India has agreed to build for Nepal a slew of petroleum projects on grants, in what is being billed as a sign of renewed engagement between the two immediate neighbours.

Observers, however, see the development differently. It could make Nepal more dependent on fossil fuels. This despite the country having abundant renewable energy in the upcoming years to power the transport sector as well as energy-efficient electric stoves in its kitchens.

On the one hand, commitments are made in different high-level global forums to adopt green energy, and on the other, petroleum pipelines are being built.

Chandi Prasad Ghimire, spokesperson for the Ministry of Industry, Commerce and Supplies, said that Minister Damodar Bhandari met Hardeep Singh Puri, minister for Petroleum and Natural Gas, India, during the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in New Delhi on Wednesday and shared the news about the agreement on the petroleum pipeline projects.

“We were unclear about funding modalities. But now it’s clear that all three projects will be built by the Indian government on grant.”

The agreed projects are an oil pipeline connecting Siliguri of India to Charali in Jhapa; a greenfield tank terminal in Charali; and an extension of the pipeline from Amlekhgunj to Lothar in Chitwan.

The estimated cost of these projects is Rs17 billion.

Nepal has also proposed a cross-border liquefied petroleum gas (LPG) pipeline.

“The funding modality of the LPG pipeline is yet to be decided,” said Ghimire.

An energy expert working in a government project, who wished not to be named, told the Post that building an LPG pipeline is another blunder. “Nepal will see a considerable amount of electricity generation that could substitute cooking gas and reduce trade deficit,” he said.

“Building new pipelines free of cost means Nepal has to sign a long-term fuel import agreement with India to raise the construction cost.”

Nepal aims to increase clean energy generation to 15,000 MW by 2030 and plans for it are on track.

Experts say it's a double standard.

Ram Prasad Dhital, an energy expert, told the Post last December that billions of rupees spent on pipeline projects will go to waste. According to him, there is an immediate need to decarbonise the transport sector, and most countries, including Nepal’s two immediate neighbours, are already moving in that direction.

What’s the rationale behind investing in the oil pipelines, experts have questioned.

While the Nepal government has committed to net-zero emissions by 2045, it is building the petroleum pipeline.

The new petroleum pipelines and storage tanks will increase Nepal’s dependence on fossil fuel, said Bhushan Tuladhar, an environmental expert.

“This kind of policy discourages energy transition. If we have the strength of green energy, we should promote it. We should not rely on fossil fuels, which we don’t produce,” Tuladhar added.

Nepal imports petroleum products worth Rs337.34 billion, which comes to nearly 20 percent of the country’s total import bills.

Tuladhar said Nepal needs to substitute fossil fuels with green energy to reduce the ever-growing trade deficit.

He said that instead of investing in fuel pipelines, the government should invest in renewable hydropower, cross-border energy trade and installation of charging stations for EVs.

To fulfil the net-zero emission commitment by 2045, the government has also introduced an ambitious hydropower roadmap.

In the transport sector, Nepal has launched a strategy to increase the sales of electric vehicles (EVs) to 90 percent of all private passenger vehicles, including two-wheelers, sold and 60 percent of all four-wheeler public passenger vehicle sales by 2030.

Massive tax waivers have been given on EV imports to promote electricity and reduce fossil fuel imports.

The agreement to build the oil pipeline projects even if it is fast tracked, may take five to six years.

And by that time, a rough estimate shows that electricity generation and EV sales would take a quantum leap.

In the first 11 months of this fiscal year, EV sales have overtaken conventional combustion vehicles.

According to the Department of Customs, Nepal imported 11,466 units of EVs worth Rs29 billion in the first 11 months of the current fiscal year, or by mid-June. The imports were 3,870 units worth Rs11.23 billion in the same period last fiscal year.

Nepal imported fossil fuel-consuming 10,310 units of passenger vehicles worth Rs9.24 billion in 2019-20. After four years, in the first 11 months of the current fiscal year, imports of conventional combustion vehicles were down to 3,537 units worth Rs4.21 billion.

Tuladhar said Nepal’s private sector is aggressively investing in the hydro sector, and the government’s investment in petroleum infrastructure could be a setback for them as well as the country.

The government has also set a goal of installing 500,000 improved cooking stoves, primarily in rural areas, and an additional 200,000 household biogas plants and 500 large-scale biogas plants.

Nepal’s strategy is to have electric stoves as the primary mode of cooking in 25 percent of households by 2030.

It is estimated that to meet the target, Nepal would need to invest $25 billion.

Nepali politicians have been making many promises to switch to clean energy.

Last December, then-prime minister Pushpa Kamal Dahal attended the 28th Conference of Parties to the United Nations Framework Convention on Climate Change (COP 28) in Dubai and spoke on climate finance Nepal seeks from the international community.

In his speech at the summit, Dahal said, “Nepal is fully committed to the Paris Agreement. We are committed to achieving net zero greenhouse gas emissions by 2045, five years earlier than the global target. We will fully utilise our hydropower potential to secure clean energy and maintain 45 percent forest-covered land.”

Before attending COP28 in May, Dahal and Indian Prime Minister Narendra Modi agreed to build two cross-border pipelines and one petroleum tank with grants from the Indian Oil Corporation during Dahal's visit to New Delhi, India.

In New Delhi, two ministers discussed building the Motihari-Sarlahi LPG pipeline, said Ghimire.

“The agreement for this project will soon be finalised. We have requested the Indian government to build the LPG pipeline on grant.”

Ghimire said that these projects will contribute to reducing the transportation cost.

The construction work may start within 2-3 months.

“Our commitment to reducing carbon emissions on international forums and building petroleum pipeline projects don’t match. But we don’t have any alternative to meet the energy demand right now.” he said. “So, we need a few petroleum projects.”

Experts, however, question what the country will do with the hydro energy the government and the private sector are producing with billions of dollars of investment. The pipe-line project may take 5-6 years to complete and there seems to be no plan to substitute petroleum imports.

“The government's policy is to increase the use of electricity, but supply is unreliable,” Ghimire said. Experts, however, questioned whether the electricity supply will remain unreliable even after five years.

“Something is cooking here,” they say.