NOC row:Walking on Air

NOC says it can maintain supplies for only one week

SANGAM PRASAIN
KATHMANDU, APR 18 -

Unless the government makes hard decisions regarding the supply and pricing of fuel, common Nepalis will continue to suffer crippling shortages. Such is the degree of the crisis that petroleum products have now emerged as one of the major issues in front of the government.

Amid volatile international oil prices, Nepal Oil Corporation (NOC) is struggling to maintain regular supplies in the country. The huge gap between the cost price and the selling price has required NOC to virtually beg the government for money every month to pay its import bills to Indian Oil Corporation (IOC).

With international prices spiralling, NOC has no option but to hike its selling price. But its hands are tied. NOC wants the government to allow it to revise fuel prices in line with the international market or provide additional subsidies. But the government is disinclined to raise prices. Instead, it has been providing loans to the corporation which have been subsequently converted into subsidies.

In the last four years, successive governments have always shied away from hiking the price because of a possible public backlash. Thus, increasing the price of petroleum products has now become a political decision.

On Sunday, the government okayed a loan of Rs 1 billion to NOC. The government has already lent almost Rs 4 billion to NOC in the first nine months of the current fiscal year.

The NOC management said that with this Rs 1 billion, it could maintain regular petroleum supplies for only one week. Hard up for cash to pay its import bills, NOC had slashed the import and supply of petroleum products during the last five days. “The released money will help us to normalise fuel supplies for at least one week,” said NOC general manager Digambar Jha. NOC’s monthly oil import bill comes to Rs 5 billion. NOC said that the government should be prepared to tackle shortage problems after one week if it doesn’t provide more money.

Jha said that at the current selling price, the corporation would be forced to curtail imports by 40 percent after a week. Subsequently, imports will be reduced by 20 percent each month. “Less supply means less losses.” However, the Finance Ministry has said that it couldn’t finance petroleum imports anymore.

NOC managing director Jha on Sunday suggested that NOC should be allowed to hike prices and that the increased burden should be jointly shared by the government, NOC and consumers. According to Jha, NOC and consumers each should bear one-third of the import costs of petroleum products while the government should cut the import duty by one-third. As per the price list issued by NOC’s sole supplier IOC on April 16, NOC is incurring a loss of Rs 23.26 per litre of diesel, Rs 11.25 per litre of kerosene, Rs 6.30 per litre of petrol and Rs 288.86 per cylinder of LPG.

With fuel consumption increasing every year and no adjustment in fuel prices in the domestic market, NOC’s loss is also surging. NOC has revised its estimated loss for April from Rs 1.77 billion to Rs 1.96 billion.

According to NOC, it will incur a loss of Rs 1.58 billion on diesel, Rs 100 million on petrol, Rs 50 million on kerosene and Rs 317 million

on LPG.

With uncertainty over the supply, hoarding of fuel has increased in recent times. NOC said the fuel shortage seen in the market was artificial as it had been supplying more fuel than the average requirement. The Kathmandu Valley consumes 240 KL of petrol and 600 KL of diesel daily. The supply statistics of NOC show that on April 11, 13 and 14, it had supplied 436 KL, 345 KL and 337 KL of petrol respectively and 608 KL, 516 KL and 500 KL of diesel respectively.