Breaking the tradition of cross subsidy system under which state-owned enterprises were given tax and other privileges to enable them recoup the loss while dealing with subsidized goods, the MoCS first time is providing direct subsidy to public enterprises (PEs).[break]
The MoCS adopted new subsidy system after PEs reported loss while trading commodities like rice, sugar, salt and goats, among others, during last year´s festive season.
“We have allocated additional budget to MoCS to provide direct subsidy to PEs,” a high live source at MoF told Republica.
The MoCS is soon instructing three state-controlled PEs -- Nepal Food Corporation (NFC), Salt Trading Corporation (STC) and National Trading Ltd (NTL) -- to sell rice, sugar and salt to general public at subsidized rates during the coming festive season.
“We are providing direct subsidy to the concerned PEs according to their transaction volume of rice, sugar and salt so that they will not have to suffer losses,” said Deepak Subedi, joint secretary of MoCS.
Under the proposed subsidy, NFC, STC and NTL will have to sell rice, salt and sugar at rates lower by Rs 5, Rs 2 and Rs 5 per kg respectively compared to market price.
NFC had suffered loss of Rs 29.3 million while trading rice and goats from its five outlets in the Kathmandu Valley during Dashain and Tihar last year. Similarly, NTL lost Rs 2.4 million in sugar trading during last year´s festive season.
“The main propose of the direct subsidy is to intervene the market of essential commodities during the festivals when chances of traders involving in black marketing are very high,” said Subedi.
According to Subedi, NTL is preparing to import 5,000 tons of sugar for the festive season, while STC is adding 12,500 tons of sugar to its existing stock of 2,500 tons. NFC has 200,000 tons of rice in its stock.
The government has already decided to allow STC and NTL to procure 15,000 tons and 5,000 tons of sugar respectively at one percent customs duty under the condition that the imports process should be completed by the end of September.
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