By Sudeshna Sarkar

Kathmandu, Jan 3 (IANS) The nearly four decades of monopoly enjoyed by India's public-sector enterprise Indian Oil Corporation (IOC) in Nepal is heading towards an end with the private sector in the country having been given the go-ahead for gas imports while laws are being drafted to open oil trading as well.

Nepal's Commerce and Supplies Minister Rajendra Mahato told IANS the government has written to the Indian government, asking for a revision in the agreement between IOC and Nepal's state-run Nepal Oil Corporation (NOC), so that other gas and petro-product sellers in India can also do business in Nepal.

"In Nepal, the government has decided to open both the LPG and oil sectors to the private sector," Mahato said. "While regulations have been drafted for the import and sale of LPG in Nepal by the private sector, we are working on similar regulations for the import of oil."

When NOC began trading after its inception in 1970, it entered into an agreement with IOC to buy petro-products and LPG. As per the pact, NOC can't buy the products from any other Indian company and IOC can't sell them in Nepal to any other company.

However, with the private sector now getting the go-ahead to import LPG, a private enterprise, the Chandi Lumbini Gas Storage Company Pvt Ltd, is showing interest and has entered into talks with IndianOil Petronas, IOC's joint venture with Malaysian giant Petronas.

Chandi Lumbini was established by NCE Holdings Pvt Ltd, which has various business ventures ranging from a bank, an insurance company and a radio station.

"We hope the Indian government will answer in the affirmative and allow other companies to sell to Nepal," Mahato said. "It will benefit Nepal."

However, Nepal's private sector says that if the Indian government demurs, it will buy gas and oil from third countries, mix and refine in India and then sell the product in Nepal.

The privatisation of the trade will rescue NOC from a quagmire of subsidies and debts.

At present, it has to dole out NRS 200 as subsidy on each LPG cylinder, amounting to a loss of NRS 24 crore a month. With the addition of petrol, diesel and kerosene subsidies, last year it lost a whopping NRS 1,600 crore.

The new government is scared to raise fuel prices as in the past, such measures triggered widespread protests and violence and forced a price rollback. But if the private sector goes ahead with a price hike, the government will not be facing the music.

Also, in the past, fuel supplies were at times slashed by IOC to pressure NOC into clearing its old dues. But with private players coming in, the flow of fuel as well as cash would improve.

About two months ago, Essar sent representatives to Nepal to discuss selling oil. NOC is willing to cut a deal and is waiting for the Indian answer.

If India objects, it can continue the IOC monopoly for a few more years. But once the regulations for the Nepali private sector are ready, it will not be able to stop the entry of other fuel sellers.

In addition, it will become severely handicapped since as per the old agreement, it will not be able to do business with the private sector in Nepal.