Indian traders complained again to the Indian government that a huge influx of soybean oil from Nepal in violation of South Asian Free Trade Area (SAFTA) rules of origin was hurting refineries and farmers in India.
SAFTA is the free trade agreement of the South Asian Association for Regional Cooperation of which Nepal and India are founding members.
The Solvent Extractors’ Association of India, one of the oldest vegetable oil and trading organizations, has called on the Indian government to set quotas on imports, claiming that soybean oil has become the main product of export from Nepal even if the country does not produce it commercially.
Soybean oil shipments reached 35.75 billion rupees in the first 10 months of the current fiscal year, according to the Nepal Trade and Export Promotion Center, a surge of more than four times on a sliding scale. annual.
“Nepal has violated the privileged rules of origin granted under SAFTA,” the association said.
Soybean oil exports amounted to Rs 8.36 billion in the first 10 months of last fiscal year.
Trade data from the Customs Department showed that Nepal imported crude soybean oil worth Rs 39.46 billion during the same period.
Soybean oil exports alone account for 32.96 percent of Nepal’s total trade.
The country imported 355.29 million liters of crude soybean oil during the period under review. Nepal bought most of its soybean oil from Argentina, Egypt, Paraguay and Ukraine.
In March, following a dramatic increase in exports of refined soybean oil from Nepal, the Indian government wrote to the Nepalese Ministry of Foreign Affairs to “confirm the authenticity and authenticity” of the origin criteria of the product or certificate of origin issued by Nepalese authorities for the export of edible oil to India under SAFTA.
Dinesh Bhattarai, secretary of the Ministry of Industry, Trade and Supply, told the Post that the ministry responded to most of the questions raised by the Indian government regarding the authenticity of the product’s certificate of origin through the ministry. Foreign Affairs.
He said his ministry, after proper study, investigation and discussion with relevant stakeholders, had sent evidence and data regarding the authenticity of the certificate of origin of the product, including the added value to the product to the Nepal. “The ministry has not received any further communication from the Indian government.”
Bhattarai said the export of soybean oil was done in accordance with international trade standards, but some traders had exploited the zero tariff privilege in a negative way.
“As long as it creates jobs by adding value and helps the government increase revenues, it is worth trading.” Indian traders have the right to raise concerns about the certificate of origin to their government, he added.
A certificate of origin is a document declaring in which country a product was produced or manufactured. The documents contain information about the product, its destination and the country of export.
It is required by many treaty agreements for cross-border trade and can help determine whether certain goods are eligible for import or whether the goods are subject to duties.
Tariff exemptions on Nepalese exports to India under the SAFTA agreement give an advantage to domestic traders. Countries outside of South Asia face tariffs of 54 percent on palm oil and 45 percent on soybean oil.
Proof of origin is required to request preferential tariff treatment. The government has authorized three associations – the Federation of Nepalese Chambers of Commerce and Industry, the Confederation of Nepalese Industries and the Nepal Chamber of Commerce – to issue the certificate of origin.
The Solvent Extractors’ Association of India said massive soybean oil imports from Nepal were hurting refiners in eastern and northern India and Indian farmers, in addition to causing loss of income for the government.
“This harms the interests of oilseed producers because it distorts the domestic market. Thus, the very purpose of maintaining import duties on edible oils is canceled,” the association said.
He called for setting quotas on the import of refined oils from Nepal and distributing imports by month and region so that a particular region suffers minimum impact in case it is not possible to stop. imports under the SAFTA agreement.
Nepal produces very little soybean oil, not even enough to meet its own needs. Paradoxically, this vegetable oil, which is used in cooking, is Nepal’s leading export product with shipments valued in the billions of dollars per year.
Solvent Extractors Association chairman Atul Chaturvedi told Indian media that the Union Ministry of Finance issued a notification in August 2020 to strictly regulate the import of soybean and palm oils and check the misuse of rules of origin, as soybean oil still entered India at zero duty in violation of existing rules.
“The current import duty, including tax, on refined palmolein and refined soybeans is 49.5%. This means India loses an income of around IR 54,000 [Rs86,000] per ton of refined soybean oil and around IR 44,500 [Rs71,000] per ton of palm oil from Nepal, ”he said.
In a letter sent to Piyush Goyal, Union Minister of Consumer Affairs, Food and Public Distribution and Minister of Trade and Industry, and Narendra Singh Tomar, Minister of Agriculture and Welfare- being farmers, by the Solvent Extractors’ Association, India loses revenues of over IR 12 billion [Rs19 billion] on the import of an annual average of 250,000 tons of soybean oil and palm oil from Nepal.
Strict rules of origin require Nepalese exporters to meet the 30 percent value-added requirement to qualify for duty-free treatment.
Opinions that Nepal is abusing the preferential treatment accorded by India to these imports are divided.
Shekhar Golchha, president of the Federation of Nepalese Chambers of Commerce and Industry, said that although Nepal does not produce soybeans and has exported by importing crude soybean oil, the export of soybean oil is carried out in accordance with trade rules and the legal framework.
“We have been told by the petroleum processing industry that there is an added value of over about 20 percent. I believe that agricultural products with more than 20% added value are allowed to benefit from preferential treatment, ”Golchha told the Post. “Raising issues on every product by Indian traders will make no sense in bilateral trade relations.”
Trade expert Posh Raj Pandey, however, said it was an abuse of the preferential treatment accorded by India to Nepal under SAFTA rules.
“Domestic traders exploit the difference in tariffs imposed on raw materials in Nepal and India upon importation,” he said. “The government should not promote such business practices to earn a little revenue. The government must immediately take control and make domestic products competitive instead. ”
Pandey said the added value should be strictly controlled by checking the difference between the price of raw materials and the price of the product.
“The government is happy to have reached the commercial export target of Rs 100 billion set ten years ago, but if the export of soybean oil is removed from the commercial list, then the export will experience. negative growth, ”he said.