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Following threats by Nepal to source its cooking gas from China thereby undermining India’s exclusivity since 1974, New Delhi has rushed in to placate its neighbour by promising to meet its entire domestic demand for petro products and adding a few more sweeteners such as product pipelines and storage.
State-owned Indian Oil Corp (IOC) on Monday signed a petroleum trade agreement to supply about 1.3 million tonnes of fuel annually to Nepal with a promise to double the volume by 2020. “The supply agreement signed today is for April 2017 to March 2022 and will meet full requirements/demand and quantities of all the major oil products,” announced IOC Chairman B Ashok.
Earlier this month, Nepal Oil Corp (NOC) had warned that it was considering a new clause being inserted in the IOC-NOC agreement, due for renewal this month, to allow Nepal to import fuel from third countries if IOC was unable to ensure regular supply of petroleum products.
According to IOC sources, that threat has been warded off with the new agreement maintaining the fuel supply exclusivity to India that was started with the first agreement signed in 1974.
For this security measure against China’s entry into India’s neighbourhood, IOC also conceded marginally on marketing charges and waived the interest levied on NOC for delay in payment. It has also agreed to compensate NOC if it failed to supply products as per the demand, said sources.
After gifting fuel during the alleged six-month economic blockade against Nepal by India that began in September 2015, China was attempting to gain a toehold by offering to become an alternate supplier.
The KPS Oli government even signed a commercial pact with China to supply petroleum products during his visit to Beijing in March 2016. However, that MoU collapsed after Oli resigned as prime minister following a no-confidence motion three months later.
India on Monday also agreed to extend the proposed Raxaul-Amlekhganj product pipeline to Chitwan with the promise to start work on the pipeline in 2017-18. The project has been hanging fire since 2006 with Nepal willing to bear the expenses and IOC providing technical help.
New Delhi also announced forming a high-level official committee to look into Nepal’s demand for a LPG pipeline from Motihari to Amlekhganj as well as extending the natural gas pipeline from Gorakhpur into Nepal. Another promise is to explore the possibility of forming an IOC-NOC joint venture for creating marketing infrastructure in Nepal that would include retail infrastructure as well as storage facilities for petrol, diesel, LPG and aviation turbine fuel in remote areas.