Nepal will be funding 27 percent of the total estimated cost to develop the proposed 41km Amalekhgunj-Raxaul petroleum pipeline, according to the final draft prepared by the joint-committee meeting of Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC).
Of the total estimated cost of Rs 4.40 billion, the Indian government will extend Rs 3.20 billion in grants, while the rest will be mobilised by Nepal.
According to NOC, the committee has forwarded the final draft with the revised investment proposal and recommendation to their respective governments.
The Indian government had pledged constructing the much-delayed pipeline project in grants.
However, the financial modality was revised after Finance Minister Ram Sharan Mahat expressed concerns that Nepal should also share the project costs.
NOC Managing Director Chandika Prasad Bhatta said that the pipeline construction cost has also been revised to Rs 2.40 billion. Earlier, it was estimated to cost Rs 4 billion, including land acquisition.
Meanwhile, Bhatta said Rs 2 billion would be mobilised to upgrade infrastructure, including capacity enhancement, at NOC’s Amalekhgunj depot.
The draft has been sent to the Ministry of Commerce and Supplies. Once the Cabinet approves the proposed draft, the two governments will sign the agreement.
NOC said it had also proposed IOC to allow private sector players to use the pipeline’s products.
The joint team has also revised the project cost, which was previously estimated to cost around Rs 9 billion, including the Amalekhgunj depot automation. But it was reduced as the joint team agreed to use the shortest route to lay the pipeline. Of the three proposed routes for construction, both sides have agreed to construct the road-to-road alignment that includes laying the pipeline along the 26km Amalekhgunj-Pathlaiya road and 12km forest areas.
IOC had proposed building the cross-border pipeline in 1995. A memorandum of understanding was signed between NOC and IOC in September 1996 at the junior-executive level. In 2004, the two sides struck another deal at the chief executive level.
The much-delayed project picked up pace after Indian Prime Minister Narendra Modi, during his Nepal visit in the first week of August, promised to build the pipeline.
The pipeline is expected to reduce transportation costs by as much as 50 percent, control leakage and ensure hassle-free transfer and quality of petroleum products.