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THE DETAILS
- India has cancelled permission to import over three lakh tonnes of refined palm oil from Nepal and Bangladesh under the South Asian Free Trade Agreement (SAFTA) as both neighbouring countries don’t produce the commodity.
NEPAL
- Population – 2.81 crores Economy – $30 billion (in Nominal terms) $94 billion (in PPP terms)
INDIA NEPAL TRADE
- As per the latest official data given in Parliament, India’s total bilateral trade with Nepal in FY 2017-18 stands $6.82 billion, but it is highly skewed in India’s favor as India exports goods worth $6.38 billion and imports goods worth $437 million.
NEPAL’S EXPORT TO INDIA INCREASED TO SOME EXTENT BECAUSE OF PALM OIL IN 2017
- A surge in export of this commodity should have come as good news for Nepal, which is struggling to narrow down its widening trade and current account deficits due to shortage of products that could be sold abroad. Instead, the surge has generated concerns about quality of Nepal’s exports and whether palm oil export can be sustained.
UNDERSTANDING THE PROCESS
- Palm oil is edible vegetable oil extracted from the fruit of oil palm trees largely grown in Indonesia and Malaysia.
- It is in great demand globally as it is used in many packaged products from doughnuts and chocolates to shampoo, lipsticks and toothpaste.
NEPAL PALM OIL INDUSTRY
- Around 10 firms in Nepal are importing crude palm oil and exporting the refined version, according to the Ministry of Industry, Commerce and Supplies. It is not exactly known how much of investment has gone into these firms or how many jobs they have created. Nepal mainly imports crude palm oil from Malaysia and Indonesia.
- Nepal’s crude palm oil imports stood at Rs 11.8 billion in the last fiscal and Rs 1.6 billion in the first month of this fiscal, shows the NRB report.
INDIA’S JANUARY RESTRICTIONS
- In January 2020, the government brought refined palm oil imports under the restricted list, which required importers to get DGFT permission to bring them into the country.
- Before that, palm oil, one of the cheapest sources of cooking oil, could be imported freely on payment of import duty. Also in February, the government raised import duty on crude palm oil to 44 per cent, while refined oils’ duty is 54 per cent.
NEPAL’S BENEFITS
- Since refined Palm oil imports were restricted in India Nepal enjoyed the exemption
- Nepal further enjoyed benefits under the South Asian Free Trade Agreement (SAFTA)
SOUTH ASIAN FREE TRADE AREA
- The South Asian Free Trade Area (SAFTA) is an agreement reached on January 6, 2004, at the 12th SAARC summit in Islamabad, Pakistan.
MISUSE OF THE SAFTA
- Traders use the SAFTA to reroute palm oil through Bangladesh, Nepal into India. The Solvent Extractors’ Association of India (SEA), the apex body of the vegetable oil trade, has called upon the government to look for ways to end indirect sourcing of palm oil and soyoil from Nepal and Bangladesh under cover of the South Asian Free Trade Agreement (SAFTA).
RECENT MEASURES IN MAY 2020
- India has cancelled permission to import over three lakh tonnes of refined palm oil from Nepal and Bangladesh under the South Asian Free Trade Agreement (SAFTA) as both neighbouring countries don’t produce the commodity.
- The government has taken this step as some commodities such as palm oil, spices and tyres can be imported duty-free under SAFTA into the country but the provisions are being misused.
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