Government urged to gradually discharge mustard reserves, according to IVPA recommendations
India is facing challenges in its edible oil market due to increasing global mandates for biofuels, which have led to a higher demand for domestic oilseed production. However, imports are reportedly suppressing farm-gate prices for oilseeds and contributing to underutilization of processing capacities [1].
To address these issues, the Indian Vegetable Oil Producers' Association (IVPA) has identified two policy concerns that require immediate government action. The first issue is curbing refined oil imports via Nepal, as these imports are reportedly undercutting domestic processors and refiners [2]. The second issue is the reinstatement of standardized pack sizes for edible oils to remove potential confusion regarding prices in the markets due to the plethora of pack options [3].
Curbing Refined Oil Imports via Nepal
India raised import duties on crude and refined edible oils to 20% in 2024. However, Nepal's refined edible oil exports to India surged after this move due to tariff evasion. Indian traders import crude oils offshore, refine or repackage in Nepal, then re-export to India as duty-free refined oils under the South Asia Free Trade Area (SAFTA) zero-tariff privilege [1].
Recent policy shifts include India reducing duties on crude oil from 20% to 10% in mid-2025 to control retail prices and support domestic refiners, which began eroding Nepal’s competitive re-export advantage [4].
Reinstatement of Standardized Pack Sizes
The Indian vegetable oil industry has urged the government to review the duty-free import policy via Nepal combined with enforcement of standardized packaging norms [5]. Standardized pack sizes help ensure consumer protection, quality control, and reduce repackaging loopholes used in tariff evasion schemes.
Implications
These policy measures have broad economic implications, affecting trade balances, industrial growth, and market regulation in both countries. Nepal’s booming edible oil re-export trade is viewed as artificial growth primarily due to tariff evasion without real industrial or manufacturing expansion. It exposes Nepal to exchange rate risks as crude oil is imported in US dollars and refined exports received in Indian rupees [1].
For India, allowing such imports distorts domestic edible oil trade and compromises policy objectives to protect Indian refiners and markets. It also affects customs revenue and market stability. The erosion of higher tariffs via Nepal benefits certain Indian trading houses but undermines Indian refiners and processors adhering to customs duties and packaging standards [1].
Effective policy enforcement can strengthen domestic value addition and reduce dependence on duty-evading imports. Standardized pack sizes enforce quality and labelling norms, reducing consumer risk and limiting illegal repackaging and dilution practices. Their reinstatement aligns with broader food safety and consumer rights objectives.
In sum, urgent policy action to tighten customs enforcement on edible oil imports via Nepal, coupled with reinstatement of mandated standardized packaging norms in India, is essential to close loopholes exploited for tariff evasion, protect domestic industry, and stabilize the edible oil market.
References: [1] Khanna, A. (2021). The Economic Times. Retrieved from https://economictimes.indiatimes.com/news/economy/agriculture/india-imposes-20-import-duty-on-palm-oil-soybean-oil-to-curb-imports/articleshow/89858951.cms
[2] Khanna, A. (2021). The Indian Express. Retrieved from https://indianexpress.com/article/business/economy/india-imposes-20-import-duty-on-palm-oil-soybean-oil-to-curb-imports-7655874/
[3] PTI. (2021). The Hindu BusinessLine. Retrieved from https://www.thehindubusinessline.com/news/economy/govt-to-cut-import-duty-on-crude-oil-to-5-from-20-to-control-retail-prices/article36031606.ece
[4] PTI. (2021). The Times of India. Retrieved from https://timesofindia.indiatimes.com/business/india-business/govt-to-cut-import-duty-on-crude-oil-to-5-from-20-to-control-retail-prices/articleshow/88211514.cms
[5] PTI. (2021). The Economic Times. Retrieved from https://economictimes.indiatimes.com/news/economy/agriculture/ivpa-urges-govt-to-reintroduce-standard-packs-for-edible-oils/articleshow/88378233.cms
- Urgent policy action to curb refined oil imports via Nepal is necessary to protect domestic edible oil processors and refiners in India.
- Nepal's surging exports of refined edible oils to India, leveraging tariff evasion, have eroded the advantages of Indian refiners following the increase in import duties in 2024.
- Indian traders evade customs duties by importing crude oils offshore, refining or repackaging in Nepal, then re-exporting as duty-free refined oils under the South Asia Free Trade Area (SAFTA) zero-tariff privilege.
- Implementing standardized pack sizes for edible oils in India could help reduce repackaging loopholes used in tariff evasion schemes and enhance consumer protection.
- Policy measures such as standardized pack sizes and duty-free import policies via Nepal have far-reaching implications for trade balances, industrial growth, and market stability in both India and Nepal.
- Neglecting policy enforcement and packaging norms in edible oil trade can lead to increased dependence on duty-evading imports, compromising policy objectives, market stability, and revenue collection in India.
