Looking over the border, Nepal’s Madhesi ethnic population, which makes up a third of the overall population, has managed to bring the country to a standstill by cutting off critical energy system transport routes.
The Indian Oil Corporation (OIC) supplies all of Nepal’s oil. For its trucks, there are six highway entry points in Bihar, one in Sikkim, and one in Uttarakhand; only one, Birganj, is directly connected to Kathmandu. As the Nepali government sends out armed escorts for fuel tankers, it will likely station troops at regular intervals along the 70 mile stretch from the Raxaul fuel depot in India to Kathmandu. The tourist hotspot city of Pokhara is 70 miles away from that point and no highway connects it to Raxaul. A pipeline was to be built from the capitol to the fuel depot, but Nepal was unable to bear the financial costs.
Some facts:
- Of the 38 bandhs and blockades in the past month in Nepal, 80% have occurred along the Indian border. Markets, industry, governance offices, are all shutdown in the region.
- Cascading failure: 50% of Kathmandu’s automobiles are not functioning. Private fuel distributors are shutdown while a few public sector nodes continue to provide oil to long lines of people.
- Kathmandu keeps a reserve of approximately three days. Pokhara only keeps enough for one day of disruption.
It is the convergence of many factors that is hitting Nepal hard:
- International uncertainty. Drives oil prices up.
- Heavy subsidization. The state-run Nepal Oil Company (NOC) is required to buy oil from the OIC at international market price sell it at low cost.
- Domestic uncertainty. OIC reducing oil supply in an effort to minimize losses as the political risk increases.
- Institutionalized corruption. 65% of end-user bought oil is a mixture of half-kerosene and water. This requires significant payoff of a large section of the government. This offers little incentive to change the status quo.
The situation is simply untenable and likely to worsen.
