Nepali Edible Oil Industry Seeks Customs Duty Cut as Cheaper Indian Sunflower Oil Raises Smuggling Concerns

Nepali edible oil businesses have called for a reduction in the customs duty on raw sunflower oil, citing concerns that the recent cut in India’s import duty could encourage an increase in smuggled edible oil entering Nepal through border areas. The Indian government reduced the customs duty on raw sunflower oil from 16.5% to 5.5% effective September 24. According to Nepali businesses, even after adding 5% GST, the resulting cost of refined sunflower oil in India is significantly lower than in Nepal, creating a price gap that could make illegal imports more attractive. Nepal currently imposes a 10% customs duty and 13% VAT on raw sunflower oil. Nandkishor Rathi, chairman of the Edible Oil Business and Industry Organization, Morang, said domestic producers could face increasing difficulty competing in the market if smuggled imports are not controlled and Nepal does not review its customs rate. He said the price of sunflower oil in India has already fallen by around Rs. 10 per liter following the reduction in customs duty. India has also reduced the customs duty on raw soybean and palm oil from 16.5% to 11.5%. However, Nepali businesses say the smaller reduction in those products is unlikely to create the same level of smuggling pressure because the price difference remains relatively limited. The larger reduction in sunflower oil duty, they argue, could have a more direct impact on Nepal’s domestic edible oil industry.