Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC) are all set to sign a new petroleum supply agreement next week in a bid to smoothen the supply of petrol, diesel and cooking gas from India.

A team of officials of the Ministry of Supplies and NOC is heading to Mumbai, India, on Sunday to seal the deal.

Nagendra Sah, acting deputy managing director of NOC, said negotiations will be held next week before signing the bilateral agreement. “However, the date for signing of the agreement has not been fixed yet,” he said.

In the run up to signing the deal, both the sides have prepared a 30-page document that includes provisions on maintaining uninterrupted petroleum supply and compensation for the loss that NOC incurred during Indian trade embargo last year, among others. 

Although the existing agreement allows NOC to tap alternative destinations to import petroleum products, the state-owned enterprise has so far failed to make use of the provision.  

Nepal and India first signed a memorandum of understanding (MoU) on petroleum supply in 1974, which defines import procedures. Since the signing of the MoU, NOC has been importing fuel solely from IOC. The MoU is revised every five years.

Sah said the bilateral agreement would focus on resolving the problems that Nepal has been facing time and again on petroleum imports from India. According to him, NOC will propose to purchase petroleum products from other sources besides IOC this time too. IOC has often been criticised for its role during the four-and-a-half-month long Indian trade blockade last year. Despite the bilateral agreement, IOC had cut off fuel supply to NOC during the period. 

NOC has been mulling over pressing IOC to extend compensation for losses incurred during the blockade. So far, IOC has not entertained NOC’s request. 

Two weeks ago, parliamentary committee on Industry, Commerce and Consumer Welfare Protection had directed NOC to seek compensation for the loss that NOC incurred during the blockade. “We will discuss this issue during the meeting,” Sah said. 

IOC, meanwhile, has already agreed in principle to form a joint committee to monitor the cross-border petroleum supply in a bid to end all types of anomalies. The joint committee will even get the authority to monitor activities at depots of both the organisations to curb malpractices.  

During the meeting, Nepal will also seek permission to import liquefied petroleum gas from IOC’s new depot being built in Mujaffarpur. If IOC approves NOC’s proposal, the cost of cooking gas is likely to come down in Nepal.

Revising the marketing margin is another agenda that will be discussed during the meeting. Marketing margin includes costs of equipment, transport, labour, capital, risk and management that the supplier charges from the company to which it is supplying the product. As per NOC, the import cost of petroleum products could be reduced by up to 10 percent if the marketing margin is reduced from existing 2.5 percent.