Oct 12, Kathmandu-  The Indian government has cut customs duties on crude oil imports of palm, soybean and sunflower by more than two levels with effect from Wednesday.

India has reduced tariffs on crude palm oil by 16.5 per cent and sunflower and soybean oil by 19.25 per cent. After this reduction, Nepal's oil industry, which exports by taking advantage of the customs difference, will be affected.

Crude oil imported from third countries was processed and exported to India. Nepal's oil industry has been booming for the past three years due to India's high tariffs. Some were expanding the industry's capacity by looking at the Indian market, while others were pushing ahead with the process for setting up new industries.

The possibility of oil export from Nepal has almost disappeared after India reduced customs duty. According to businessmen, India's new strategy has affected about Rs 70 billion in exports. This is India's second reduction in crude oil tariffs in a month. A month ago, the customs duty on all three crude oil was reduced from 30 percent to 24.75 percent.

India has reduced its crude oil tariff for the second time to control rising prices and provide relief to the general public. According to the new notification, the import duty on crude palm oil in India has been reduced from 24.75 per cent to 8.25 per cent. Similarly, India has revised the tariff on soybean and sunflower oil from 24.75 per cent to 5.50 per cent.

Bipin Kabra, treasurer of the industry association Morang and operator of Kwality Oil Refinery, said that India's new decision would affect Nepal's export of edible oil. He claimed that even if Nepalese refineries use bank guarantee or passbook facility in the raw material imported for export, the raw material imported by Indians after paying customs duty would be cheaper.

"We don't have to pay any revenue when we import crude oil under the bank guarantee and passbook facility," argued Treasurer Kabra. Since Indian buyers buy raw materials in bulk, the raw materials they pay are cheaper than the raw materials we do not pay revenue. So our exports are likely to be affected. Now refined oil will be cheaper in India than in Nepal. '

Amit Sharda, operator of Pashupati Edible Oil Industry, said that although it would take time to calculate the impact on exports, according to a preliminary study, exports could not take place. "It is not uncommon for tariffs to be cut by more than two levels," said Sharda. "The government of Nepal needs to move in the same direction. We are often slandered for raising oil prices. But the Indian government has been forced to reduce tariffs due to excessive international inflation.

The price of crude palm oil imported from Indonesia and Malaysia is currently 1,350 per tonne. Just a month ago, it was priced at 1,180. The price of crude sunflower oil imported from Argentina, Brazil and Ukraine is 1,485 per tonne from 1,300 a month ago.

The price of crude soybean oil imported from Argentina, Brazil and Ukraine has also reached 1,420 per tonne. A month ago, it was priced at Rs 1,250, Sharda said.