KATHMANDU, Jan 1: Braking the 45-year monopoly of Nepal Oil Corporation (NOC) in petroleum transactions in Nepal, the government has issued a permanent license to Malika Petroleum Private Limited, for petroleum business in the country.
The Department of Commerce and Supply Management (DoCSM) issued a permanent license to the private company for petroleum business in Nepal, on the recommendation of the government's Petroleum and LP Gas Management and Regulation Committee.
Malika Petroleum is a Kathmandu-based private company chaired by Dipak Raj Timalsina. The issuing of the lisence means NOC will face its first ever competition once the private firm enters into fuel transactions.
The Petroleum and Gas Transaction (Regulatory) Orders, 2069 had opened the doors for private sector participation in the petroleum business for the first time in Nepal. Malika Petroleum is one of four companies that had applied with the government for engaging in a permanent petroleum business in the domestic market.
“We have issued a permanent license to Malika Petroleum as the firm appears viable for engagement in the petroleum business in Nepal,” said Shambhu Koirala, member-secretary of the Petroleum and LP Gas Management and Regulation Committee. Koirala, who is also director general of DoCSM, told Rebublica that the company vows to manage all infrastructure required for petroleum trading within two years.
As per the provisions of the Petroleum and Gas Transaction (Regulatory) Orders, 2069, Malika Petroleum has fulfilled the criteria of a paid-up capital of Rs 250 million in the preliminary phase. However, government provisions make it mandatory for the private company to increase its paid-up capital to Rs 5 billion on a phase-wise basis once the company begins market transactions.
Similarly, as per the petroleum regulatory orders, the company will have to build 20,000 kiloliter storage capacity for fuels—14,000 kiloliters for diesel, 5,000 kiloliters for petrol and 1,000 kiloliter for kerosene. As per the provisions, the private company can fix the fuel rates on its own, but within the price ranges determined by the Petroleum and LP Gas Management and Regulation Committee.
The private company will have to submit a detailed and finalized report showing its readiness to enter into the petroleum business, within two years of getting the license.
“The committee itself will study the final report of the private firm before recommending to DoCSM to give the 'go-ahead' for petroleum transactions,” Koirala said, adding, “While the company will set the fuel rates as per the international market, the government will play a regulatory role in issues related to quality.”
Koirala further said that petroleum products supplied by the private firm can be cheaper compared to NOC rates because NOC has been keeping quite a big margin in all petro-products to reduce its debts.
Malika Petroleum officials said that they are working to go into petro-transactions within one and half years. Talking to Republica, Dipak Raj Timalsina, chairman of the company, said, “We have been working in depth to manage infrastructure, and talks with a possible Indian supplier are going on every day.” “If things do not stall, we will enter into petroleum transactions in the market within one and half years,” he added.
Timalsina informed that the company has been dealing with foreign contractors to build fuel storage tanks in Chitwan, Birtamod and Nepalgunj in the first phase. In the second phase, the company will construct five more fuel storage tanks, one each in the five development regions, according to him.
The company is also in the process of purchasing required tankers and bullets to supply petroleum products.
“We aim to cover 10 percent of Nepal's fuel market within the first year of entering into transactions and gradually up to 30 percent in a matter of some years,” Timalsina added.
Meanwhile, Malika Petroleum has also applied for a license for LP Gas business in the domestic market. However, the government is yet to decide on this application.
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