Lack of clarity over double taxation on oil imports from China has delayed the signing of a commercial agreement with Petro-China. The government is sending a technical team of Nepal Oil Corporation (NOC) to China on Monday to clarify the taxation issue before a high-level government delegation travels to Beijing to sign the deal.

According to the Ministry of Commerce and Supply (MoCS), the government has put on hold its plan to sign a commercial pact with China as it wants to settle fuel prices and taxes first.

“We have postponed the government level visit for now as the government has been making efforts to avoid double taxation on petroleum products before signing the commercial deal,” said MoCS Spokesperson Shambhu Ghimire. According to the ministry, NOC directors Sushil Bhattarai and Deepak Baral will be leaving for China on Monday.

The government team was originally scheduled to go to China on Sunday to sign the commercial agreement to import fuel. The government has been asking China to waive local taxes, but it has not issued any official confirmation on cancelling local tax and export duty.

Ghimire said they were sending the technical team as China had not responded on the tax issue. “Although China has unofficially agreed to waive the tax, it has not done so officially,” he said. According to him, the technical team will also discuss risks, transport subsidies and taxes besides fuel prices.

Last Thursday, the government had been all set to send a seven-member team led by Ghimire to China. It was supposed to sign the agreement paper.

If China waives the local tax, NOC will be able to sell the Chinese product at the same price it charges for the Indian product. “However, the cost will go up to Rs170-180 per litre if we have to pay tax,” said NOC Spokesperson Mukunda Ghimire.

According to NOC, it does not have to pay local or export taxes on the fuel it imports from India. The corporation has been importing fuel from Indian Oil Corporation (IOC) depots in Barauni, Raxaul, Baitalpur, Karnal, Mathura, Haldiya, Banthara, Gonda and Siliguri.

Ghimire said NOC used to import fuel mainly from the IOC depot in Siliguri. It switched to Barauni two decades ago after the West Bengal government started imposing local taxes. Following the NOC-IOC agreement in 2012, India has waived both the local tax and export duty on petroleum being provided to Nepal.

Nepal has been seeking to sign a commercial deal with Petro-China to diversify its sources following the unofficial embargo by India. On October 28, the state-owned oil monopoly had signed a framework agreement with PetroChina, which is owned by the Chinese government, to make commercial imports of fuel from China.