KATHMANDU, August 10: Prime Minister Sher Bahadur Deuba called the ministers in his Cabinet and instructed them to reduce various taxes being levied on petroleum products after the price of petroleum products reached its highest in the last weeks of June. In the discussion between Deuba and the ministers, there was an agreement to reduce the tax on petrol by Rs 20 per liter and on diesel by Rs 29 per liter. After this agreement, Minister for Industry, Commerce, and Supplies Dilendra Badu mentioned in a press conference that the tax on petrol and diesel would be reduced by the agreed amount.
Even though Finance Minister Janardan Sharma agreed to reduce the tax at that time, no adjustment has been made as of yet. Because of this, the price of fuel has not decreased. This raises the question: Is the country’s executive head — the prime minister — really superior in terms of power to the finance minister? However, since the tax has not been adjusted so far, the arrears of the Nepal Oil Corporation (NOC) have reached about Rs 35 billion. For this reason, the corporation has not been able to decrease the price even though it received a decreased price for petroleum products from the Indian Oil Corporation (IOC). Since the tax has not been adjusted, consumers have been deprived of cheap fuel.
Either the government might have announced that the tax was to be reduced to gain cheap popularity, or that Finance Minister Sharma did not follow the instructions of the Prime Minister. Asserting that the economy may suffer due to the high price of fuel, a meeting of the ruling coalition parties also insisted on reducing the tax on fuel to give relief to the people. Both the people and NOC have been affected by the non-adjustment of fuel taxes. Despite the reduction in the price of petroleum products from the IOC, the people have not received concessions, and the corporation has not been able to reduce the price so as to manage its old losses.
It has been over a month and a half since the reduction in the tax was announced, but it has not yet been implemented. As per the government, even though the price of fuel was decreased by IOC, the corporation has not reduced it. According to Nagendra Sah, Acting Deputy Executive Director of NOC, the corporation still has a monthly loss of Rs 1.3 billion. He argues that had there been an adjustment in the tax as per the government’s commitment, the price of fuel could have been reduced as per the latest price given by the IOC.
High NOC officials say that the commitment made by the Prime Minister has not been implemented even until now. An NOC official said, “The corporation has been burdened as the Ministry of Finance did not implement the decision to adjust the tax.”
Umesh Prasad Thani, Executive Director of the NOC, said that the oil corporation was unable to reduce the price because it had an obligation to pay Rs 34 billion. “We were not able to increase the price as suggested by the government when it had increased,” he said, “And since the corporation still has dues of a large amount, we have not been able to reduce the price now that it has dropped.”
NOC owes Rs 23 billion to the IOC. It will have to pay Rs 7 billion to the government and Rs 3 billion to the Rastriya Banijya Bank. It has a total liability of about Rs 35 billion. “The corporation had about Rs 10 billion per month as losses,” said Nagendra Sah. He added, “Now it has decreased to Rs 1.5 billion per month.” According to the corporation, there was a loss of Rs 39 per liter in diesel, but now it has decreased to Rs 9.37 per liter. Similarly, there was a loss of Rs 700 per cylinder in gas, but now the loss is about Rs 500. Likewise, there was a loss of Rs 32 per liter in petrol; however, now there is a profit of Rs 2 per liter.
Even though the government had asked to pay Rs 10 per liter as infrastructure tax, the corporation did not get the tax from mid-June to mid-July. Despite giving the amount from mid-May to mid-June, the government has not given the corporation the amount from mid-June to mid-July. Currently, the price of petrol is Rs 181 per liter, and that of diesel is Rs 172 per liter. Had the Ministry of Finance adjusted the taxes, the corporation could have sold petrol at Rs 159 per liter and diesel at Rs 152 per liter as per the price list sent by the IOC on August 1. Since the tax was not adjusted, the corporation is projected to incur a loss of Rs 636.5 million in 15 days in the fuel business.
According to the price list given to NOC on July 15, the price of petrol was reduced by Rs 15.76 per liter and that of diesel by Rs 16.56 per liter. Similarly, as per the price list given on August 1, the price of diesel was reduced by Rs 12.45 per liter and the price of petrol was reduced by Rs 16.80 per liter. The corporation claims that because the tax was not adjusted, it has not been able to decrease the price even though it received a decreased price for petroleum products from the IOC twice.