Ending Indian oil monopoly in Nepal

KATHMANDU, Nov. 27 : In an unprecedented development, China and Nepal signed two fuel related agreements on October 28 under which Nepal is getting 1.3 million litres of petrol in grant from China. As per the deal, Nepal will from now on import one third of its oil needs from China.

It is the first time that Nepal is going to import oil from China for commercial purposes, marking an end of India’s four decades long monopoly over Nepal oil market.

State-owned Nepal Oil Corporation (NOC) which signed the deal with PetroChina, (Chinese state-owned oil company) said that they are moving ahead in a fast-track mechanism to conclude the commercial deal which would give some relief to the tiny landlocked Himalayan republic reeling under severe crisis of fuel and other essential commodities as a result of the Indian embargo. “During this time of crisis, the people have huge expectation from the NOC. So we are doing our best to import oil from China through a fast-track mechanism,” said Sushil Bhattarai, the acting deputy managing director at  NOC. Bhattarai, who was a part of the delegation that signed the MoU with PetroChina, further added that the exact deadline for bringing oil from the northern neighbor would be known once the commercial deal is signed.

Why petro deal with China?

Nepal had reeled under similar (but declared) economic embargo imposed by India twice in the past (the first in 1969 and then in 1989),  but, unfortunately, failed to learn any lesson from them. This could be because during the previous blockades Nepal had not faced such a crippling fuel crisis (as there were far less number of vehicles plying on the roads) and the resulting multiplier negative effects on the daily lives of the people as now.  Minister for Commerce and Supplies Ganesh Man Pun said Nepal should have sought an alternative much earlier so as not to be solely reliant on India for supply of such an essential commodity as fuel. “The petro deal with China has been done to prevent situation like this from happening in the future,” Pun told APD. “The reality that Nepal should not depend on a single country for the supply of essential commodities such as oil has finally dawned on our leaders and policy makers.”

Nepalese Foreign Affairs and trade experts agree that Nepal government’s move was just a result of ‘punitive action’ taken by the southern neighbor to express its dissatisfaction over certain provisions in the new constitution.

“Nepal has been pushed to the wall and left with the only alternative… to seek oil from alternative sources,” said Bhekh Bahadur Thapa, Nepal’s former Ambassador to India.

According to him, if Nepal starts to import oil from China then it should be considered as a supplementary source rather than a complete alternative of importing oil from India.

An amendment to bilateral trade agreement between NOC and 2007, had allowed Nepal to import oil even from a third country. Former Commerce Secretary Purusottam Ojha, who negotiated for amended agreement at the time, said that the current crisis has shown that Nepal should neither depend on a single country nor a single company for unobstructed supply of such a “strategic product” as fuel to avoid similar situation in the future.

A High Level Parliamentary Committee in 2012 had rightly pointed out the possibility of IOC curtailing supply of petroleum products to Nepal in the future as the Indian supplier had at that time drastically cut down its supply citing the debt-ridden NOC not paying the oil bill in time. “Due to the monopoly market and single source of supply, the possibility of the IOC curtailing fuel supply in the future cannot be ruled out,”

Bhim Acharya, coordinator of that house committee, told APD that the possible solution of importing oil from China was suggested after reaching the conclusion that Nepal might  face a crisis similar like the one it is facing today and also to ensure competition among
suppliers which would help bring down oil prices for Nepal significantly.


Will oil flow from China?

Although Nepal has signed a petro deal with China to import a portion of its oil needs, there is still doubt whether the government would dare to infuriate India by actually buying oil from China.

But the government seems to be committed in this regard with Prime Minister K.P. Sharma Oli insisting the need for diversifying supply sources of fuel to avoid similar situation in the future. “The decision to bring fuel from China is not against any country,” he said.

Experts suggest that not bringing oil even after the signing the MoU with China would only tarnish Nepal’s credibility.

However, even after Nepal starts importing oil from China, infrastructure and pricing will be important factors to be considered.

NOC’s Bhattarai said that he didn’t find any infrastructure related problem on the Chinese side. “The problem is with us,” said Bhattarai, who visited Shigatse, where PetroChina has its depot.

(Source APD Kathmandu issue)

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