Cost of Building Amlekhgunj-Raxaul-Motihari Oil Pipeline Soars

In the past couple of years, there has been a significant rise in the cost of construction materials. Due to which, the cost of building the Motihari-Amlekhgunj oil pipeline has gone up by at least 15% as compared to the estimated price on the former agreement of the project, reports The Himalayan Times.

The Backstory:

• An official agreement was signed in August 2015, between the government of Nepal and India for the oil pipeline which put the overall cost of the 36-kilometer-long project at Rs. 4.40 billion.
• As per the agreement, India would contribute Rs. 3.2 billion to the project, and the rest of the cost would be covered by Nepal.
• The deadline for the completion of the project was 30 months.
• However, the project has only just gained momentum in the past couple of months, after having remained dormant for nearly two and a half years.
• The Indian Oil Corporation (IOC) and other agencies appointed by IOC for the project have started unloading the pipes along the finalized route.

Why it matters:

• The price hike puts more pressure on the Nepal government.
• As per the agreement, India has already decided to contribute Rs. 3.2 billion for the project, and the rest of the fund will have to be provided by Nepal.

What they are saying:

• Owing to inflation of construction materials required for the project like pipes, rods, cement and labor costs, among others, in the past couple of years, the cost of the cross-border petroleum pipeline has climbed much higher today, informed a highly placed source at Nepal Oil Corporation (NOC) to The Himalayan Times.
• “Execution of the Motihari-Amlekhgunj fuel pipeline project is taking longer than anticipated. The project cost today has already risen a lot and is bound to increase further if the project construction work is not started soon,” said the NOC official, adding that both Indian and Nepali authorities should coordinate to execute the project as soon as possible.
• According to the NOC official, the cost of the Motihari-Amlekhgunj oil project has increased by over Rs. 600 million over the last two-and-a-half years. This means that constructing the pipeline project today will cost more than Rs. 5 billion.
• “As IOC had stated it could start construction works on the petroleum pipeline project once at least 10 kilometres of the project’s route was fully ready, we are expecting IOC to start the pipe laying process from the Parwanipur-Pathlaiya section (stretching almost 20 km), as issues related to encroachments along this part of the planned project route have been settled,” said Sushil Bhattarai, acting deputy managing director at NOC.