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Oil in the Himalayas

Publication Date : 23-05-2014

 

When the Maoist insurgency started in the remote Mid-Western hills of Nepal in 1996, the Maoist leaders cited underdevelopment as the root cause behind raising arms against the state.

They made their intent clear when they declared that multi-party democracy as an institution had failed as a system to deliver good governance.

Today, we have reached a critical juncture in our country’s political history. Politicians and political parties have to be determined to undertake radical steps in strengthening our delivery systems in terms of governance if we are serious about the sustenance of liberal democracy.

The Maoist’s are now a part of the multi- party system and we must work together in delivering governance to the people at the earliest. The failure to provide governance will invite further conflict in Nepal, pushing economic development backwards.

As we move forward with the aim of propelling development in Nepal, energy remains a constant variable that will decide the fate of Nepal’s economic push. In the absence of electricity, oil has emerged as Nepal’s most sought after resource.

Supply and NOC

On my appointment as the Minister of Commerce and Supplies, a friend jokingly told me that I would be responsible for a change in government should I fail to ease the supply of oil into the market. I knew that my friend was warning me about my responsibilities and the potential consequences should I fail to take heed of his advice. It is actually quite evident how oil has become integrated into our daily lives and this integration is firm across different income groups. In fact, oil is not just Nepal’s most sought after resource but also a national security asset.

Should the government not be in a position to supply oil smoothly in the market, disturbances will inevitably erupt, threatening the balance of our security. In simple words, we will be staring at an imploding law and order situation, which will put state institutions on the edge when they are already vulnerable.

Although the Nepali populace has remained resilient to the increasing development woes it has been facing, a sustained shortage of oil supplies would seriously test the people’s patience.

Now that I have spoken about the issues at hand vis-à-vis oil supplies into the Nepali market, let me now turn to addressing some issues. The first issue I want to address is the pricing of oil commodities and its relations with the international oil market and consequently, its impact on Nepal.

The Government of Nepal, despite all odds, has been supplying oil to the Nepali market at subsidised rates, leading to heavy financial losses for the Nepal Oil Corporation (NOC). Political parties in the ruling coalition and opposition parties have to reach a common understanding on the issue of oil pricing.

For example, a political party today could oppose the government’s decision to increase oil prices but it has to think seriously of a situation when it may come into power and face similar circumstances in the future. To this end, the parliamentary committee that has been tasked with drafting a report suggesting changes to the NOC is a cross-party committee and I believe parties of the ruling coalition and the opposition will do away with political opportunism and come to an agreement on the pricing of oil commodities.

This pricing must be consistent with the prices paid in the international oil markets. This reality of expensive oil prices, its unsustainable character and its impact to the environment could motivate the government to initiate long awaited hydropower projects that remain in the dark.

Seeking partnerships

It is an open secret like most other government corporations, the NOC too has become a victim of political interference and endemic corruption. While politicians may be agreeable to adhere to the changes suggested by the parliamentary committee tasked to look into this affair of oil pricing and supplies, the task of revamping NOC’s management will prove challenging.

The deep nexus that exists between nefarious politicians and their counterparts within the bureaucracy must be identified, dismantled and punished by law. It is here where I urge my friends in the media to be vigilant and report extensively on the political-bureaucratic nexus that is in operation against the interest of the nation.

I aim to introduce legislation that articulates stealing national property, such as oil, or engaging in the exchange of oil in the market through unlawful means, as anti-national or to be precise, treason. However, the more important point to be made here is to bring about management changes within the NOC at a professional level. Institutions such as the NOC must not be compromised for political considerations.

The vision for the future of oil supplies in Nepal has to be thought out on a strategic level, both domestic and bilateral in nature. For a starter, oil can’t replace hydro electricity but as long as hydro electricity is scarce, oil will continue to play a vital role in the growth of the Nepali economy.

The Indo-Gangetic plains are home to India’s largest population density and as India’s economy grows, energy will play a vital role in sustaining India’s growth. This is where Nepal and India need to work closely in developing one of the world’s richest hydropower reserves to propel growth, in both Nepal and India. But in order to initiate this exercise in exploring Nepal’s hydropower reserves, Nepal needs to overcome its vulnerability with its oil supplies. In order for Nepal to overcome this vulnerability,

I am determined to kick-start infrastructural reforms such as building oil pipelines, opening the Nepali oil market to private companies and bringing about structural and legislative reforms to push this process forward. I believe there is no alternative to developing a strategic bilateral partnership between Nepal and India in solving our joint energy difficulties.

A long-term strategy

In the absence of hydro electricity and the time it will take to develop probable hydro projects, we have to understand that oil is Nepal’s most valuable energy resource. In order to supply oil to the Nepali market smoothly, the Government of Nepal must be prepared to pay what it costs to do this as per the prices in the international market.

This problem is further extenuated by the simple fact that we don’t produce oil and we have to pay what it costs to ensure smooth supply. To push this forward, we need to develop cross-party understanding on the issue of oil pricing and be committed to introducing structural and legislative reforms collectively.

For this matter, it will be critical for the government to develop a team of ministers led by the finance minister to develop Nepal’s long-term energy strategy that will help rejuvenate Nepal’s frail economy.

The failure to overlook Nepal’s oil crisis will have a long-term impact on the development of Nepal’s hydro reserves, resulting in an energy imbalance in the region. The faster we act and the more strategically we think, we will get closer to the goal of sustainable development of our region.

*Thapa is the Nepali Minister of Commerce and Supplies

 

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