KATHMANDU, June 12: The government on Sunday hiked the price of petrol by Rs 5 per liter, but refrained from adjusting prices of diesel and liquefied petroleum gas (LPG) that have been generating biggest oil loss to the state-owned petroleum supplier Nepal Oil Corporation (NOC).
As per the new hike, consumers in the Kathmandu Valley will now need to pay Rs 102 for a liter of petrol.[break]
With the fresh price hike, the cash-strapped NOC now generates a profit of Rs 2.29 on a liter of petrol. But given that petrol bears just about 10 percent weight in overall petroleum business, the change, which added substantial financial burden on the private vehicle owners, had very little positive impact (just about 4.5 percent) in the overall financial statements of NOC.
“The hike will cut our monthly loss by Rs 60 million. This might sound big. But when compared to the volume of loss we are suffering, which was Rs 1.33 billion prior to hike, the figure is pretty insignificant,” said NOC Spokesperson Mukunda Dhungel.
Pricing data issued by the NOC shows that diesel, which occupies 60 percent weight in the fuel market, alone is generating over 75 percent (Rs 1.01 billion) of the total loss to the corporation. Likewise, liquefied petroleum gas occupying about 20 percent weightage is generating almost 23 percent (Rs 423.19 million) of the total loss.
These facts clearly show that the real loss is coming from diesel (loss of Rs 15.60 per liter) and LPG (loss of Rs 385.44 per cylinder).
“But instead of closing these floodgates, the government is concentrating on plugging the smaller seepages. This will neither help NOC, nor does justice to petrol consumers,” said an official at the Ministry of Commerce and Supplies.
NOC chief Digambhar Jha said the government refrained from raising diesel price because of inflationary pressure it exerts in the economy.
As for LPG, officials said the government fears hike in its price will trigger consumers uprising, particularly as it is a popular household fuel of urban citizens. Experts, meanwhile, tagged such arguments as lame excuses of the government.
“If the government wants to funnel the scarce resources in the much-needed basic services and ensure economic stability, it should take right decisions,” said an official at Ministry of Finance.
But as the government consistently refrained from adjusting domestic prices in line with the international trend, NOC has suffered well over Rs 6 billion in loss over the first 10 months of this fiscal year alone.
While it seriously distorted its fund flow, the corporation over the past six months relied solely on loans to finance imports. NOC records show that it has already taken loans of about Rs 5 billion from the government and financial institutions to finance imports during the period.
This has jacked up NOC´s total outstanding loans liability, including those that it took in 2008 and 2009, to Rs 17.39 billion. It includes Rs 3.90 billion taken from Employees Provident Fund and another Rs 1.13 billion taken from Citizens Investment Trust.
“Unfortunately, our fund flow still remains ominous. We will soon need another tranche of loans from the government if we are to ensure uninterrupted fuel supply,” said Dhungel.
NOC sources told Republica that the corporation has already initiated talks with the government for Rs 1 billion in loan to finance import over the next one month.
“We have no other option but to patch up our fund flow by knocking on the doors of the government unless the government dares to take unpopular but sensible decision on oil pricing,” the source said.