NOC at loss even after repeatedly hiking prices of petroleum products

Published On: May 17, 2021 02:05 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, May 17: Fuel prices rose in the international market amid the COVID-19 pandemic. The Nepal Oil Corporation (NOC) in line with the Indian Oil Corporation (IOC) increased the prices of all petroleum products except cooking gas from Sunday night. The corporation has been criticized for raising prices during the pandemic.

Even with the price hike, the NOC has a loss of Rs 1.15 billion in 15 days. Why? The corporation has incurred losses due to high taxes imposed on petroleum products by the government and consumers are forced to buy expensive fuel. The NOC has stated that it is incurring loss even after increasing the price as it has to pay high taxes to the government while buying from IOC. 

Even if the corporation buys cheap petrol from IOC, it has to pay tax under various headings. It has been paying value added tax (VAT) of Rs 55.23 per liter on petrol. Similarly, Rs 37.90 per liter as revenue and VAT on diesel has to be paid to the government. The corporation has been selling the petroleum products by adjusting transportation fare and dealer commission.

According to Binit Mani Upadhyaya, spokesperson at Nepal Oil Corporation, the corporation has incurred a loss of Rs 8.58 per liter on petrol, Rs 4.46 per liter on diesel and Rs 375.13 per cylinder on LPG. "There will be a loss of Rs 110 million in 15 days," said Upadhyaya. "The corporation has a loss of Rs 540 million on gas alone." 

The corporation has increased the price of petrol, diesel, kerosene and aviation fuel by Rs 2 per liter with effect from midnight on Sunday. After the hike, the price of petrol has gone up to Rs 123 per liter, diesel and kerosene to Rs 106 per liter and aviation fuel to Rs 78 per liter for domestic flights.

When the government levies taxes on the import of petroleum products directly related to the general public under various headings, on the one hand, consumers are forced to pay high prices and on the other hand, the corporation is running at a loss. The corporation, which has been making continuous profit for the last six fiscal years, is going to go into loss this year. The corporation has incurred a loss of around Rs 1 billion till mid-May.

Former Finance Minister Yubaraj Khatiwada had increased the tariff rates on diesel, petrol and kerosene in the budget of the Fiscal Year 2020/21. Last year, the tariff rate on diesel, petrol and kerosene was increased by Rs 10 per liter. The customs duty on petrol is Rs 25.20 per liter, while it is Rs 20 per liter on diesel and kerosene. The tax hike has had an impact on prices in the domestic market. The government has been levying tax on fuel under various headings in addition to customs tax and VAT. NOC determines the price by adding charges under various headings including infrastructure tax and pollution charges. 

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