageous arbitrage over third-country oil.
India's Edible Oil Imports — Strategic Dependence
India is the world's largest importer of edible oils, importing 13-15 million tonnes annually (worth $15-20 billion). India imports palm oil from Indonesia and Malaysia, soybean oil from Argentina and Brazil, and sunflower oil from Ukraine and Russia. This dependence is a chronic strategic vulnerability.
Key Details
- India's self-sufficiency in edible oils: ~40% (severely deficit)
- PM National Edible Oil Mission — Oil Palm (NMEO-OP): Launched 2021-22; Rs 11,040 crore outlay; targets 10 lakh hectares of oil palm by 2025-26 to reduce import dependence
- Key imports (volume): Palm oil ~8 mt, soybean oil ~4-5 mt, sunflower oil ~2-3 mt
- Import duty structure: Crude oils (palm, soya, sunflower) attract lower customs duties; refined oils attract higher duties — designed to protect domestic refining industry
- National Mission on Oilseeds and Oil Palm (NMOOP): Predecessor programme for domestic oilseed production enhancement
Nepal's duty-free soybean oil import surge highlights the tension in India's edible oil policy — lower crude oil duties to incentivise domestic refining vs SAFTA obligations that allow neighbouring country refiners to arbitrage the duty differential.
- Nepal's soybean oil exports to India in 2025: 694,153 MT (up from 65,138 MT in prior year — ~10x increase)
- Nepal's total exports to India (2025): ~$2 billion (doubled year-on-year)
- Nepal's share of India's soybean oil imports: 12.3% (3rd largest source)
- India's total soybean oil imports: 5.6 million tonnes
- Duty advantage: Non-South Asian origins face 45% Indian tariff on refined soybean oil; Nepal faces 0%
- India's response: Cut basic customs duty on crude soybean oil from 20% to 10%
- SAFTA rules of origin: 30% value addition + tariff heading change at HS 4-digit level
- SAFTA entered into force: January 2006
- India's annual edible oil imports: 13-15 million tonnes (among world's largest)