Indecision keeps proposed Nepal-India oil pipeline in limbo
The much talked about Nepal-India cross-border petroleum pipeline project is yet to take off, thanks largely to indecision on the part of the Nepal government. Construction of the 40-km long Raxaul-Amlekhgunj pipeline is currently stalled with Nepal Oil Corporation (NOC) undecided whether to build it on its own or have Indian Oil Corporation (IOC) do it.
On Feb 17, 2010, the cabinet had approved NOC’s new action plan for its construction. As per the plan, Nepal and India would construct the pipeline separately in their respective territories. The pipeline would then be linked after signing a bilateral pipeline treaty.
The new scheme superseding the earlier plan to implement it as a joint venture has become more complicated for the government. According to NOC, IOC has asked that it or the Nepal government take the responsibility to build the pipeline or let IOC do it. Either way, building the pipeline looks difficult for NOC to undertake under the Public Procurement Act. According to NOC managing director Digamber Jha, if the Nepal government assumes the responsibility, it would have to call for a global tender as per the act to hire a consultant. That means IOC would use a different consultant on its side.
With IOC willing to construct the pipeline with its own consultant on both sides, it could be difficult to link the pipeline constructed by another consultant after the project is finished. “IOC has shown interest in providing technical know-how and performing a supervisory role regarding the safety and other aspects of the project which also means that it is keen to undertake the project on both sides,” an NOC official said.
As oil pumping equipment would be installed in India, the project’s Indian component would account for 60 percent of the total cost. The project has been estimated to cost Rs 1.60 billion excluding the cost of land acquisition. Though IOC has been pressing NOC to decide the kind of scheme to be implemented at the earliest, NOC has not been able to come to a decision because of the requirements of the Public Procurement Act, Jha said.
The Ministry of Commerce and Supplies (MoCS) has been studying the issue following IOC’s request as the provision of the act could delay the project.
“The ministry should be first convinced about the project, and after assessing it, a direct decision can be made by the cabinet,” said Ganesh Prasad Dhakal, spokesperson of the MoCS.
According to him, the newly appointed minister will also be briefed about the issue. The proposed Raxaul-Amlekhgunj pipeline has been lingering for the last 14 years. A pre-feasibility study done in 2004 and a technical study done in 2006 had determined that the pipeline project would be economically viable if it is operated unhindered for 20 years. The project, which was first proposed by IOC in 1995, is projected to reduce fuel transportation costs by over 50 percent.
The report of the High-Level Petroleum Reform Committee had also suggested immediate construction of the pipeline.
Posted on: 2011-07-21 09:48
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