“We are introducing the dual cylinders from August 17,” said Lal Mani Joshi, secretary at the Ministry of Commerce and Supplies (MoCS). [break]
However, the two types of cylinders will not be differently sized, as MoCS had announced earlier. “Their sizes will be the same: 14.2 kgs. But the color will be different,” he said.
According to the plan that the Ministry has worked out, general consumers will continue to get their LPG in red cylinders. Commercial consumers like hotels, restaurants, factories and vehicles will need to use blue cylinders.
“General consumers will continue getting the fuel at a subsidized rate. However, commercial consumers will be charged prices equal to the actual cost that Nepal Oil Corporation (NOC) incurs while importing the fuel,” said Joshi.
Presently, NOC is incurring a loss of almost Rs 350 on the sale of each cylinder (14.2 kgs) of LPG.
In order to ensure enforcement of the differential pricing from August 17, MoCS has also instructed NOC to immediately ask LPG bottlers to get their cylinders segregated as between general and commercial supplies.
“The onus of compliance with the new arrangement lies with LPG bottlers. If they cold-shoulder our call, they will be penalized,” said Joshi, stressing that subsidizing commercial ventures was a gross waste of state resources.
Once the new arrangement comes into effect, the 42 LPG bottling companies will need to disclose how much gas they are importing for commercial consumers and how much for the general public right at the stage of acquiring the product delivery order (PDO), and pay NOC accordingly for those quantities.
“This will enable NOC to cut its loss at the very first stage of LPG import,” said Joshi.
NOC officials also stated that the corporation has already issued instructions to LPG bottlers to segregate their cylinders for commercial supply and to that end paint half the cylinders in their possession blue.
However, the NOC´s instructions instantly drew strong resistance from the bottlers.
“It is impossible to segregate the cylinders at one go,” said Hari Pathak, president of Nepal LPG Industries Association (NLPGIA), pointing out that there are a total of 4.5 million cylinders in circulation in Kathmandu Valley alone.
Coloring 2.25 million cylinders blue will take time, he stated, adding that it will also require industries to instantly invest at least Rs 560 million as painting each cylinder costs around Rs 250.
“This is a huge investment. We cannot arrange that within a month,” said Pathak.
Not just LPG bottlers, but officials at MoCS themselves question the effectiveness of the new arrangement.
“When there is dual pricing, chances of manipulation and leakage rise. We must devise a strong control mechanism. And the plan does not guarantee that NOC´s losses will drop significantly,” said an MoCS official.
Given this situation, the official opined that the ministry should require cylinders of different sizes; that is, 19 kg cylinders for commercial supplies and 14.2 kg ones for household use, to control such manipulations.
“Mere differentiation of cylinders by color will make monitoring difficult. Besides, use of the same size cylinders will continue to make it possible for commercial users to take undue advantage of the subsidy,” he said.
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