Redeeming ties: Oil pipe to Nepal

India and Nepal have taken an important step to improve the latter’s energy security. Early this week, Prime Minister Narendra Modi and his Nepali counterpart K P Sharma Oli jointly inaugurated the 69 km-long, India-funded oil pipeline project. The pipeline will transport fuel from the Barauni refinery in Bihar to Amlekhgunj in south-east Nepal. It has an annual capacity of two million metric tonnes. In addition to making available fuel to Nepal at a cheaper rate—the pipeline is estimated to save Nepal $8.7 million in transport costs—the pipeline will energise bilateral co-operation. Hitherto, fuel has been transported from India to Nepal via trucks only. The pipeline will help the two countries reduce dependence on roads. Its inauguration comes amidst major changes in the Himalayan country’s economic relations with its neighbours. Its ties with China are deepening, much to India’s concern.

Sandwiched between India and China, Nepal’s ties with India have been strong historically. Geography, too, has encouraged interaction with India. Nepal’s terrain towards China is mountainous and snow-bound through many months of the year. In contrast, the terrain towards India slopes downwards until it meets the Gangetic plains. This accounts for India’s near-monopoly over Nepal’s trade with the world. In fact, India held a monopoly over Nepal’s fuel imports. That began to change in 2015, when a trade blockade, which Nepal alleged was imposed by India, sent fuel prices soaring in the country and crippled its economy. It prompted the Nepali government to reduce its dependence on India and reach out to China. China has begun supplying fuel by road to Nepal, and while this meets just a small part of Nepal’s needs, the future will be different. Nepal is a part of China’s Belt and Road Initiative. China is building an oil pipeline that will run through the Himalayas to Nepal. This, and a vast road and rail network, will transform the Nepali economy. It is to counter China’s mounting influence in Nepal that India has rushed to complete the oil pipeline project.

The pipeline idea was first proposed in 1998. It was put on the backburner thereafter and it was only in 2014 that India took up the idea more seriously. The fraying of India-Nepal relations in 2015 and the consequent breaking by the Chinese of India’s monopoly over Nepal’s fuel trade resulted in India putting the pipeline project on a fast-track. Its implementation was prioritized and the project completed ahead of schedule. Indian projects abroad have suffered from long delays, angering host countries. The India-Nepal pipeline project indicates that with political will, India is capable of timely delivery of projects.