Nepal asks India for Rs 3b credit guarantee

KATHMANDU, May 2: As petroleum shortage deepens in the country due to the lack of cash to finance oil imports, the government has requested India to issue a three-month credit supply guarantee worth 3 billion rupees to the Indian Oil Corporation, the sole oil supplier to Nepal.



An official at the Ministry of Foreign Affairs told Republica that the government sent the request to the Indian government last week through the Indian embassy in Kathmandu and Nepali embassy in New Delhi. The Indian government has yet to respond, the official said.[break]



Since the loss-ridden Nepal Oil Corporation (NOC) has no cash to pay for oil imports, the government is left with no alternative other than to request the Indian government for a guarantee, said the official.  As per the latest price quoted by the IOC, the monthly loss of NOC has jumped to Rs 2.7 billion ($38.5 million) from last month´s Rs 1.96 billion ($28 million). The accumulated loss of the troubled NOC has jumped to over Rs 15 billion ($215 million) -- almost four times its current assets.



Continued reluctance of the political leadership to adjust domestic oil prices with the international price has been one of the main reasons behind the ballooning NOC losses. The international oil price has lately touched $124 per barrel whereas it was hovering around $82 six months ago.  



Mukunda Dhungel, NOC spokesperson, said the state-owned fuel importer is suffering a whopping loss of Rs 8.01 and Rs 23.42 per liter in petrol and diesel respectively.



Similarly, the loss per liter of kerosene has gone up to Rs 13.61 and per cylinder of cooking gas Rs 322.06. However, NOC is still enjoying a profit of Rs 7.06 per liter in aviation fuel.



Apart from the request for credit supply guarantee, the government has also initiated process to arrange Rs 2 billion in loan for cash-strapped NOC through the Employees´ Provident Fund (EPF). However, given the present scale of losses, the loan amount even if approved will barely cover NOC´s losses of one month.

 

Meanwhile, IOC has increased fuel supply to Nepal after being informed about the government´s fresh move to arrange loan to NOC. The protracted scarcity has hit consumers across the country for the last 19 days. In second week of April, the government had issued Rs 1.50 billion in loan to NOC.

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