Jointly Constructing Oil Pipeline to Nepal; Some Issue to Resolve

-Madhab Raj Ghimire, Infrastructure Legal/Regulatory Consultant

Latest development in between Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC) to build Oil pipeline by the IOC from Amlekhganj (Nepal) to Raxaul (India) length of 41 km has given little hope to resolve fuel crisis in Nepal. The most potential cross border of Raxaul/Birgunj, Nepal, which has burden to import around 70% of fuel from India, may reduce the number of obstacles such as strike, oil leakage and obstruction from local agitators or form of other political parties (Albeit, price adjustment factor has been analysed through high level Petroleum Sector Reform Taskforce). Very importantly, it will reduce transportation cost contributing to lower the price of oil.

To build the high invested oil pipeline, the first party IOC seems major beneficiary than to NOC. The first party of IOC role for investing to the pipeline can be highly appreciated, in the same time IOC benefits as large economic scale of an externalities needs to be evaluated on the investment side.

Nepal has major and concrete role to give strategic supply and security of challenges of 41 km pipe lines, hopefully will bring service efficiency to deliver the product to Nepal, Port of Amlekhganj, technically lying pipelines below 1.5 meters grounds is standardising the security concern of investments. The financial burden to built 39 km to NOC side and 2 km to IOC side has a lot of inspiration of financial incentives to singular investments.

The context of acquiring the land of 400 bighas and without even purchasing of Nepal Railways could be better steps if same property can be used as both stake holders (Nepal Railway and NOC) to take the ‘right of way’ of permission might be hassle to the NOC in Nepal considering present situation in Terai region.

There need to be contract based regulated regimes in between two countries for simplifying the operation. It is almost sure that potential natural monopoly on oil pipeline will be exist in future. Therefore, there should not be any confrontation based on competitive measurement.

It is learnt that Taskforce has recommended that ‘competition only’ can resolve the crisis within NOC. Very importantly, the proposal of establishment of Nepal Petroleum Authority recommended by Taskforce can resolve and simplify the process to built the joint pipeline and, in case of dispute settlement in between two countries.

However, the concept to build pipelines was introduced in 1995, which already took one and half decade to make formal decision. The reality of implementation might take other more years ahead. However, the initiatives might not be undermine even to transition period of Nepal. Reducing scarcity of the petroleum product and cost will be huge relief as well as daily basis essential needs of consumers. Similarly, other products based on high transportation cost will be reduced automatic reduction will ease the life of consumers.

mrghimire@hotmail.com