NOC is still at a Rs 50 billion loss. Who is then making the profit from higher prices of petroleum products?

Published On: August 17, 2022 03:53 PM NPT By: Republica | @RepublicaNepal

KATHMANDU, August 17: Throughout the last fiscal year, the consumers were forced to buy fuel by paying much higher prices. Nepal Oil Corporation (NOC), which has a monopoly in the petroleum business in Nepal, should have made profit by selling petroleum products at higher prices. But this is not the case. The accumulated loss of the NOC has reached Rs 50 billion by the end of the last fiscal year 2021/22

When both buyers and sellers are at a loss, a question arises: Who is actually benefiting from the fuel business?

The NOC has been attributing the increase in the price of crude oil in the international market and the sharp appreciation of the US dollar as main reasons behind the loss. But this is not the reality. High taxes imposed by the government are the main reason behind it.

If anyone has benefited from the fuel trade, it is only the government. In the past year, the NOC has submitted a total revenue of one trillion 20 billion rupees to the government in the name of taxes imposed under various headings. Interestingly, the tax collected by the government accounts for about 35 percent of the total turnover. Last year, the total turnover of fuel was only three trillion 43 billion rupees.

Organizing a press conference on Tuesday, the NOC said it suffered a huge loss in the last fiscal year due to the high prices of petroleum products in the international market. Although the price of crude oil has continuously declined in the international market in recent days, the NOC has not been able to reduce the prices to cover its accumulated losses.

Umesh Kumar Thani, Executive Director of the NOC, said the NOC still owes 23 billion rupees to the Indian Oil Corporation (IOC). The NOC has not been able to adjust the prices of petroleum products in line with the decrease in the prices of petroleum products in the international market. Ordinary consumers are deprived of cheap fuel due to the unwillingness of the government to adjust various taxes levied on the petroleum products under various headings.

Finance Minister Sharma has not agreed to reduce the tax even though the government earlier announced that it had decided to withdraw certain taxes being levied on petroleum products. It has been almost two months since the tax reduction was announced, the decision has not been implemented yet.

Currently, the price of petrol is Rs 181 per liter, and diesel is Rs 172 per liter. Due to the appreciation of the value of the US dollar, the NOC said it continues to incur a huge loss. The exchange rate of 1 dollar was Rs 122.58 on May 1, 2020, whereas it has increased to Rs 127.34 on August 16, 2022.