If you look only at the headline number, Nepal's biggest export success story is soybean oil, worth Rs 128.74 billion in FY 2025/26 — more than 40% of the country's entire merchandise export total. Look one line lower in the same customs data, and you'll find Nepal imported almost exactly as much crude soybean oil as it exported in refined form. This is Nepal's re-export economy in miniature, and it's worth understanding in detail, because it explains both a genuine business success and a real structural weakness at the same time.
What's Happening: Import Crude Oil, Export Refined Oil
Nepal has essentially no commercial-scale soybean or sunflower farming. What it does have is refining capacity and a favourable tariff arrangement with India. So Nepali companies import crude soybean, sunflower, and palm oil from global producers, put it through a domestic refining process, and export the finished, bottled or bulk-packaged oil — almost entirely to India. The refining step is real: it employs people, uses real plant and machinery, and generates genuine processing revenue. But the raw material behind Nepal's single largest export category never touched Nepali soil as a crop.
The Numbers (Crude Imports vs. Processed Exports, Near 1:1 Ratio)
The Department of Customs recorded Rs 132.77 billion in crude soybean oil and related raw material imports in FY 2025/26, against Rs 128.74 billion in refined soybean oil exports — a ratio close enough to 1:1 that it's hard to argue this is anything other than a processing-and-re-export operation. Widen the lens to all edible oils (soybean, sunflower, and palm combined) and the export figure climbs to Rs 148.98 billion, or 47.3% of Nepal's total exports for the year. In the prior fiscal year, the growth rate was even more dramatic — edible oil exports reportedly surged over 1,500% in a single year as traders scaled up the model to exploit tariff arbitrage.
Why Argentina & Brazil Became Key Suppliers
Argentina and Brazil are among the world's largest soybean and soybean-oil exporters, with globally competitive pricing and established shipping routes to South Asia. Nepal's crude oil imports for this trade come primarily from Argentina, with meaningful volumes also arriving from Brazil, Indonesia, Thailand, Ukraine, and a handful of smaller suppliers. Argentina's dominance in this specific trade has been so pronounced that it single-handedly pushed the country into Nepal's top three sources of imports overall in FY 2025/26 — worth roughly Rs 116 billion — even though Nepal barely exports anything back to Argentina in return.
Why This "Export Growth" Doesn't Fix the Trade Deficit
This is the part that trips up casual readers of Nepal's trade statistics. Yes, exports are growing, and yes, that growth is real money entering the country. But because the import bill for crude oil roughly matches the export revenue from refined oil, the net contribution to closing Nepal's trade deficit is small — it's the processing margin that matters, not the gross export figure. Strip edible oil out of Nepal's total export numbers entirely, and the picture looks considerably less impressive: underlying, non-oil exports have grown far more slowly than the headline "exports up 13.81%" figure suggests.
Regulatory & Tariff Factors Behind the Trend
The entire business model rests on one regulatory gap: India imposes an import duty of around 35.75% on refined edible oils and roughly 16.5% on crude edible oils from most countries, but under the South Asian Free Trade Area (SAFTA) and the Nepal-India Trade Treaty, Nepal — classified as a Least Developed Country — enjoys zero or near-zero duty on its refined oil exports to India. That gap of over 30 percentage points is, quite simply, the entire commercial rationale for refining oil in Nepal rather than shipping crude oil directly into India for local refining.
Risks: Over-Reliance on a Single Commodity
Indian industry associations, including the Solvent Extractors' Association and edible oil manufacturers' groups, have repeatedly petitioned their government to restrict imports from Nepal, arguing that actual domestic value addition in Nepal is only around 5-7% — well short of the 30% domestic value-addition threshold SAFTA rules of origin are meant to require. If India tightens enforcement of rules-of-origin requirements, or raises the effective duty Nepal-origin oil faces, this entire export category could shrink very quickly. Given that edible oil alone makes up close to half of Nepal's total exports, that concentration risk is arguably the single biggest vulnerability in Nepal's current export profile.
Could This Model Work for Other Products?
In principle, yes — any product where Nepal enjoys a meaningful tariff advantage into a large neighbouring market, and where the processing step is genuinely worth doing domestically, could follow a similar logic. In practice, replicating it deliberately is harder than it sounds: the edible oil trade scaled up organically because refining margins were attractive and the tariff gap was large and stable. Policymakers looking to build a second version of this story would need to identify a product with a similarly durable tariff or market-access advantage, while also pushing for genuine value addition thresholds that would survive scrutiny from trading partners — otherwise they risk building another export category that inflates headline numbers without meaningfully closing the trade deficit.
FAQs
Does Nepal actually grow the soybeans it exports as oil?
No — Nepal lacks large-scale commercial soybean cultivation and imports nearly all the crude oil it refines, primarily from Argentina.
Why is soybean oil Nepal's top export if it's imported first?
Because Nepal enjoys preferential, near-zero-duty access to India for refined edible oil under SAFTA and the Nepal-India Trade Treaty, making the refining-and-re-export margin commercially attractive even though the raw material is imported.
Could India restrict this trade?
Indian industry groups have already petitioned their government to tighten rules-of-origin enforcement, arguing Nepal's local value addition falls short of SAFTA requirements — a real regulatory risk to this export category.
Does edible oil re-export actually help Nepal's economy?
Yes, to a degree — it generates real refining-sector jobs and foreign currency from the processing margin — but because import and export values are so close, its net effect on narrowing Nepal's overall trade deficit is much smaller than the headline export figure suggests.
Discussion