Nepal has formally applied for an observer status in the Shanghai Cooperation Organisation (SCO) following a series of meetings that Prime Minister Girija Prasad Koirala had with SCO representatives and Chinese embassy officials. By being associated with the organisation, which consists of six countries — China, Russia, Kazakhstan, Kyrgystan, Tazikistan and Uzbekistan — Nepal seeks to open an alternative source of supply of the petroleum products. Koirala initiated the process only after getting New Delhi’s nod. Foreign minister Sahana Pradhan sent a letter to her Chinese counterpart last week requesting China’s help in accepting Nepal’s application. This association would make it easier for Nepal to import petroleum from central Asian countries, and the government, it is reported, aims to meet the shortfall in supply thus in times of crisis. Traditionally, the Indian Oil Corporation (IOC) has been the sole supplier of petro-products to Nepal.

It is indeed necessary for any country not to put all the eggs in one basket. The government may have been prompted to explore alternative routes because a prolonged Tarai agitation recently severely disrupted petroleum supply in the country, all the more so in the capital city. For the past few months, the supply of petroleum has been highly erratic. Currently, the country is suffering from an acute shortage, but this time, as on several occasions during the past few months, caused by the reduced supply from the IOC after the Nepal Oil Corporation (NOC), the state-owned sole distributor for Nepal, failed to pay the oil bills. Probably, Nepal’s application will be cleared, given the goodwill of the SCO member countries, particularly of China, for Nepal. Foreign ministry officials are, however, doubtful whether the import of oil via Chinese territory will be “cost-effective”.

Of course, the cost factor will be the key to any trade decisions, as buyers seek the cheapest rates, including transport costs. But oil for Nepal is not only an essential but a strategic commodity. Prolonged disruptions of supply can cripple its economy and sap its staying power. The Tarai agitation has taught an important lesson. A serious political dispute with the supplier country can choke off the country’s oil lifeline. In 1989-90, Nepal had this bitter experience when India imposed a virtual economic blockade for 15 months. Nepal was forced into making do with the extremely costly option of bringing in petrol from Singapore by the Nepal Airlines Corporation aircraft. So, for this particular commodity, the cost factor is not the only important factor, though it will make good economic sense to import most of the oil from the cheapest sources and through the shortest and easiest routes. But every nation should keep its options open, especially when it comes to strategically important supplies. It may take several years to make bulk import of oil through the Nepal-China border logistically possible. Nepal needs to open more routes across the Nepal-China border for that purpose. The effort to this end will be worthwhile.