With China on mind, fresh fuel to India-Nepal energy ties


With China at the back of its mind, India has agreed to deepen energy ties by renewing its fuel sale deal with Nepal by another five years and assist the Himalayan country in implementing a cooking gas-for-the-poor scheme akin to the one launched by Prime Minister Narendra Modi in India’s most populous state of Uttar Pradesh.

As per the agreement signed in New Delhi on March 27 by Indian Oil Corp. and Nepal Oil Corp. in the presence of Oil Minister Dharmendra Pradhan and Nepal’s Minister for Supplies Deepak Bohara, the state-owned Indian energy giant will supply about 1.3 million tonnes of fuel every year for the next five years. India has been supplying fuel to Nepal since 1974 under contracts that were periodically renewed. Indian Oil chairman B. Ashok, who was present on the occasion, said the renewed deal is for the period from April 2017 to March 2022 covering petrol, diesel, kerosene, jet fuel and liquified petroleum gas (LPG).

Mr Pradhan said that Mr Modi had in 2014 said in an address to Nepal Constituent Assembly (parliament) that India would build the Raxaul-Amlekhganj petroleum product pipeline, for which work is expected to start in 2017-18. Nepal wants the pipeline to be extended closer to its capital Kathmandu. Mr Pradhan added that the investments will be made by Nepal and Indian Oil will provide technical assistance. Pradhan and Bohara also discussed the construction of a similar pipeline for the supply of LPG between India and Nepal.

Fuel supplies from India witnessed temporary disruption in 2015 when protestors had blocked the main transit point on the India-Nepal border. Indian Oil then used alternative entry points to supply fuel to Nepal. Nepal also signed a fuel purchase deal with China but the route between the nations presents logistic challenges.

The renewal of the fuel deal with Nepal indicates India’s subtle attempt to check China’s growing influence in the Himalayan nation, which had seen a rise in anti-India sentiment during the economic blockade in 2015 by minority Madhesis – Nepalese of Indian origin – that hit severely hit fuel supplies from India, sparking shortage of petroleum products in that country.


During the blockade, China had offered to supply LPG to Nepal after gifting fuel to ease the crisis in the country. According to Nepal’s Ambassador to China Mahesh Maskey, China has expressed its willingness to supply cooking gas bullets directly to Kathmandu by establishing a joint customs point at Panchkhal of Kavrepalanchowk district, situated 75 km east of Kathmandu. But logistical difficulties and costs involved in bringing the fuel from China through the high mountain passes made that option economically unviable.

Both Mr Pradhan and Mr Bohara expressed confidence that it would lead to further engagements in the hydrocarbon sector between the two countries and make it one of the important areas of relationship between India and Nepal, said an official statement. He added that Mr Pradhan also assured India’s continued support to Nepal in meeting its complete hydrocarbon requirement.

Mr Pradhan emphasized the benefits of Pradhan MantriUjjwalaYojna (PMUY) scheme, under which cooking gas is supplied to the poor in UP free of cost, to his Nepalese counterpart and suggested its implementation in Nepal. He said India will assist Nepal in implementation of the scheme by sharing its experience and expertise. The scheme was stated to have contributed to Mr Modi-led Bharatiya Janata Party’s remarkable victory in recent assembly elections

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