Pipeline pact snags on contract period
KATHMANDU, JAN 06 -
A planned agreement on laying an oil pipeline between Nepal and India has snagged on differences over the period of the supply contract, Indian media reports said. The proposed pipeline will be 41 km long and link Amlekhgunj and Raxaul.
Indian Oil Corporation (IOC) has said that Nepal should pledge to buy petroleum products from it for 15 years, but Nepal Oil Corporation (NOC) wants to continue with the present five-yearly pact. The two countries review the supply agreement every five years.
On April 27, NOC and IOC signed a new petroleum supply pact valid till March 31, 2017. The pact confirms IOC as the sole exporter of the products to Nepal for the next five years.
According to Indian media reports, the Indian Oil Ministry has sought the help of the External Affairs Ministry to resolve the matter that is holding up the project. The reports said that the construction of the pipeline would start this month and be completed by July 2017.
NOC Spokesperson Mukunda Prasad Ghimire said Nepal had proposed to buy fuel under the existing five-yearly supply pact and that it could be renewed with mutual agreement. “As petroleum has always been a political commodity, a long-term arrangement would be problematic.”
According to NOC officials, a long-term agreement with a single company would prevent Nepal from importing fuel from other sources, including other Indian oil marketing companies, and scouting for cheaper suppliers. IOC has been supplying fuel to Nepal since 1974 when the two countries signed a Petroleum Supply Agreement to start petroleum trade. As per the pact, Nepal has to buy all its petroleum products from IOC.
Nepal imported petroleum products worth Rs 134 billion in 2013-14, up from Rs 111 billion in 2012-13.
As IOC plans to shift its depot from Raxaul to Motihari and the cost of building the pipeline is expected to go up, Ghimire said IOC had agreed to extend the pipeline to Motihari from Raxaul at its own expense.
The cross-border pipeline to Amlekhgunj is the first phase of the project. Under the second phase, the pipeline would be extended to Kathmandu as agreed during Indian Prime Minister Narendra Modi’s visit to Nepal last August.
Of the total estimated cost of Rs 4.40 billion, the Indian government will provide a grant of Rs 3.20 billion while the rest will be mobilized by Nepal. The two countries have agreed to construct the pipeline in a road-to-road alignment which means it will be laid alongside the 26-km Amlekhgunj-Pathlaiya road and pass through 12 km of forests.
Source: The Kathmandu Post
