Nepal's trade data of fiscal 2020-21 was reminiscent of the trade figures of fiscal 2019-20, in the sense that the country's top export commodity was an item not produced locally.

The macroeconomic update report for the last fiscal unveiled by Nepal Rastra Bank last week showed the country exported soyabean oil worth Rs 53.65 billion - 38 per cent of the total exports worth Rs 141.12 billion. The central bank report for 2019-20, on the other hand, showed that Nepal exported palm oil amounting to Rs 18.32 billion, comprising 18.7 per cent of the total exports of Rs 97.71 billion.

Interestingly, both these commodities are imported in the raw form from various countries, refined here and exported.

While the practice in itself is not illegal as long as it conforms with the agreement with the trading partner, the fact that the final produce was exported primarily to India means the trade is heavily reliant on the policies of the southern neighbour.

"We have not conducted any extensive study on the matter, but the trend is clearly unsustainable as we saw in the case of palm oil," said Prakash Kumar Shrestha, executive director of Economic Research Department at NRB.

Although it was the top export category for fiscal year 2019-20, palm oil dropped off the list after the Indian government placed refined palm oil in the 'restricted' import category in January last year in a bid to protect local refiners.

Although not in the top 20 list for the first six months of fiscal 2020-21, soyabean oil export suddenly soared to a whopping Rs 19.59 billion by the seventh month (mid-January to mid-February this year), a surge of 229.5 per cent compared to the same period of the previous fiscal, and 28 per cent of the total exports.

In June-end, India announced it was allowing import of refined palm oil for six months. Not surprisingly, refined soyabean oil and refined palm oil became the top Nepali export items for the first month (mid-July to mid-August) of the current fiscal, as per the Nepal Foreign Trade Statistics compiled by the Department of Customs.

"Due to lack of genuine industrialisation, our exports are neither based on domestic resources nor focused on higher value addition to products that would ensure competitive strength," explained Dilli Raj Khanal, an economist. He said possible misuse of trade treaty with India has been flagged time and again and reforms of industrial policy and other related areas, not to mention exploration for market diversification, may be long overdue.

Officials of Federation of Nepalese Chambers of Commerce and Industry - the largest umbrella organisation representing the private sector - did not respond to requests for comment.

In response to THT's queries, B V Mehta, executive director of The Solvent Extractor's Association of India, said in an e-mail, "We had drawn attention of the Indian government to excessive import of refined soybean oil hurting domestic refining industry and trade and had requested appropriate measures."

The Ministry of Industry, Commerce and Supplies, meanwhile, seemed keen to dismiss the matter as a 'non-issue'. "Our traders are complying with the criteria set in the trade agreement and we have not had any correspondence regarding this matter from our Indian counterparts," said Narayan Prasad Regmi, spokesperson for MoICS, further suggesting 'proper research' before fielding additional queries.

A version of this article appears in the print on August 31 2021, of The Himalayan Times.