India?s continued hegemony on Nepal?s fuel supplies

By Harsh Doshi

India has signed a renewed fuel deal with Nepal to supply about 1.3 million tonnes of fuel every year for five years from 2017 to 2022. This renewed deal comes after almost two years of the unofficial fuel blockade that India declared on Nepal in 2015 following a suspected disagreement with Nepal’s new constitution.

Nepal’s dependence on India

Nepal is a landlocked country, surrounded by India on three sides except on the North, where China is its neighbour. Consequently, Nepal has remained one of India’s biggest trading partners. The majority of trade happens via the border town of Birgunj, which is home to Nepal’s largest customs office in terms of revenue that handles most of Nepal’s trade with India. The two countries have maintained cordial relations with each other. India has had numerous fuel supply contracts with Nepal since 1974 to supply all kinds of fuels including petrol, diesel, kerosene, jet fuel, and liquefied petroleum gas (LPG).

Nepal’s geography and its 2015 Constitution controversy

Nepal has a mixed geographic landscape, with plains and fields in the south and hilly regions in most of the north. The southern part is fertile and is traditionally called Madhes. Madhes shares most of its border with India. In 2015, when Nepal promulgated the first preliminary draft of its new Constitution, it was subject to a lot of controversy and disagreement. Most of the disagreements came from the Madhesis on a few particular provisions.

For example, unlike the interim Constitution, the new 2015 Constitution did not give Madhesis electoral constituency representation on the basis of percentage of the population. Also, the posts of President, Vice-President, Prime Minister, Chief Justice, Speaker of Parliament, Chairperson of National Assembly, Head of Province, Chief Minister, Speaker of Provincial Assembly and Chief of Security Bodies will be given to Nepali citizens by descent only. This clause is discriminatory to a large part of the Madhesis who have acquired citizenship by birth or naturalisation. Lastly, the delineation or demarcation of constituencies has been postponed to once every 20 years instead of once every 10 years.

These particular provisions led to protests by the Madhesis, blocking trade routes via India. This hampered fuel supply to a large extent. However, the Nepalese Government maintained that it was an unofficial blockade by India to gain power over Nepal and effect changes in its Constitution and support Madhesis. The Indian Government maintained that it was Nepal’s internal unrest that was hampering trade.

Help from China and the new deal with India

The Nepal Oil Corporation, the state-owned oil company, eventually turned to China for help. Most parts of the country were in shortage of LPG and fuel due to the blockade. They secured a third of their total requirement from China, the first of such deals in decades. However, Nepal Oil had to rely on India for the other two-thirds of the requirement, which led to a renewed fuel deal with India. This brings into the picture India’s hegemony on Nepal’s fuel supplies. India is like a big brother to Nepal. Nepal has been dependent on India for a few of its supplies.

Prime Minister Narendra Modi announced in the Nepalese Parliament in 2014 that India would build the Raxaul-Amlekhganj petroleum product pipeline. Nepal wants the pipeline to be extended closer to its capital city of Kathmandu, where it will finance it and India will extend technical expertise. The impact this will have is yet to be seen.

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