Oil import prices rise<br/>Govt refuses to adjust retail rates

KATHMANDU, June 17: Import prices of petrol and diesel have inched up, shrinking the profit margin of Nepal Oil Corporation (NOC) and hence its loan repayment capacity, the latter by Rs 315.50 million for June. However, this is not going to impact consumers, as the government has refused the corporation´s proposal to adjust retail prices, fearing political resistance and consumers´ ire. [break]



Under the new import rates received on Tuesday, the corporation´s profit margin on petrol has dropped to Rs 6 a liter, or nine rupees less than what it needs to be able to repay loans. In the case of diesel, NOC has suffered a net loss of about Rs 1 a liter, whereas for meeting its loan repayment schedule, the corporation was required to post a profit margin of Rs 6.5 a liter.



“The new pricing has lowered our profit margin to Rs 184.50 million a month,” said NOC spokesperson Mukunda Dhungel. To keep up with its loan repayment schedule, the corporation needs a profit of Rs 500 million a month.



NOC had Rs 15.96 billion in loans till eight months ago, taken for financing imports as it went bankrupt after crude prices skyrocketed and the government refused to adjust domestic rates in line with international trends over the last four years.



But when prices receded, the government endorsed NOC´s repayment plan, which set a target of clearing loans in 30 months through profit-taking of Rs 500 million a month. Profit-taking was to be maintained by not lowering retail prices even though crude dropped as low as US$ 38 a barrel.



“Unfortunately, crude prices have caught a rising trend yet again and threaten to jeopardize our payment schedule,” said Dhungel to myrepublica.com, adding that the corporation would surely miss the payment timeline unless the government gave a nod on time for local price adjustments.



Close on the heels of rising crude prices, the Indian government this week hinted at an oil price hike. However, the newly formed government here has argued that the time is not appropriate for adjusting oil prices.



Sources said NOC did seek consent for a price adjustment, but the government turned it down.



With profits reaped by fixing domestic prices at a higher level, the corporation has managed to lower its loan liability to Rs 11.19 billion as of mid-June 2009.



Of the total outstanding loans, NOC presently owes Rs 8.01 billion to the government, Rs 986 million to the Citizens Investment Trust (CIT) and Rs 2.20 billion to the Employees Provident Fund (EPF).

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