Indian Oil Corporation (IOC) has agreed to Nepal’s proposal of a five-year oil supply contract agreement, paving the way for the construction of the much-delayed Nepal-India petroleum pipeline. Earlier, the IOC had been insisting on a 15-year agreement.
A senior official at Nepal Oil Corporation (NOC) said the IOC, about two weeks ago, agreed to Nepal’s proposal in a draft Memorandum of Understanding (MoU), which the NOC has forwarded to the government.
Receiving the draft, the Ministry of Commerce and Supplies has started consultations with the Ministry of Finance and Ministry of Foreign Affairs, the source said. Proposing a five-year contract, the NOC had argued it would be difficult for if it had to award the oil supply contract to suppliers other than IOC in future. Currently, the two countries review the supply agreement every five years.
The long-awaited project got momentum after Indian Prime Minister Narendra Modi’s spoke about the construction of the pipeline during his Nepal visit in August.
The IOC has agreed put in IRs 5.5 billion for the construction of the 41-km pipeline that will supply petroleum products from IOC’s depot in Raxaul to NOC’s depot in Amlekhgunj.
Of the total cost, pipeline construction and land acquisition costs are estimated at IRs 2.5 billion. Rest of the funds will be used for other work, including capacity upgradation of NOC’s Amlekhgunj depot, its automation, and construction of a pumping station.
A pre-feasibility study in 2004 and a technical study in 2006 had determined the bilateral pipeline project to be economically viable, provided it is operated unhindered for 20 years.
The project, which was first proposed by IOC in 1995, is expected to reduce the transportation cost of fuel by over 50 percent. It is also expected to end the frequent shortage of petroleum products due to strikes of petroleum transporters.