NEW DELHI: State-owned Indian Oil Corp (IOC) today said it has signed an agreement with Nepal Oil Corp (NOC) to lay a Rs 275-crore oil pipeline from Raxaul in Bihar to Amlekhgunj in Nepal.

"Subsequent to signing of an MoU between the government of India and the government of Nepal on August 24, 2015, IOC and NOC signed an MoU on August 25, 2015 in Kathmandu for construction of Raxaul-Amlekhgunj petroleum product pipeline with a 1.3-million tonne per annum capacity," the company said in a statement.

The pipeline as well as some maintenance work at Amlekhganj petroleum depot of NOC will cost Rs 275 crore. "The completion period is 30 months after receipt of statutory clearances," it said.

Nepal depends on India for meeting all of its fuel requirements. Petrol, diesel, domestic LPG and jet fuel (ATF) are currently trucked from IOC's depot at Raxaul to Nepal.

The 41-kilometre pipeline -- 2 km in India and 39 km in Nepal -- will initially supply petrol, diesel and kerosene.

The pipeline, IOC said, will "ensure long-term supply of petroleum products to Nepal as well as stability of supplies from India to Nepal, which will benefit both the countries".

India exports about USD 1.1 billion worth of petroleum products per annum to Nepal. Bulk of this volume will be transported through this pipeline.

The pipeline was first proposed in 2006 for transportation of fuel from Raxaul to Amlekhgunj and was to be funded 50:50 by IOC and NOC. The project, however, never took off as Nepal refused to fund its share of cost.

IOC has now agreed to pick up the tab of Rs 200 crore for the pipeline in exchange of Nepal committing to buy products for at least 15 years.