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New Delhi: As part of the National Democratic Alliance (NDA) government’s neighbourhood-first foreign policy, India will build a 200 crore petroleum product pipeline to Nepal. The first transnational petroleum pipeline in South Asia will supply petrol, diesel and kerosene to the landlocked country and will be built by state-owned Indian Oil Corp. Ltd (IOC) from its own budget.

India and Nepal signed an agreement on Monday for constructing the pipeline, which is expected to reduce the latter’s oil transportation cost by as much as 60%. Nepal gets all its petroleum products supply from India under a government-to-government agreement. Fuel products are currently transported from India by trucks.

“India exports about $1.1 billion worth of petroleum products per annum to Nepal. Bulk of this volume will be transported through this pipeline. This will also ensure smooth, cost-effective and environment-friendly supply of petroleum products to Nepal," India’s petroleum ministry said in a statement.

In comparison, India’s energy import bill is around $150 billion.

The memorandum of understanding (MoU) was signed by India’s petroleum and natural gas minister Dharmendra Pradhan and Nepal’s commerce and supplies minister Sunil Bahadur Thapa.

“The two ministers signed an MoU on a Petroleum Product Pipeline which will be built from Raxaul in India to Amlekhgunj in Nepal. In addition, IOC will also do reengineering of the Amlekhgunj petroleum depot to make it compatible with receiving petroleum products by pipeline," the statement said.

India has been working with Nepal on several fronts, including providing relief to the quake-hit nation with which it shares a 1,850km-long border.

“It will take IOC 30 months to complete the project after receipt of necessary statutory clearances from Government of Nepal. Nepal Oil Corporation will invest 75 crore to develop additional facilities in Amlekhgunj depot," the statement said.

India’s Power Grid Corp. of India Ltd is also working towards rebuilding the power distribution network of Nepal. While India, Nepal’s largest trading partner, buys 1,450 megawatts (MW) from Bhutan, Bangladesh and Nepal get 500MW and 150MW from India, respectively. Still, Nepal faces a shortage of about 550MW.

Improving ties with south Asian countries has been the focus point of Prime Minister Narendra Modi’s foreign policy. For his swearing-in ceremony, he invited heads of all neighbouring states. This was followed by a visit to Nepal after 17 years by an Indian premier.

“It may be recalled that Hon’ble Prime Minister Shri Narendra Modi, during his 1st official visit to Nepal in an address to the Constituent Assembly of Nepal on 4 August, 2014 , had announced the building of the petroleum pipeline to Nepal," the petroleum ministry statement added.

Nepal has also been working on a plan to set up a state-owned power trader with the eight-member South Asian Association for Regional Cooperation (Saarc), signing a framework agreement on electricity trade at its Kathmandu summit in November.

An inter-connected grid planned under the agreement will allow power to be traded like any other commodity to meet the electricity demand of the region. The Saarc members are India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka, Afghanistan and the Maldives.

“When the Prime Minister undertook his first visit to Nepal, he expressed willingness to accept the longstanding demand of the product pipeline. We have started work on the same. Our vision is to emulate Modiji’s vision of Saarc to emerge as a big block and work together for energy security; as a market and as a workforce," Pradhan told Mint in an interview on 11 November.

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