Nepal Oil Corporation (NOC) has sought compensation from Indian Oil Corporation (IOC) for heavy financial losses and brand image damage caused by the IOC’s refusal to provide petroleum products to Nepal.

Forwarding a letter to its Indian supplier on Friday, the oil monopoly said IOC’s unilateral decision to halt supply to Nepal has troubled Nepali consumers, the cost of which is “beyond imagination”.

In a strongly worded letter, the NOC said the 40-year bond between the two companies had arrived at a crossroads. “IOC, being a multinational company, should not be involved in such unethical and unreasonable business practices, that too with a longtime business partner like the NOC,” reads the letter.

IOC’s pretext of mechanical failure and security reasons for the denial was baseless and against the spirit of the NOC-IOC agreement signed on April 27, 2012. “We forwarded a letter to inform them [IOC] about the business losses that the NOC sustained due to the supply obstruction,” said Deepak Baral, spokesperson for the NOC.

NOC has asked the IOC to compensate for the losses incurred mainly in the last two weeks since the Indian company stopped fuel supplies. “We asked the IOC to respect the agreement between the two parties,” said an NOC official. The Nepali supplier is said to have faced losses amounting to Rs2 billion in the last one and a half months.

The NOC used to import 300-350 tankers of petrol/diesel and 35-40 bullets of liquefied petroleum gas on a normal day. The current shipment from India accounts for “less than 10 percent” of the regular supplies. “We need at least 40-50 percent of normal supplies to operate public utility services alone,” said Baral.

The business losses due to the current embargo have affected the NOC’s move to clear its debt.

In the past one year since the adoption of an automated pricing mechanism, the NOC has reduced its loans to Rs16.64 billion from over Rs35 billion. It owes Rs4 billion to the Citizen Investment Trust and the remaining Rs12.64 billion to the government.

IOC has continued its short supply of petroleum products to Nepal despite claims from the Indian side that there is no restriction, NOC said.

As per an NOC record, only 19 out of the total 171 petroleum tankers that had reached IOC depots for refilling were allowed to load on Monday. The state-owned IOC is the sole supplier of petroleum products to Nepal.

A total of 1,309 oil tankers are en route to IOC depots in Siliguri, Barauni, Raxaul, Baitalpur, Gonda/Allahabad and Banthara to collect petroleum products.

In the last two weeks since India imposed undeclared embargo, the IOC has been reloading very few NOC tankers. NOC spokesperson Baral said the IOC had been denying petroleum products to NOC tankers, citing directives from above.

Baral said the IOC had refilled 19 NOC tankers—five each were refilled at Baitalpur and Siliguri and nine at Barauni on Monday. Similarly, only 27 petroleum tankers entered Nepal on the day, according to the NOC.  

Of them, two were cleared through Nepalgunj customs point and the remaining tankers, including 12 vehicles carrying petrol and 13 laden with diesel, entered from Biratnagar customs point.

The NOC says 119 petroleum tankers are still held up at Nepal-India border. “Many of the tankers are not given clearance by the Indian customs authority, while a few that have been cleared by the customs have been restricted by the Indian security forces from entering Nepal,” he said.

The IOC has also been reluctant to provide cooking gas to Nepal. According to the NOC, only two bullets of cooking gas entered from the Rani customs point in Biratnagar on Monday.

There are 500 gas bullets awaiting refill at IOC‘s refineries in Haldiya, Barauni and Mathura. Besides, 273 loaded gas bullets are awaiting customs clearance at various border crossings.