MoF asks NOC to submit reform plan

KATHMANDU:

As Nepal Oil Corporation (NOC) has proposed the government to convert the debt it owes the state into capital, the Ministry of Finance (MoF) has said the decision cannot be taken unless NOC comes up with satisfactory reform initiative and business plan.

NOC — the state-owned petroleum supply monopoly — had submitted the proposal regarding conversion of its debt to capital at the MoF through its parent ministry, Ministry of Commerce and Supplies, some two months back.

After reviewing NOC’s proposal, MoF has asked it to submit its business plan and initiate reforms before taxpayers’ money is injected into the public entity, according to Ram Sharan Pudasaini, chief of the Corporation Coordination Division of MoF.

“NOC has yet to submit its business plan,” he informed, adding that MoF would take the decision only after receiving the plan.MoF has also said that without proper reform initiatives in the public entity, the government cannot green-light converting Nepal Oil Corporation’s debt into capital.

NOC owes the government about Rs 12.64 billion. The amount was borrowed at different points in time in the past to import fuel.

Nepal Oil Corporation officials had long been arguing that its debt had ballooned due to subsidised price in the domestic market. Consequently, the government recently introduced the automatic pricing mechanism to deregulate fuel prices. However, prices have not been deregulated entirely. The automatic pricing mechanism only regulates prices of petrol, diesel and kerosene.

NOC’s annual transaction had crossed Rs 134 billion last year, but the public entity is weak

in terms of its capital base. Its paid-up capital stands at Rs 96.7 million.“NOC needs to expand its capital base,” said its Spokesperson Mukunda Ghimire, further informing that NOC is also preparing to reevaluate its property.

NOC has total credit of Rs 30.16 billion that it owes to various financial institutions, including the government. If the government agrees to convert the credit extended by the state into capital, NOC’s loan burden will be reduced to Rs 17.52 billion.

Source: THT