Petroleum Infrastructure Projects Secured with Indian Grants

The construction of three major petroleum infrastructure projects in Nepal has been secured with Indian subsidies, marking a significant step in enhancing the country’s energy security.

This decision was finalized during a visit by Nepal’s Minister of Industry, Commerce, and Supply, Damodar Bhandari, to India for the BIMSTEC conference. In a meeting with India’s Minister of Petroleum and Natural Gas, Hardeep Singh Puri, it was agreed that India would fund the construction of the Amlekhganj-Chitwan and Silgarhi-Jhapa pipelines, as well as petroleum storage facilities in Jhapa.

Baburam Adhikari, Joint Secretary of Nepal’s Ministry of Commerce, who accompanied Minister Bhandari on the visit, confirmed that the projects will be carried out with Indian grants. “The decision has been finalized. India will build the project with subsidies, and there is no more confusion,” he stated.

A joint secretary-level meeting between the two countries will soon recommend the project to the respective governments, after which construction will commence. The project is expected to significantly bolster Nepal’s petroleum infrastructure, improving both supply security and cost efficiency.

The agreement to build these projects with Indian investment was initially reached a year ago during Prime Minister Pushpa Kamal Dahal ‘Prachanda’s visit to India, in the presence of Indian Prime Minister Narendra Modi. However, there had been uncertainty regarding whether the investment would be in the form of a loan or a grant. Minister Bhandari’s recent visit has clarified this issue, ensuring that the projects will proceed with grant aid from India.

Chandika Prasad Bhatt, Executive Director of Nepal Oil Corporation, who also participated in the discussions, emphasized that grant support for the construction of these projects was a priority during the talks. Indian Petroleum Minister Hardeep Singh Puri expressed his enthusiasm for the meeting with Minister Bhandari via social media, underscoring the importance of this cooperation.

The joint task force of Nepal Oil Corporation and Indian Oil Corporation (IOC) has already completed on-site studies for all three projects. The pipeline from Motihari-Amlekhganj, built with Indian grant support, will be extended to Lothar in Chitwan, with plans to construct a storage facility with a capacity of 100,000 kiloliters. The Siliguri-Jhapa pipeline, expected to span 50 kilometers, will be constructed from IOC’s Siliguri terminal in West Bengal to Mechinagar-13 in Jhapa, where a warehouse will also be built.

In addition to these projects, discussions were held on building a gas storage facility in Sarlahi. The storage would be constructed on land owned by the Nepal Oil Corporation, with plans to transport gas from Motihari in India via pipelines. This initiative is expected to save Nepal 6 billion rupees annually in transportation costs and enhance supply security.

The estimated costs for these infrastructure expansions, according to a 2020 study, are as follows: 4.38 billion rupees for the Amlekhganj-Chitwan pipeline, 4.6 billion rupees for the Siliguri-Jhapa pipeline, and 8.3 billion rupees for the Jhapa warehouse. In total, these projects are expected to require an investment of 17.01 billion rupees, fully covered by Indian grants.

During his visit, Minister Bhandari also inspected India’s Visakhapatnam port, a critical hub for Nepal-India trade. He requested Indian authorities to streamline the import process from Visakhapatnam, addressing concerns from Nepali businesses about high logistics charges associated with import-export activities from the port. The Indian officials noted that while the train route from Visakhapatnam to Birgunj is longer, the transportation cost is lower due to the port’s access to shipping facilities.

This development signifies a deepening of economic ties between Nepal and India, with substantial benefits expected for Nepal’s petroleum infrastructure and trade logistics.