Nepal's Soyoil Exports to India Jump Tenfold on Duty Free Access

Why It Matters

The surge narrows Nepal's trade deficit with its biggest market while reshaping regional edible‑oil pricing dynamics, forcing Indian refiners to confront higher duties and competitive imports. It underscores how trade agreements can rapidly alter supply chains in South Asia.

Key Takeaways

• Nepal's soy oil exports to India rose tenfold in 2025.
• Duty‑free SAFTA access enabled $1 billion export value.
• Nepal captured 12.3% of India's soy oil imports.
• Indian refined oil duty increased to 35.75% in 2024.
• New Nepali refineries may boost shipments in 2026.

Pulse Analysis

The South Asian Free Trade Agreement (SAFTA) has become a catalyst for Nepal’s rapid expansion in the edible‑oil sector. By granting duty‑free entry for refined soybean oil, the pact allows Nepali refiners to import cheap crude from Brazil and Argentina, process it domestically, and ship the finished product back to India without tariffs. This logistical loop, though costly due to land transport from Haldia Port, is offset by the substantial duty differential, turning Nepal into a cost‑effective conduit for high‑volume soy oil shipments.

India’s decision to lift the import duty on refined soy oil to 35.75% in September 2024 reshaped the competitive landscape. Domestic refiners now face a steep cost disadvantage against Nepali‑origin oil, which enters the market duty‑free and is priced slightly below locally processed alternatives. The price pressure has narrowed the trade deficit between the two neighbors but sparked concerns among Indian industry groups that the influx is depressing domestic margins and could incentivize further tariff adjustments. This tension illustrates how policy shifts in one market can reverberate across supply chains, influencing pricing strategies and trade flows throughout the region.

Looking ahead, Nepal’s export momentum is set to continue. The commissioning of two to three new refineries in 2026 promises higher processing capacity, potentially increasing shipments beyond the current 60,000‑70,000 tons annually. While the benefits for Nepal’s export earnings are clear, Indian policymakers may reassess duty structures or negotiate SAFTA terms to protect local producers. The evolving dynamics underscore the strategic importance of trade agreements in shaping South Asia’s agricultural commodity markets and highlight opportunities for investors monitoring regional supply‑chain transformations.