The broken oil bureaucracy of Nepal is in need of urgent reforms. This much is beyond doubt. But in the absence of political will, this vital reform agenda has been pushed to the backburner year after year. Continuing with the past trend, the new government under Khil Raj Regmi has assured Nepal Oil Corporation (NOC) of another Rs 1 billion in loans and an extra Rs 800 million in VAT refund. The loss-making NOC already owes Rs 27.5 billion in loans to various financial institutions, while its accumulated loss stands at Rs 23 billion. NOC’s projected loss for the month of March alone stands at Rs 732.8 million. The subsidies are a big drain on NOC. The oil monopoly currently loses Rs 5.43 per liter of diesel and Rs 513.14 per cylinder of LPG, losses which are not covered by its meager profits on petrol, kerosene and aviation fuel. But a big reason for the colossal losses at NOC is undoubtedly rampant corruption and lack of accountability in NOC establishment and those higher up in government chain.
Nepalis have had to pay dearly for this mess in the country’s sole oil importer and supplier. In the past few weeks, the country has been hit by yet another shortage of petro products. The cause of the latest shortage is maintenance works at the Raxaul depot. The situation was compounded after the murder of a helper of a fuel-carrying tanker operating on the Barauni-Amlekhgunj route. The ensuing arrest has decreased supplies along the crucial stretch. Unfortunately, such unplanned disruptions are not one-off, and many more seem to be in the offing. NOC has already clarified that petroleum supplies would be affected if the government does not provide it with yet another tranche of loans to clear its dues with the Indian Oil Corporation. Apparently, IOC, the sole supplier of petroleum products to Nepal, is all set to further cut supplies without the settlement of its earlier dues. The import of petroleum was down to 102,000kl in February, from 119,000kl in the earlier month.[break]
We believe the state has its strategy on oil badly wrong, on multiple fronts. The arrangement with IOC was put in place in 1970, at a time the country had a very small economy; it makes no sense to stick to the single-supplier agreement when the country’s fuel needs have increased many times over. We believe the private sector has a role in easing the procurement and distribution of petro products. If the government is not sure about the capability of the private players, it can start a pilot project to test the feasibility. It is equally important to open up the opaque NOC bureaucracy (which contributes to public skepticism on price adjustments). Crucially, back in 2011, a High-Level Petroleum Sector Reform Taskforce set up by the government had proposed vital reforms in NOC management. According to the report prepared by the taskforce, ship-shaping its distribution system could alone save up to Rs 5.4 billion annually; another Rs 6.40 billion can be saved through review of the purchase agreement with IOC. The message: If there is genuine will to clean up the muck, there certainly are ways available.
Related story
Recommendation committee proposes leadership for TRC and CIEDP...
