Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC) on Monday signed a new petroleum supply agreement that is expected to smoothen supplies of petrol, diesel and cooking gas from India.

Nepal and India first signed a memorandum of understanding (MoU) on petroleum supply in 1974, which defines import procedures. Since the signing of the MoU, NOC has been importing fuel solely from IOC. The MoU is revised every five years. The last accord expires on March 29.

The agreement was signed in the presence of Supply Minister Deepak Bohara and his Indian counterpart Dharmendra Pradhan. Minister Bohara said, “The agreement clearly stipulates that India should provide petroleum products as demanded by Nepal. If India cannot provide adequate supplies, this agreement has freed us to turn to third countries.”

Bohara said that the latest pact was more progressive than the previous one. The agreement also allows Nepal to buy crude oil from third countries and have it refined in India, according to Bohara.

The document includes provisions on maintaining uninterrupted petroleum supply and compensation for the losses that NOC suffered during the Indian trade embargo last year, according to Minister Bohara.

Besides renewing the oil supply agreement, the two sides have agreed to expedite construction of the Amlekhgunj-Raxaul petroleum pipeline. During the meeting, Indian officials said that construction had been delayed due to problems on the Nepali side.

Minister Bohara proposed to extend the pipeline to Chitwan, and the Indian side agreed. “Nepal will bear the cost of the extended line and India will provide technical assistance,” Bohara said.

The two ministers also discussed building a gas pipeline between the two countries. As India is expanding its gas pipeline network to border areas, officials said it could be extended to reach Nepal. Similarly, the two sides talked about importing natural gas from India for the purpose of producing fertilizer.

Meanwhile, the Ministry of Foreign Affairs has expressed displeasure at the signing of the oil supply pact without consulting it and without its consent.

Two weeks ago, the Cabinet ordered that the Foreign Ministry should be consulted before signing any agreement with foreign countries, a ministry official said.

“We have been kept totally in the dark, and the Supply Ministry did not consult with us. This goes against the Cabinet decision,” said a Foreign Ministry official.