India’s edible oil imports rose 3% year-on-year to 166.51 lakh tonnes in FY26, according to data released by the Solvent Extractors’ Association of India (SEA). While the increase appears moderate on the surface, industry attention has shifted toward the sharp rise in duty-free imports routed through Nepal, which has become a significant channel for refined edible oil shipments into the Indian market.

The latest import trend comes at a sensitive time for India’s agri-commodity and food processing sectors, where policymakers have been encouraging higher domestic oilseed production under the National Mission on Edible Oils and other self-reliance initiatives. Instead of a broad-based surge in consumption demand, industry executives suggest the increase was disproportionately influenced by arbitrage opportunities created through regional trade agreements.

According to the industry body, refined soybean oil formed the largest component of Nepal’s exports to India during the fiscal year. Smaller quantities of sunflower oil, RBD Palmolein and rapeseed oil were also imported through the neighbouring country. Under existing trade arrangements, Nepal enjoys preferential access for certain products entering India, allowing shipments to enter with lower or zero duty structures under qualifying conditions.

The issue has become increasingly important for Indian refiners because refined edible oils entering through Nepal can directly compete with domestically processed oils. Industry participants argue that this impacts utilisation levels at local refining facilities, particularly when global edible oil prices remain volatile and margins are already under pressure.

India remains one of the world’s largest importers of edible oils, relying heavily on overseas supplies to meet domestic consumption demand. Palm oil is largely sourced from Indonesia and Malaysia, while soybean and sunflower oils come from countries including Argentina, Brazil, Russia and Ukraine. Any change in import flows therefore has direct implications for India’s food inflation trajectory, trade balance and agricultural policy planning.

The rise in imports through Nepal also highlights a broader policy challenge for the government. While India has periodically adjusted import duties on crude and refined edible oils to balance consumer inflation and farmer interests, duty-free entry routes can dilute the effectiveness of such tariff measures. If refined oils continue to enter through preferential trade channels in large quantities, domestic processors may face pricing pressure even when tariff protections exist on direct imports.