Indo-Nepal oil pipeline stuck over duration of agreement

Five months after India agreed to lay a pipeline from Bihar to Kathmandu for supply of petrol, diesel and ATF, the project is stuck over differences on the tenure of fuel supply.
While Indian Oil Corp (IOC), which is to invest Rs 200 crore for laying the pipeline, wants Nepal to commit to buying fuel for 15 years, the Himalayan nation is willing to sign agreement for only five years, official sources said.
The pipeline from Raxaul in Bihar to Amlekhgunj in Nepal in the first phase and to Kathmandu in the next phase, was agreed during Prime Minister Narendra Modi's visit to the Himalayan nation in August.

Seeking it as a 'gift' from New Delhi, Nepal wanted India to foot the cost of laying the project, which IOC agreed.
While IOC and Nepal Oil Corp (NOC) were in broad agreement on the modalities of execution of the project, including the funding options, the duration of the proposed Sale Purchase Agreement was a bone of contention.
IOC, they said, has maintained that the agreement should be for a period of at least 15 years but NOC wants it to be for 5 years only. It can be renewed with mutual agreement after every five years, the Nepalese firm had conditioned.

The Oil Ministry has now sought the help of Ministry of External Affairs to resolve the issue that is the main impediment in moving forward with the project, sources said.

While IOC is to fund the project, Nepal is to provide encroachment free pipeline corridor. Also, NOC will have to bear the cost for building fuel storage tanks and other facilities at Amlekhganj.
Work on the 41-km pipeline was to start this month and is targeted for completion by July 2017.
Nepal is dependent on India for meeting all of its fuel requirements. Petrol, diesel, domestic LPG and jet fuel (ATF) are currently trucked from IOC's depot at Raxaul to Nepal.

In 2006, a 41-km pipeline from Raxaul to Amlekhgunj in Nepal was proposed for transportation of the fuel. The pipeline was to be funded 50:50 by IOC and NOC. The project, however, never took off as Nepal refused to fund its share of cost.
IOC, in the meanwhile, has decided to shift its oil storage depot from Raxaul to Motihari.
The Raxaul-Amlekhgunj project was to cost about Rs 100 crore, excluding the cost of land acquisition and the new line would cost almost double of that, sources said.
Nepal is keen on the pipeline from Motihari to Amlekhganj in view of the traffic congestion and frequent complaints of pilferage and adulteration during trucking.

Of 41-km pipeline, about 39 km would lie in Nepal. At the same time, the Raxual depot would have to be upgraded and linked to the Barauni refinery through Motihari depot.