NOC demands Rs 2b to maintain fuel supplies

KATHMANDU, JAN 04 -

The perennially broke Nepal Oil Corporation ( NOC ) has demanded another Rs 2 billion in bailout funds from the government to finance petroleum imports. Or else, it said, there could be fuel shortages from mid-January.

Jay Raj Acharya, officiating managing director of NOC , said the board had endorsed the decision and the corporation planned to dispatch a “grant” request letter to its line ministry next week.

According to Acharya, extended load-shedding hours during the winter season had swelled LPG and diesel demand, forcing NOC to ask the government for a handout to maintain smooth fuel supplies. “Due to our present financial health, we are not able to address the growing demand,” he said. “The latest tariff sent by Indian Oil Corporation (IOC) on Jan 1 has pushed up our monthly projected loss to Rs 1.85 billion from Rs 1.35 billion two weeks ago.”

The debt-ridden NOC has taken loans from the government and financial institutions amounting to Rs 33.66 billion, including  Rs 5.16 billion provided this fiscal year only to prevent NOC from biting the dust and ensure smooth supply of gasoline during the Dashain and Tihar festivals and the Constituent Assembly election on Nov 19.

If the state-owned oil monopoly’s latest demand for Rs 2 billion is okayed, its borrowings will balloon to a record Rs 36 billion.

NOC had recently invited student leaders, media persons and consumer rights activists to tell them about its financial and supply situation as a prelude to hiking prices. However, the plan fell through as it got the cold shoulder from the government which feared raising prices in the political scenario.

NOC sources said the present administration wanted to pass on the unpleasant task of jacking up fuel prices to the incoming government as petroleum is regarded as a political commodity.

“However, the discussion created an impact on the market setting off panic buying in the Kathmandu valley,” the source added. Some opportunist traders have created an artificial shortage speculating that NOC would raise fuel prices, he said. “In fact, fuel supplies in December were normal. We supplied 76,000 kl of diesel last month, which is 10,000 kl more than the normal supply,” said Acharya. Likewise, LPG stocks stood at 19,000 tonnes compared to the normal 17,000 tonnes.

As per the latest import tariff, NOC incurs a monthly loss of Rs 1.60 billion by selling 1.4 million tonnes of LPG. It subsidizes LPG to the tune of Rs 1,143 per cylinder. Likewise, its monthly losses on diesel amount to Rs 641.3 million. It subsidizes diesel to the tune of Rs 9.87 per litre. However, NOC makes a profit on petrol, kerosene and aviation fuel.

IOC reviews its export prices of petrol and diesel fortnightly and of other products such as kerosene, aviation fuel and LPG on a monthly basis. Petroleum is the largest import commodity of Nepal. In 2012-13, the country imported petroleum products worth Rs 107 billion, up 16.1 percent. In 2011-12, the petroleum import bill amounted to Rs 92.25 billion.