Nepal's supply corridors: why India and China routes decide costs
A shock in the Strait of Hormuz exposed how Nepal's fuel, medicine and fertiliser lines run through two neighbours, and why supply security is now a task for diplomacy.
A tanker blocked in the Gulf does not look like a Nepali problem. Yet after Iran closed the Strait of Hormuz following US-Israeli strikes on 28 February 2026, the shock reached a landlocked country thousands of kilometres away. An essay in Khabarhub puts the rise in petrol and diesel prices at roughly 40%, and says a cylinder of cooking gas climbed to Rs 2,160, without dating that price.
The episode shows how a landlocked economy lives: nearly everything it needs arrives across someone else's territory. For businesses, the question is no longer only what imports cost, but which road they take and who controls it.
A shock from far away
Daily transits through the Strait of Hormuz fell from an average of 129 ships to single digits by early March 2026. Brent crude rose by more than 74% between 27 February and 9 March 2026, from under $52 a barrel to peaks of $90 to $145.
India draws roughly 88% of its crude, 90% of its LPG and 69% of its LNG from the Persian Gulf, and it was hit hard. By April 2026 more than 40% of its usual maritime energy flows had been choked off, and crude imports slipped from 5 million barrels a day in February to between 4.3 million and 4.4 million.
Nepal relies on India for all of its refined petroleum. Higher crude costs were passed from the Indian Oil Corporation to the Nepal Oil Corporation, which handles petroleum procurement, storage and distribution, and from there to pumps and households. Consumer price inflation reached 6.34% by September 2026, with food and beverages at 7.54%. Facing depleted fuel buffers and panic buying, the government rationed LPG, filling cylinders only half-way, and imposed a five-day working week. The essay does not give dates for these measures.
Source: Khabarhub essay; figures not independently verified
The southern lifeline
Trade figures show how lopsided the arrangement is. More than 77% of an annual import bill of Rs 2,100bn is split between India and China. India supplies over 57%, or Rs 1,210bn, including a virtual monopoly on petroleum products.
Refined fuels and LPG from India are worth Rs 185bn a year and arrive over flat terrain and through the Motihari-Amlekhgunj pipeline. India also provides over 90% of Nepal's pharmaceuticals, worth Rs 32bn. At the central bank's rate of Rs 150.21 to the dollar, the Rs 1,210bn bought from India is about $8.1bn.
Source: Khabarhub essay; figures not independently verified
The northern counterweight
China is often cast as the natural balance to India. A 2016 transit protocol identified six border points and promised access to Chinese land and sea ports. China accounts for roughly 20% of imports, or Rs 425bn, and is a main supplier of agricultural inputs, with Rs 25bn to Rs 30bn of chemical fertiliser a year.
But the geography is unforgiving. The Rasuwagadhi and Tatopani passes are vulnerable to landslides and winter freezes. On these facts, the northern route can supply fertiliser, but looks poorly suited to carrying oil and medicine, which cannot wait. Nepal's infrastructure is also built around the Indian plains, with little capacity to redirect flows north at short notice.
Leverage and its limits
Dependence is not a weakness in itself. Closeness, existing infrastructure and long-running commercial ties give Nepal real advantages, and interdependence can strengthen a relationship when agreements are reliable. The risk lies in having no contingency plan, no diversified procurement and no dependable transport.
Nepal cannot influence events in the Gulf or the Red Sea. It can influence how prepared it is. Several bodies already hold part of the task: the Ministry of Foreign Affairs, the Ministry of Industry, Commerce and Supplies, the Nepal Oil Corporation, and the health, agriculture, transport and customs authorities. A reasonable reading is that supply security belongs in the permanent work of diplomacy rather than being handled once shortages appear.
For investors, that makes logistics a pricing factor. Importers of fuel and medicine depend heavily on the southern corridor, and the 2026 shock showed how quickly such exposure can feed into inflation and operating costs.
What to watch
- Whether Kathmandu negotiates firmer supply and storage arrangements with New Delhi, and how fuel pricing is handled in them.
- Any investment in the Rasuwagadhi and Tatopani routes, and use of the 2016 transit protocol.
- Fuel reserves held by the Nepal Oil Corporation, and whether rationing is lifted.
- Inflation readings after the September 2026 figure of 6.34%.
How this story was made: researched and written by The Standard’s desk with AI assistance, from the published reporting and official data credited below, and checked against those sources. Our standards.
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