Indian Oil will increase fuel supplies to Nepal

Nepal has signed a deal with China for supply of petroleum products to tide over acute fuel shortages caused by the blockage of land routes from India

Indian Oil Corporation (IOC), the nation’s largest fuel retailer, said on Thursday that it would expand supply of petroleum products to Nepal. This came a day after Nepal’s government-owned petroleum company signed an agreement with China to tide over the acute fuel shortage caused by the blockage of border points with India, due to protests by local communities.

“We have a four-decade agreement with Nepal. Supplies have come down recently as a few routes are blocked but we are continuing to supply to them and are hopeful of increasing supplies once the protests subside,” IOC Chairman B Ashok told Business Standard.

Wednesday’s agreement between Nepal Oil Corporation (NOC) and China National Unified Fuel Corporation brought to an end IOC’s status for a little over 40 years as sole fuel supplier to Nepal. China has committed to supply 1,000 tonnes as a grant and agreed to negotiate a long-term commercial agreement with NOC for future supply.

China would, it appears, take away a third of India’s export volume of petroleum products to Nepal. It presently supplies around 1.3 million tonnes of petroleum products there, worth around Rs 9,000 crore annually. This includes petrol, diesel, kerosene and cooking gas, transported from IOC refineries in northern and eastern India to NOC’s depots across the border.

Disruption in fuel supply from India began following the dispute between Madhesi parties and major national parties over Nepal’s new Constitution. An eight-member Nepali delegation had reached Beijing on Monday to discuss fuel supplies. The same day, China announced it would help Nepal as a friendly neighbour “to relieve its shortage”.

Nepal’s snub to India comes a week after their new prime minister, K P Sharma Oli, sent his foreign minister, Kamal Thapa, to India to reset ties soured by tensions over the issue of equal rights for Madhesis in the new Constitution.

On Monday, an eight-member Nepali delegation had reached Beijing to discuss the modalities of fuel supply. The same day, Chinese foreign ministry announced China would help Nepal as a friendly neighbour to "relieve its shortage of fuel supply".

Beijing has agreed to send about 1,000 tonnes of fuel in grant and has signed an MoU with Nepal Oil Corporation for a long term commercial deal. NOC is making arrangements to bring the supplies to Kathmandu over the weekend.