Nepali manufacturers find themselves in a quandary

Birgunj, August 3:

Nepali ghee manufacturers were jubilant at the announcement by minister for finance Dr Ram Sharan Mahat to bring down export duty by 50 per cent, from an earlier eight per cent to four per cent.

But their joy did not last long as just before its implementation, India has slashed import duty on palm oil.

India on July 23 fixed a 45 per cent duty, a reduction by five per cent, on the import of palm oil, the raw material used to produce vegetable oil.

Mahat had slashed the export duty to four per cent from eight per cent. The reduction meant that the price of vegetable ghee would come down by Rs 6.40 per kg, manufacturers said.

“Rise in palm oil price and a minimum difference on customs duty between the two countries have made vegetable ghee export very challenging”, director of Narayani Refinery Shrawan Chachan said.

Price of vegetable ghee per jar containing 15 kg in the Indian market is Rs 720. The same costs Rs 625 in the local market. Transportation cost, the commission of India’s State Trading Corporation (Rs 1,800 per metric tonne) and state governments’ tax have made vegetable ghee export competitive, ghee exporters said.

Although transportation cost is not high, a major chunk of the profit goes to pay state governments’ tax in India.

Bihar and UP government charge 12.6 per cent and 21 per cent respectively, as tax liable to the state government.

India has allocated Nepal a maximum of 100,000 metric tonne as the export limit. On the other hand, another south asian neighbour is given a quota of 2,50,000 metric tonne. Attracted by the huge quota, some Nepali industrialists have started ghee manufacturing venture in Sri Lanka itself.

Vegetable ghee export from Birgunj during the last fiscal year compared to the preceding fiscal year declined by 25.24 per cent. 58,905 metric tonnes of vegetable ghee was exported in the fiscal year 2063-64, customs office said.

Of the total of 16 vegetable ghee manufacturing industries, Narayani Refinery, Sri Krishna Oil, Annapurna Vegetables, Arati Refinary, Shiv Shakti Ghee, Sushil Banaspati, Ganapati Ghee and Nandal Ghee are in operation.

Chaudhary group stopped its plan to embark on vegetable ghee manufacturing venture after it found the Indian market not very lucrative, a source said.