Secretary of Commerce, Purushottam Ojha told myrepublica.com that the Ministry of Commerce and Supplies (MoCS) has already finalized the draft, and is forwarding the document to the cabinet for enforcement soon.
"The special legislative framework of charter will deregulate the prices and welcome the private sector to jump into oil imports and sales," he told myrepublica.com.
Sources said the government preferred to open the sector through a special cabinet decision, as it was not optimistic about the long-pushed Petroleum Transactions Bill, shelved in parliament some two years ago, to be enacted soon.
"So, exercises have been done to open the sector through a special cabinet decision," said an official. Moreover, the move follows rising pressure by experts, who argue that Nepal could miss oil sector liberalization if it did not make a decision now during the low-price era.
According to the draft disclosed to myrepublica.com, any trading firms and business houses can jump into the business by acquiring a license from the Department of Commerce (DoC). Interestingly, it remains silent on investment and infrastructure requirements for aspiring players, which were kept quite strict in the Bill.
It has been left for the private players to propose, said Ojha, who elaborated that interested parties would need to clearly cite the international supplier, procurement modality, area of operation (national or regional), and distribution networks, as well as storage and safety measures, in the proposal.
"The licenses will be issued considering the financial and technical proposal of the parties," he said.
Moreover, the draft has designated the DoC as market monitoring authority and the Department of Standard and Metrology (DoSM) as quality monitoring authority. The much-talked about high-level Petroleum Board provisioned in the Bill as the sector’s regulatory authority, however, is missing in the charter.
The concept of implementing a pricing formula and announcing a price band to prevent undue profit-taking and price undercutting, has also been ruled out for now. "The Ministry’s argument is that state-announced prices, which Nepal Oil Corporation will implement, will act as a control measure for now," said the source.
Officials noted that any party who obtained the license would need to build storage tanks of 500 kiloliters capacity, as well as other infrastructures, apart from developing its own distribution network. "Those will have to be upgraded gradually, as our aim is to replace the charter with the Petroleum Transactions Act as and when it is enacted by the parliament," said Ojha.
The Act has proposed a paid-up capital of one billion rupees for aspiring companies to import and distribute petroleum products. Companies seeking to venture into the petroleum business should also have a contract with a reputed international supplier for at least five years. They are also required to have their own storage tanks in all five development regions.
Among others, companies will need to maintain buffer stock for at least 15 days. The Act proposes to establish a Petroleum Regulatory Board to monitor the price, quality, supplies and market as a whole.
milan@myrepublica.com
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