NOC, IndianOil seal new fuel supply
Nepal   30-Apr-2012


The Nepal Oil Corporation (NOC) and IndianOil on Friday signed a new petroleum supply agreement.

As per the new pact that will be effective until March 31, 2017, the IndianOil will be the sole exporter of refined petroleum products to Nepal for the next five years.

NOC acting Managing Director Suresh Kumar Agrawal and IndianOil General Manager (commercial) R Karandikar signed the bi-lateral pact.

According to NOC, the agreement has scrapped the existing price adjustment factor (PAF), under which IndianOil had been charging 5 percent on LPG, diesel and petrol and 2.5 percent on other petroleum products.

PAF includes refinery and transportation charges, among other technical losses, under IndianOil’s current price formula. Instead of PAF, IndianOil will now charge a flat marketing margin of 2.5 percent on all petroleum commodities. The corporation said the scrapping of PAF will save Rs 2 billion annually.

The new agreement has also allowed NOC to import petroleum from the Mumbai port, apart from Haldiya. The new point is expected to reduce fuel cost for the Mid- and Far-Western Region, NOC said.

NOC has also been allowed to deal in IndianOil’s bitumen, lubricants and grease products.

The two companies have agreed to negotiate on reducing the existing pricing of furnace oil and light diesel oil and initiate the process to allow import of LPG from refineries other than the existing Barauni, Haldiya and Mathura refineries.

NOC will also be able to procure finished products from the international market and import through IndianOil, according to the new agreement. Also, NOC can buy crude oil from the international market and sell it to IndianOil, and the latter will supply equivalent amount of petroleum to Nepal. The new agreement has revised the time for payments of oil imports. NOC can make fortnightly payments instead of the present weekly. However, the pact on allowing NOC to pay IndianOil in either US dollars or Indian rupees has been dropped. According to a NOC source, IndianOil has asked some time to work out on the mode of payment negotiated before the pact.

NOC Deputy Director Sushil Bhattarai said the new agreement is based on ‘mutually agreed’ principle unlike past pacts and that it is balanced.

The agreement has given the advantage to NOC to negotiate on any issue on every review that has not been foreseen in the Friday’s agreement. “Although, NOC and IndianOil have to call review meeting every six months, it was not implemented earlier.

However, the new accord is specific on holding review for the improvement and amendments to the agreement every six months” Bhattarai said.

The agreement has talked about construction of the Amlekhgunj-Raxaul pipeline and conducting feasibility study of the Nepal-India LPG pipeline.