Duty-free edible oil imports from Nepal hit 804,295 metric tons in 2025, a 548% jump that has alarmed Indian industry bodies. The surge threatens domestic refiners and farmers due to tariff advantages under existing trade treaties. The Indian Vegetable Oil Producers' Association has urged the government to review these agreements to protect local refining capacity and tax revenue.
The Indian edible oil industry is facing intense pressure as imports from Nepal have seen a sharp and rapid increase. According to data highlighted by the Indian Vegetable Oil Producers' Association (IVPA), imports of edible oils from Nepal rose to 804,295 metric tons (MT) in 2025, compared to 124,056 MT in 2024 and 47,295 MT in 2023. This rapid growth trend has sparked concerns among domestic manufacturers regarding fair competition and long-term sector viability.
Trade Agreements and Tariff Disparity
The primary driver of this influx is the preferential trade status granted under the South Asian Free Trade Area (SAFTA) and the India-Nepal Trade Treaty. These agreements allow vegetable oil imports from Nepal to enter India with zero customs duty. Because domestic Indian refiners must import crude oils and pay applicable duties, Nepalese producers hold a structural cost advantage. The IVPA estimates that the value addition from crude to refined oil is only about 5-7%, making the 0% tariff on finished goods a significant competitive factor.
Industry representatives have pointed out that this situation allows refined oil to be sold in India at prices that domestic refiners find difficult to match. The northern and eastern regions of India, which have a combined annual demand of roughly 3.5 million MT, are particularly affected. Estimates suggest that if the current trend continues, nearly 25% of the demand in these regions could be supplied from Nepal, displacing domestic production.
Impact on Domestic Refiners and Farmers
The surge in imports is creating multiple layers of concern for the Indian vegetable oil sector. Domestic refiners, who have invested in large-scale processing infrastructure, are seeing their capacity utilization come under pressure. Beyond the refining sector, there are concerns that the availability of cheaper imported oil could eventually impact the price realization for Indian oilseed farmers, who are already navigating challenges in a highly competitive global market.
Furthermore, the government is facing a direct impact on its tax collections. With these large volumes entering duty-free, the central exchequer is losing potential revenue that would otherwise be collected as customs duty on crude oil imports. In a representation to Union Commerce Minister Piyush Goyal on July 20, 2026, the IVPA formally requested an urgent policy review to address the imbalance caused by these trade arrangements.
Investors and stakeholders will now watch for the government’s response to these requests. Key updates to track include potential changes to tariff structures, revisions to the SAFTA framework as it pertains to edible oils, or new regulatory safeguards to ensure a level playing field for domestic refiners. Any government move to impose duties or establish import quotas could alter the current cost dynamics for regional players and impact the overall supply chain in the edible oil sector.