How India surrendered its Nepal monopoly to China

Claude Arpi
Claude ArpiNov 06, 2015 | 13:42

How India surrendered its Nepal monopoly to China

It was unthinkable a few years ago, but it has happened. On November 3, Xinhua, China’s official news agency, announced, “Nepal has sent four fuel tankers to China’s Tibetan city Jilong (Kyirong) to receive the first lot of fuel grant to ease the fuel crisis in the country following India’s blockade.”

A day earlier, the tankers belonging to the Nepal Oil Corporation (NOC) crossed the newly-opened border post between Nepal and China at Rasuwagadhi. Deepak Baral, the NOC’s spokesperson, stated, “Though we planned to send 12 empty tankers today, only four have been sent owing to heavy snowfall which has obstructed the highway.”



Though the NOC tankers had a capacity of 12,000 litres, they only collected 9,000 litres of petrol each, owing to the poor condition of roads.

In a way, the number of tankers was irrelevant. China just wanted to break India’s monopoly of oil supply to Nepal and publicise it. For Nepal, it was a historic first; for India, it would remain for a long time an incident to ponder, as it marked the end of a special relationship with Nepal which lasted (with ups and downs) for centuries.

Will India look at what went wrong? Unfortunately, introspection is usually not South Block’s forte.

There is no doubt that the opening of the Kyirong (called Gyirong or Jilong in Chinese) land port between Tibet (China) and Nepal can provide a tremendous boost to Nepal’s all-important economic relations with its giant northern neighbour. Already in 2014, the official China Tibet Online reported, “The Gyirong port has been listed in the key work plan of national ports in 2014.”

The earthquake in April this year (with its epicentre in Kyirong) delayed the port’s operations, but it is now functional. Earlier in October, The South China Morning Post had reported that China may provide fuel to Nepal through Kyirong “amid undeclared blockade by India”, and that “China will supply Nepal with 1.3 million litres of fuel to ease crippling shortages after protests over a new constitution blocked imports from India.”


Even after trucks had been stranded at the India-Nepal border for several weeks forcing fuel rationing across Nepal, observers were incredulous. Can China supply oil to Nepal? But on October 26, Sushil Bhattarai, NOC’s deputy managing director, confirmed to AFP that China had agreed to offer “as a grant”, 1.3 million litres of petrol.


The French news agency noted that it was “unclear whether China has donated fuel to Nepal”, adding “the two countries have never commercially traded oil or gas (in the past).” A few weeks earlier, the Nepalese ambassador to India, Deep Kumar Upadhyay, had given a hint of what was coming. He had asked India not to “push it to the wall” by blocking petroleum and other essential supplies; otherwise the landlocked country would have to find alternatives “despite logistical difficulties”.

Even if the constitutional issues are resolved to the satisfaction of all (and not only a section of the Nepalese population), China is already the clear winner. On September 21, Beijing had congratulated Kathmandu on the promulgation of its new constitution made public on the previous day.


The relations between Nepal and Tibet are upbeat too. On the day the new constitution was promulgated in Nepal, Dadhiram Bhandari, an official at Nepal’s consulate in Lhasa, lavishly praised China for its role in Tibet: “Despite having a similar topography, Tibet has taken a heightened step in development whereas Nepal is still crawling.” Bhandari told Xinhua that Nepal should learn from the dedication of the Chinese government and its commitment towards the development of Tibet.

This is of course propaganda, but the fact remains that Nepal and China are getting closer by the day, at a time when the relations between Kathmandu and New Delhi are frosty. Nepal is also eyeing the waves of tourists invading Tibet (17 million are expected in 2015). Kathmandu calculates that it would greatly benefit if even ten per cent of the Chinese tourists to Tibet could be diverted to Nepal. Out of the eight lakh foreign tourists visiting Nepal every year, already about half are Chinese.


Reversing the trend will not be an easy task for New Delhi. Many in Kathmandu are happy with the new turn of events. An editorial in The Himalayan Times mentioned the MoU between NOC and Petro-China: “Nepal has ended the four-decade-old monopoly of the Indian Oil Corporation (IOC) for the supply of petroleum products to Nepal.” The Nepali newspaper added, “The initial understanding is that Nepal would import up to one-third of petrol, diesel and cooking gas required for Nepal at the same price that Nepal has been buying from IOC.”

But perhaps even more dramatic for India, by the end of the decade, trains will reach Kyirong. Beijing has planned the construction of a railway line connecting Shigatse with Kyirong county and Nepal’s border during the 13th Five-Year Plan (2016-2020). Then, not only Chinese tourists, but also commodities, including oil, food products, etc will flow into Nepal.

In the long-term, it signifies that China will replace India as the main supplier of commodities, which will have serious political consequences. So, has India already lost the battle? The problem is that India is often seen as a country which reacts rather than taking any pro-active initiative. It is not the case with Beijing.

Last updated: November 06, 2015 | 21:13
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