India’s Delay on Petroleum Pipeline Subsidy Agreement with Nepal Raises Concerns

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KATHMANDU, March 26: According to the agreement to build two petroleum pipelines and a fuel storage facility, India has refused to give a subsidy of about Rs 17 billion. According to the agreement with the Government of India last May, the Indian Oil Corporation (IOC) has hesitated to proceed with the project with subsidies. IOC is a Government of India-owned company.

Despite several discussions between the officials of Nepal Oil Corporation (NOC) and IOC to implement the project, the project could not proceed after IOC hesitated to provide the grant. According to the agreement, Amlekhgunj-Chitwan Petroleum Pipeline, Siliguri-Jhapa Petroleum Pipeline and Greenfield Terminal at Charali in Jhapa should be constructed by IOC with subsidy.

The construction cost of this project is around Rs 17 billion. Similarly, there is a plan to build a Greenfield terminal at Lothar in Chitwan with the investment of the NOC with the technical support of IOC.

During Prime Minister Pushpa Kamal Dahal’s visit to India in May, the two governments signed a joint venture agreement to build two pipelines and one Greenfield terminal (storage house) with subsidies from IOC. In the presence of Prime Minister Dahal and his Indian counterpart Narendra Modi, the then Industry, Commerce and Supply Minister Ramesh Rijal and Indian Petroleum Minister Hardeep Singh Puri signed the agreement.

Before the agreement, the then Secretary of the Ministry of Industry, Commerce and Supply Madhu Marasini, Joint Secretary Radhika Aryal and the then Executive Director of the NOC Umesh Kumar Thani took the stand that the project would not go ahead without the grant, the Indian side agreed to build it with a grant.

Regarding the issue of Funded by India being mentioned in the agreement, the IOC official has now put forward a proposal that the NOC should pay for 10 to 25 years. The project could not be implemented after the officials of the NOC took the stand that it should be built with a subsidy.

A senior official of NOC mentioned they are currently deliberating on proceeding with the project under IOC’s subsidy. “According to the agreement, our position is that IOC should construct it with a subsidy,” the official stated. He added, “Now, IOC is suggesting we determine over how many years we would pay, and they are proposing a per-liter payment scheme.”

It was agreed to take the project to the implementation stage within six months of the agreement. According to the NOC, despite four meetings with IOC officials on this matter, the matter of proceeding with the construction has not been finalized. The spokesperson of NOC, Manoj Thakur, said that the project could not go ahead because the matter of investment had not been decided.

“It is the corporation’s position that it should be done through grants,” said spokesperson Thakur adding, “it should be decided from the ministry level of the two countries.” According to a joint study conducted by the IOC and the NOC in 2020, the construction cost of the Amlekhgunj-Chitwan petroleum pipeline is about Rs 4.38 billion, Rs 4.6 billion for Siliguri-Jhapa petroleum pipeline, and Rs 8.3 billion for the Greenfield terminal construction at Charali in Jhapa.

This project is planned to be built with the investment of IOC and the Greenfield terminal of Lothar in Chitwan with the investment of the NOC at a cost of around Rs 9.88 billion. Estimated in 2020, the cost is estimated to increase now.

It is planned to make the capacity of Jhapa fuel storage terminal 42,000 kiloliters and the capacity of Lothar terminal 103,150 kiloliters. After the construction of the Motihari-Amlekhgunj petroleum pipeline with the help of IOC with the investment of the NOC, diesel is now being imported from India through the pipeline.

Although the issue of building a petroleum pipeline between Nepal and India has been raised for a decade and a half, the Motihari-Amlekhgunj pipeline was put into operation on September 10, 2019. After seeing dozens of advantages of importing petroleum products through pipelines, the NOC is going to start construction of new pipeline projects.

Construction of the pipeline helps to save the transportation cost, maintain the purity of the petroleum products coming to Nepal and control leakages. Bringing petroleum through pipelines not only makes it cheaper, but also prevents theft, leakage and adulteration. The problem of traffic jams during oil tanker movement will also be solved and environmental pollution will also be reduced.

The Siliguri-Jhapa Pipeline will cover the demand of Eastern Nepal and even Koshi Province. As the currently operational Motihari-Amlekhgunj petroleum pipeline cannot meet the demand of the country, the NOC is going to construct this pipeline to cover the eastern part.

About 35 km of the Siliguri-Jhapa pipeline is in India and 15 km in Nepal. Even now, the NOC is transporting petroleum products required for Koshi region from Barauni and Siliguri in India. After building the pipeline, fuel will become cheaper.

India has already provided supply to many of its territories by building pipelines. NOC officials say that since the pipeline has been connected to Siliguri, it is easy to extend it to Jhapa. It has also purchased land in Jhapa to build a fuel storage site.

The petroleum pipeline brought to Amlekhgunj is going to be extended to Chitwan. The country’s capital, Kathmandu, and another major city, Pokhara, consume the most petroleum products. Therefore, to reduce the transportation cost in these areas, it is planned to build a petroleum pipeline up to Lothar in Chitwan.

After bringing the pipeline from Amlekhgunj to Chitwan, it is expected to facilitate the sale and distribution of petroleum products in the country in the long term.

 

Source: Republica