India and Nepal on 27 March 2017 signed an agreement to renew the supply of petroleum to Nepal for five years. The renewed MoU was signed between Indian Oil Corporation Ltd (IOCL) and Nepal Oil Corporation (NOC) for another five years.
The Indian Oil has been supplying petroleum and associated products to Nepal since 1974.
Highlights of the renewed petroleum trade pact
• With this renewal, the state-owned Indian Oil Corp (IOC) will supply about 1.3 million tonnes of fuel annually to Nepal with a promise to double the volume by 2020.
• India also agreed to extend the Raxaul- Amlekhganj product pipeline to Chitwan. It had promised to start work on the project in 2017-18. At present, the work on the pipeline was hanging since 2006.
• India has announced to constitute a high-level official committee. This committee will look into Nepal’s demand for an LPG pipeline between Amblekhhanj and Motihari. It will also look after the extension plan of the natural gas pipeline from Gorakhpur into Nepal.
Renewal of the petroleum supply agreement between the two companies was needed because the existing pact was supposed to expire on 31 March 2017. The new agreement will come into effect from 1 April 2017 and will expire on 31 March 2022.
The Ministry of Petroleum and Natural Gas statement said, “The agreement is an umbrella document between the two parties which apart from detailing the supply of petroleum, oil and lubricant products and also puts in place an institutional mechanism for cooperation in the areas of additional services and technical assistance between the two”.
The signing of the revision pact between IOCL and NOC was overseen by Minister of State for Petroleum and Natural Gas Dharmendra Pradhan and his Nepali counterpart Deepak Bohra.
At present, the two nations are working towards deepening engagement in the oil and gas sector including construction of Motihari-Amlekhgunj Pipeline. Once completed, the pipeline will help in uninterrupted supply of petroleum products to Nepal.
Comment: Revision of the petroleum supply-pact along with the promise to meet domestic demand of almost all petro products was signed by India to stop China from entering into India’s neighbourhood. As earlier in March 2015, the former Government of Nepal led by KPS Oli had signed a commercial pact with China under which the latter would have supplied petroleum products to Nepal. However, the pact failed to come into light after Oli resigned as Prime Minister of Nepal.