Duty-free imports of refined edible oils from Nepal to India, the world’s largest edible oil importer, surged 17-fold to 804,000 tonnes in 2025 from 47,295 tonnes in 2023. These imports touched 284,976 tonnes in the first five months of 2026, posing a key concern for India's vegetable oil industry. Mint explains the jump in the backdrop of Nepal's limited edible oil domestic production.
Why are Indian edible oil producers concerned over duty-free imports from Nepal?
According to the industry, the surge in imports from Nepal distorts the domestic edible oil market by creating an uneven playing field for Indian processors.
Imports from Nepal enjoy preferential treatment under the South Asian Free Trade Area agreement, which allows member countries to export eligible goods at concessional or zero customs duty, provided they meet the prescribed rules of origin.
Comparatively, India levies import duty of 16.5% on crude edible oils and 35.75% on refined oil for countries under the most favoured nation route.
How does the surge affect India's domestic refining industry?
India, the world's largest importer of edible oils, remains structurally dependent on overseas supplies as domestic production meets only 40% of its total requirement. India imports about 60% of its edible oil consumption of 24 million-25 million tonnes annually.
India primarily imports crude edible oil rather than refined oil as part of its value-addition strategy. Crude oils such as palm, soybean and sunflower are processed at domestic refineries before reaching consumers. This policy supports local refining capacity, generates employment, attracts investment and creates demand for allied industries such as packaging and logistics.
India maintains a higher import duty on refined edible oils than on crude oils to ensure that value-addition takes place within India. However, the rapid increase in duty-free imports of refined edible oils from Nepal has altered this balance.
The rising volume of duty-free imports also has implications for customs revenue, estimated by the industry at ₹2,000 crore-2,500 crore annually.
How are oilseed farmers affected?
Domestic refining creates demand for locally produced oilseeds such as soybean and mustard, which support millions of Indian farmers. If refiners lose market share to imported refined oil, domestic crushing and refining operations could slow, reducing demand for locally produced oilseeds.
Lower refining activity reduces demand for domestically produced oilseeds—particularly soybean and mustard—exerting downward pressure on farm-gate prices and affecting farmer incomes in major producing states such as Madhya Pradesh, Maharashtra and Rajasthan. This undermines the objectives of the National Mission on Edible Oils, minimum support price operations and the government's vision of Atmanirbhar Bharat by weakening the domestic oilseed value chain.
Do the imports raise concerns over rules of origin?
Under the South Asian Free Trade Area agreement, products qualify for duty-free access if they meet the prescribed rules of origin. This ensures sufficient value addition in the exporting country and is intended to prevent the routing of goods made in a non-member country to claim duty-free access.
Experts said Nepal has limited domestic production of palm oil and soybean, making it important for Indian authorities to verify whether the refined oils it exports satisfy origin requirements.
What has the industry asked the government to do?
The industry has urged the government to review the surge in duty-free refined edible oil imports from Nepal.
"The extraordinary pace and scale of duty-free refined edible oil imports call for a comprehensive policy review to ensure that preferential trade arrangements continue to promote genuine regional value addition while safeguarding the competitiveness of India's domestic refining industry," said Sudhakar Desai, president of the Indian Vegetable Oil Producers' Association, which represents India's vegetable oil refining and processing industry.
The industry has called for stricter implementation of rules of origin and to verify that imports from Nepal meet the rules of origin prescribed under the South Asian Free Trade Area agreement. Verification would ensure that preferential tariffs are extended only to products that genuinely qualify for the benefit.
It has also called for a review of the current tariff structure to preserve incentives for domestic refining. The objective is not to restrict legitimate trade with Nepal but to safeguard the integrity of India's preferential trade agreements and maintain a level playing field for domestic refiners.