Instead, it has floated an alternative model, suggesting the two sides to separately construct the pipeline in the respective territories and brought it into operation by inking a bilateral pipeline treaty.
“We will invest 30 percent in the project, as proposed by Nepal, but it will go in the construction of 2 km long pipeline system, pumping station and other requisites on the Indian side of the border for operating the system,” a source at NOC quoted senior IOC board members as saying.
IOC has also offered to directly construct or supervise constructions, whichever suits Nepal, to lay down the proposed 39 km long pipeline system in Nepali territory.
The sole supplier of petroleum products to Nepal mooted such change in the project after its crucial board meeting, convened to endorse the NOC-IOC JV agreement for implementing the project, raised questions over the effectiveness of the model.
The two sides had finalized the agreement after IOC gave its consent on the JV model. But the IOC board mooted changes, referring to the provisions that place JV Pipeline Company -- a subsidiary of NOC and IOC -- and seeks its management to turn to respective corporations for all crucial decisions.
"Our experience suggests such structure and modus operandi of JV Company will fail to ensure efficient and smooth operations of the pipeline system," the source quoted S Behuria, chairman of the IOC, as saying in the board meeting. Behuria said ´separate-ownership, joint-operation´ model, on the other hand, will largely do away with constraints and problems of JV model.
The changes sought by the IOC, meanwhile, has pushed the fate of the pipeline project in limbo.
The two governments had signed an understanding to implement it as a JV project. "If we are to make changes, the whole process needs to be redone," said the source, expressing concerns over possibility of divided political opinions lingering the whole deal.
The cross-border pipeline project was first proposed by IOC about a decade ago. And studies have reckoned it will reduce Nepal´s fuel transportation cost by 40 percent, something which will greatly relieve the consumers.
It is also expected to generate additional revenue to the government against the use of pipeline, reduce technical loss, oil theft, and road deterioration, besides making the supplies cleaner and cheaper. Most importantly, it will end fuel shortages that hit the market now and again.
Despite such benefits, the project has failed to move ahead because of leaders´ opinion that it is ´politically sensitive´ matter. The government decided to implement it only a year ago.
NOC Chief Digambhar Jha stated that the changes sought will yet again slow down the process of materializing the project. He, however, added that developing the system under JV model actually faced legal hurdles as well.
The major hurdle comes from the fact that the government has not yet opened overseas investment for Nepali companies, whereas the JV Pipeline Company would need to invest and build pipeline and pumping station in the Indian Territory.
However, given the involvement IOC would seek in the project, sources said NOC would not find it easy to say yes to the alternative modality as well.
milan@myrepublica.com
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