– By Indra Adhikari
With the hike of petroleum (POL) products in neighbouring India and the international market, the loss-making Nepal Oil Corporation (NOC) has found itself in an unsustainable condition.
Spokesperson of the NOC, Mukunda Dhungel, said gross loss of the state-owned Corporation has reached to all-time high of Rs 650 million per month after the recent POL price hike in India.
The new rate of India has come into effect to all supplies to Nepal beginning June 15.
General Manager of NOC, Umesh Prasad Dahal, told Nepalnews that they have held a number of meetings with the government officials in this new circumstance of POL market price and possible ways for readjustment of the petroleum price at par with international market. “The government should take the issue very seriously and decide immediately to avoid further losses being incurred by the NOC,” Dahal said.
The Sher Bahadur Deuba-led government had decided to give autonomy to the NOC with regards to the adjustment of POL prices as per the market situation in December 2004 but after the royal takeover in February 2005 the decision was reversed. This time as well, the NOC has been waiting for green signal from the government market price adjustment.
While making payment to the Indian Oil Corporation (IOC) – the sole supplier of POL products to Nepal– next month due on 15th of July, NOC will have to pay an additional amount worth Rs 3.5 billion simply due to hike in the price of POL products in India. NOC officials are at their wit’s end on how to foot the bill.
The NOC has more than Rs 5.21 billion worth due to the IOC. During Prime Minister Girija Prasad Koirala’s recent visit to India, the two governments agreed to simplify modalities of payments from the NOC to IOC—an entity owned by the Indian government. However, the payment modalities will be finalized during the meeting of officials of the two corporations. Dahal said NOC has already written to the IOC to organize meeting and finalize the agreement. “But we are still waiting for their response” he added.
It is obvious that the NOC will continue to incur losses as long as it is asked to procure POL products from India at higher prices and sell the same in domestic market at lower prices. According to NOC, the losses it is incurring has reached to Rs 11.06 per liter in petrol, Rs 12.35 in diesel, Rs 7.24 in kerosene, Rs 4.63 in avian fuel and Rs 171 per cylinder in LP gas.
In the span of four years, the price of crude oil has risen from US$ 23.31 in March 2002 to US$ 70.92 per barrel in May 2006. To balance the increasing price in the international market Indian government on June 5 announced the increment of Rs 4 in petrol and Rs 2 in diesel.
As the Seven Party Alliance (SPA) government is under pressure to announce some relief measures to general public in the new budget, the decision to hike petroleum prices is likely to be opposed from within the ruling constituents. But the “populist measure” would also mean that the government will be simply turning back from its commitment to let the price of POL products be determined on the basis of international market. It will also result into virtual collapse of the NOC that still enjoys monopoly in the import of the POL products in the country.