‘Include provision of compensation in the new Supply Agreement with IOC’

Kathmandu, March 13

A parliamentary sub-committee today directed the Nepal Oil Corporation (NOC) to include a provision of compensation in the new Supply Agreement that would require Indian Oil Corporation (IOC) to compensate NOC at times of supply disruption from the IOC side.

The direction to this effect has come at a time when the five-year NOC-IOC Supply Agreement is ending on March 31 and the two sides are gearing up to ink a new agreement soon.

“The new Supply Agreement should be signed in such a manner that it ensures uninterrupted supply from IOC to Nepal even during difficult times. Provision of compensation in the agreement itself will compel IOC to make supply regular,” Subash Chandra Thakuri, coordinator of sub-committee of the Committee on Commerce and, Industries and Consumer Welfare Relation, said.

NOC had incurred huge financial loss, amounting to billions of rupees, due to the months-long disruption in supply of petroleum products to Nepal from IOC almost a year-and-a-half ago. The NOC had then also written a letter to IOC seeking compensation for the financial loss that it incurred due to fuel supply disruption. However, IOC had remained mum back then.

The sub-committee also directed NOC to keep enough space in the agreement that would allows NOC to sign commercial petroleum deal with other nations and import fuel from other sources at times of difficulties. “Along with IOC, NOC also should sign commercial petroleum deals with other feasible nations,” Thakuri said. The committee also directed NOC to expedite the process of signing commercial fuel deal with China.

Though NOC and PetroChina of China had signed a memorandum of understanding a year ago to engage in commercial petroleum deal, the two oil giants have not been able to materialise the historic deal that would break IOC’s monopoly in petroleum supply to Nepal.

Addressing the meeting, Gopal Bahadur Khadka, managing director of NOC, said that the draft of the new Supply Agreement with IOC has introduced a provision that allows NOC to procure fuel from third country in case IOC is unable to supply petroleum products to Nepal as per demand. “We should be compensated in case of supply interruption of fuel and we will urge IOC to keep a provision to this effect in the new pact,” said Khadka.

Meanwhile, Khadka said that commercial fuel trading with China and other countries is only possible through government-level agreement. “If we are to diversify our petroleum trade, the government should hold government-to-government talks with governments of different countries. We are optimistic that the future visit of Prime Minister Puspa Kamal Dahal to China will expedite the process for Nepal-China commercial fuel trade deal,” added Khadka.