Kathmandu, Apr. 27:

Nepal Oil Corporation (NOC) and the Indian Oil Corporation (IOC) Friday signed an agreement for supplying petroleum products to Nepal for the next five years.

Suresh Kumar Agrawal, acting managing director of Nepal Oil Corporation, and R. Karandikar, general manager (supplies) of the IOC signed the agreement on behalf of their respective organizations.

The earlier agreement ended on March 31 this year.

As per the agreement, the prices of petroleum products will be fixed by adding the cost price in fetching them from Arab Gulf to IOC depot to the basic spot prices as per the daily listing by Platts and Argus Orgnization.

As per the new pact, the IOC has agreed to slash 2.5 per cent as Price Adjustment Factor (PAF). Currently, the IOC has been charging 2.5 per cent as PAF and marketing margin. PAF includes refinery and transportation charges, among other technical losses under IOC’s current price formula.

The corporation expects a surplus wroth of Rs. 2 billion annually from the new provision that writes off the PAF.

Similarly, the new pact also made an agreement to add Mumbai Port for supplying the petroleum products in the western regions of Nepal. Earlier, the IOC had been supplying fuel from Haldiya Port. This will reduce the cost price of the fuel for the mid and far-western regions.

The two parties also agreed on additional mechanisms for ensuring quality control of fuel.

They also agreed to start a feasibility study for constructing a Raxaul and Amlekhgunj petroleum pipeline and a LP gas pipeline between Nepal and India.

The IOC has agreed to receive payment from the NOC the day following the holiday if the payment day happens to be holiday. Earlier, the NOC had been paying one day before the holiday in such cases.

They also agreed to forward the process to increase the supply of cooking gas to Nepal from the other Indian refineries like Panipath. Currently, IOC supplies cooking gas to Nepal from Haldiya and Mathura refineries.

Similarly, the NOC may also import the refined petroleum products from the international market with support from the IOC. As per the agreement, the NOC can sell the crude oil to the IOC after importing the crude oil from the international market.

The IOC also agreed to provide various training courses to increase the capacities of the employees of the NOC.

Sushil Bhattarai, deputy director of the NOC, said that the present agreement signed between the IOC and NOC was positive for Nepal and it would also enhance the capacities of the corporation for fuel supply.

He also said that the IOC had agreed to reduce the PAF considering the interest of Nepal which would generate a yearly surplus of more than Rs.2 billion.