Cabinet agrees 'principally' on Raxual-Amlekagunj oil pipeline construction

The cabinet yesterday ‘principally’ agreed to allow Indian Oil Corporation (IOC) — the sole supplier of petroleum products to Nepal Oil Corporation (NOC) — construct a 40-km petroleum pipeline from Raxaul depot of IOC to the Amlekhgunj depot of NOC.

However, the cabinet has also formed a committee led by vice chair of the National Planning Commission (NPC) Deependra Bahadur Kshetry to study the modality of the pipeline project. "After the committee takes a complete shape with representation from NOC and Ministry of Commerce and Supplies, we will finalise the modality and procedures," said Kshetry. "Earlier, the project was proposed to be constructed under the Build-Operate-Own-and-Transfer model, but the committee will finalise the model."

The cabinet had earlier sent the proposal to Economic Infrastructure Committee under the cabinet to discuss the ambitious project that has been in the pipeline since long to overcome the problems of frequent transportation strikes.

"The cross-border petroleum pipeline to import fuel from India is expected to help reduce transport cost by around 50 per cent and ease constraints in transportation caused by transportation strikes apart from leakage control and quality control," according to NOC.

The pipeline was estimated to cost Rs 1.60 billion excluding the cost of land acquisition. A pre-feasibility study done in 2004, and a technical study done in 2006, had concluded that the pipeline project would be economically viable within six to seven years, and the construction company will get its return on the investment. "IOC had, thus, earlier asked to sign a 10-year agreement," the corporation added.

Though Indian Oil Corporation had proposed the construction of the pipeline in 1995, NOC and IOC signed the agreement last April.

Earlier, the High-Level Petroleum Sector Reform Committee led by then Constituent Assembly member Bhim Acharya had recommended starting the project immediately as petroleum products are the largest imports of the country. In the four months of the current fiscal year 2012-13, the country has already imported petroleum products worth Rs 31.96 billion, whereas in the last fiscal year, the country had imported petroleum products worth Rs 92.25 billion from India, according to the central bank data.

Nepal is becoming more dependent on petroleum products — MS, HSD, SKO, ATF and LPG — for meeting its energy requirements with an annual increase of 20 per cent. Petroleum products constitute about 11 per cent of the total energy consumed in the country.

The Raxaul depot that caters to the energy hungry central region that consumes around 70 per cent of total petroleum imports can also supply fuel to Bhairahawa and Biratnagar which will also reduce huge costs of NOC that claims that in the future the pipeline could be linked to Barauni depot for more supply.

Currently, some 1,180 tankers of some 494 transporters ferry petroleum products across the country. But they have been creating problems for NOC by forcing it to increase transportation cost by not allowing it to issue a tender.