NOC hints at oil price hike

International price increase has compelled NOC to incur massive losses


SANGAM PRASAIN
KATHMANDU, JAN 11 -

Nepal Oil Corporation (NOC) on Monday hinted that the price of petroleum products could increase in line with the Jan. 1 hike in the price in the international market and its continued rise.

NOC general manager Digambar Jha said that the price increment in the international market had compelled it to adjust gasoline prices with global trends.

Speaking at the 41st anniversary of NOC, Jha said that the price of oil was likely to rise to the all-time high of 2008. According to Jha, crude oil in the international market was over US$ 90 per barrel and is likely to cross US$ 100 per barrel soon due to rising fuel demand worldwide.

Crude oil saw an all-time high of US$ 147.27 per barrel on July 11, 2008. The heavy increase in the price in the international market was reflected in domestic prices with petrol costing Rs 100 per litre, diesel Rs 70 litre and kerosene Rs 65 litre in 2008.

The state-owned monopoly said that the price increase since Dec. 1 had compelled it to incur massive losses. “NOC has been incurring losses of Rs 650 million each month since Jan. 1,” Jha added. He said that NOC was not in a position to bear such heavy losses as it was already reeling under outstanding dues worth a hefty Rs 11 billion. “If the government does not consider the issue, there is a chance of rampant smuggling and black marketing that could lead to severe fuel shortages.”

Minister for Commerce and Supply Rajendra Mahato said that the government had adopted a scientific price determining policy and NOC had been entrusted with revising the price based on the international market.

However, social and political pressures had made it difficult to implement the policy. “The government should think about providing subsidies to people who cannot afford to run their household in line with the increased oil price,” he said.

Secretary at the Commerce and Supply Ministry Purushottam Ojha also pointed out that prices could climb back to 2008 levels. “If the price is not adjusted in time, the problem that emerged in 2008 might resurface,” he said.

However, petroleum dealers complained that it was not only rising international prices that has induced NOC to hike gasoline prices. “Unchecked irregularities in the corporation and inadequate reform policy have forced consumers to pay the cost ultimately,” said Saroj Pandey, president of the Nepal Petroleum Dealers Association.

He added that NOC should include the private sector in its discussions to make any deal more transparent. “Bankruptcy or collapse of NOC means it will hurt the entrepreneurs who have

invested millions in the sector. Therefore, NOC should be more professional to become sustainable,” Pandey said.

Petroleum Product increasing demand

Fiscal Year Imports in KL Value in Billions

2005-06 748,935 Rs 31.95

2006-07 754,882 Rs 32.46

2007-08 723,704 Rs 38.93

2008-09 892,562 Rs 39.80

2009-10 1,050,318 Rs 50.26

(Source: NOC)