Is the highest exporting commodity of Nepal sustainable?

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Reducing trade gap has been one of the major problems for Nepal. Nepal depends on India and other countries for almost everything. Products of daily usage and machinery items are imported in large quantities. For the fiscal year 2076/77, Nepal had total trade for 1,294.51 billion nepali rupees in which import shared 92.5% and export just 7.5%. This has widen the trade gap with export import ratio of 1:12.2 (TEPC, 2021).

In spite of the huge trade gap, it is a slight improvement comparing to export-import ratio of last fiscal year which was 1:14.6. One of the contributing factors in this improvement was export of Palm oil. Palm oil was the highest export commodity in fiscal year 2076/77 worth Rs. 18.3 billion contributing to 18.75 % of total export of Nepal (TEPC,2021).

Condition of trade of Palm Oil in Nepal

Export in 2075/76

Commodity

Quantity(kg)

Export value (Rs. 1000)

Crude palm oil

Palm Oil (excluding crude oil)

And its fractions, refined or not but not chemically altered

95,664,664

103,330,051

Import in 2075/76

Commodity	Quantity(kg)	Import value (Rs. 1000)
Crude palm oil	168,844,515	11,861,892.69
Palm Oil (excluding crude oil) And its fractions, refined or not but not chemically altered	12,144,791	995,766.68
Palm kernel or babassu oil (excluding crude oil and fractions), refined or not but not chemically modified	981,411	126382.55
Palm hearts	2,179	184.76

Although Palm oil is the highest commodity of export from Nepal, production of crude palm in Nepal is zero. Indonesia led the table of high palm exporters with an export volume of about 27.5 million metric tons followed by Malaysia with 16.3 million metric tons of export in 2019/20.

Nepal imports Crude Palm oil from Indonesia, Malaysia and Thailand. Imported crude oil is then processed in Nepal using different chemicals and export to India. India was the highest country to import palm oil in 2019 (statistia, 2019).

Palm oil refining process

Story behind the rise of Palm oil

The palm business flourished in Nepal after India imposed 40% tariff on Palm oils from foreign countries in order to promote local refiners. But the South Asian Free Trade Area agreement permits import and re-export with lower duty rates or at zero rates, giving an advantage to Nepali Palm oil traders. So, the palm refining industries emerged in Nepal.

The Palm export business is not as stable as it seems. Although, Nepal and India have very good relation from the ancient time but recent trade embargo imposed by India and border issues between two countries have developed a no trust situation. India has been suspending import license of Indian traders time to time to protect domestic industry.

After the launch of Make in India, India plans to promote domestic goods receiving investments and reducing foreign imports. Nepal depends on its neighboring country India for economic activities and trade routes to global market through sea. But India has been imposing restrictions on Nepal’s excess to other foreign countries, trade embargos and suspension of agreements. (Chand, 2018)

In the nutshell, the quicker the export line surge up, so will be the fall. The chain is not at all a sustainable solution to reduce trade gap. According to an official of Commerce Ministry, “Such types of trade do more harm than good to the country. Foreign currency goes out of the country and the only beneficiaries are traders—both in Nepal and India.” The following suggestions can come in handy in finding sustainable solutions.

Promotion of local products

We do have for lots of flora and fauna that are rare in the world. Their multiplication, export and display can earn us huge currencies. For example, we have native marshi rice variety, Chyuri products, yarshagumba and wild berries that are yet to be discovered. Government should explore and invest on promoting local products.

Value addition to existing products

The main reason farmers are underpaid is because they are poor and they cannot afford value addition expenses. They are very aware that value addition will increase their profit margin by a huge number. But they have to stop their contribution till harvest only because of their economic status, their knowledge and absolutely no use of technology. So, young minds should get into the agri-business.

Yield increasing strategies

We are unable to produce the required amount of food supply we need i.e. we lack food security and our country is under food hunger. The best way that we can think of is by increasing productivity. So, how can we do this? The answer is very common as we always say, create awareness, government must act and so on. But being specific, as of the present condition what the country can do is supply good quality seed and make timely availability of fertilizers to farmers.

We are in the country, where production increases due to timely rainfall. Looking at this condition, I can say we have huge prospects and dreams in agriculture. Because our agriculture is slowly moving from substantial to commercial. So, we are waiting for the day when our products will be famous with “made in Nepal” tag in the whole world.