Hit by petro crisis, Nepal sends SOS to India
May 11, 2007 - 11:44:32 AM

Kathmandu, May 11 - With just enough petroleum stocks left for 48 hours after Indian Oil Corporation - slashed its supplies on non-payment of dues, Nepal's government has sent an SOS to India.

Nepal's Industry, Commerce and Supplies Minister Rajendra Mahato met Indian ambassador to Nepal Shiv Shankar Mukherjee Thursday to urge the Indian envoy for help.

'I requested the Indian ambassador to ask IOC to resume supplies and give us some time to clear old dues,' Mahato told IANS. 'The envoy said he would convey the request to the authorities.'

The spectre of the worst fuel crisis ever loomed large over Nepal after the Indian company, the lone one exporting oil to Nepal, reduced petroleum supplies by 40 percent in a bid to pressure the importer, state-owned Nepal Oil Corporation -, to clear old dues.

The NOC owes the Indian firm nearly NRS.6 billion - and the IOC this month refused to send oil until it received about NRS.150 million a month.

The 40 percent cut, coming after a reduction of 30 percent in the earlier months, coupled with continuing unrest in the southern Terai plains that crippled supplies from India, has created a crisis in Nepal.

Gas stations in the capital have begun putting up signboards saying 'No petrol' while the few that still have stock are being besieged by huge queues.

According to the Petroleum Dealers' Association, private stations have not received stocks since Tuesday and have run dry.

Mahato, who held crisis talks with Prime Minister Girija Prasad Koirala, said the premier would speak to the Indian authorities.

'It could mean the Indian prime minister or - appropriate minister,' Mahato said.

The NOC's inability to repay IOC stems from the staggering losses it has been incurring for years due to the government's much-criticised policy of subsidising petro products.

Nepal sells petro products at much lower rates than market prices, resulting in the state exchequer suffering huge losses. NOC alone incurs a loss of about NRS.199 million a month.

While the government is bleeding over the subsidiary, there is a flourishing black market with petro products being taken to India across the border, where they are sold at a profit.

Prodded by the World Bank and the International Monetary Fund, the earlier governments had tried to raise oil prices to maintain parity with international market prices but had to shelve the bids due to massive public protests, aided by the student organisations of some ruling parties.

Mahato said the government is exploring options to tide over the crisis.

'We are also asking the Indian government for a loan to tide over the period of difficulty,' he said. 'The other option is to open the distribution of gas cylinders to the private sector.'

NOC loses NRS.245 per cylinder due to the subsidiary and is mooting that the product be sold in the open market to take the burden off its shoulders.

The continuing funds crunch faced by Nepal has also hit the construction of a proposed pipeline between Amlekhgunj on the Nepal border to Raxaul in India to facilitate oil supplies and cut down on costs and theft.

The pipeline was estimated to cost NRS.1.7 billion but it is likely that the cost will go up considerably by the time the project begins.

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