NOC flouts law, keeps 27% profit margin on kerosene

KATHMANDU, Aug 23:

Nepal Oil Corporation (NOC) has been overcharging customers on kerosene.

The state-owned petroleum monopolist has been keeping profit margin of 26.9 percent on kerosene, a popular cooking fuel of low-income people, against the allowed margin of a maximum of 20 percent.

Black Marketing Act, 1975 allows business firms to make profit of a maximum of 20 percent.

NOC currently enjoys profit of Rs 22.61 per liter. It has been selling kerosene at Rs 84 per liter.

Bimal Wagle, chairman of the Public Enterprises Directorate Board (PEDB), said that the profit margin kept by NOC in kerosene is unjustifiable. "Kerosene is mostly consumed by people of lower economic class. Keeping such a high profit margin on essential commodity is an act of black-marketing," Wagle told Republica, adding, "Such a high profit on aviation fuel or petrol would have been justifiable."

He also said the trend of keeping high profit margin kerosene and liquefied petroleum gas (LPG) has to be discouraged as it directly affects lower income group.

"This shows that NOC has been misusing the authority to fix fuel prices on its own," Wagle, said, adding that his office, however, do not have the authority to interfere with NOC.

NOC officials, however defended, the high profit margin, saying that the number of people using kerosene as cooking fuel is very nominal. "The high profit margin has been kept for making prices of diesel and kerosene same to discourage adulteration of diesel," a source at NOC said. "If the price of kerosene and diesel is same, there won't be adulteration of diesel."

Stating that Nepal consumes only 1,500 kiloliters of kerosene a month compared to monthly consumption of more than 80,000 kiloliters of diesel, the source said: "The decision to keep high profit margin on kerosene has controlled distribution of adulterated diesel."

A former board director of NOC said profit margin on some petroleum products should be reviewed. "Profit margin on some petroleum products, including kerosene, is very high," he said, adding, "NOC should review its profit and give some relief to consumers." He also said NOC should not put burden on consumers in the pretext of clearing its debt.

NOC, which still owes Rs 20 billion to the government and different financial institutions, enjoys profit of Rs7 .02 liter profit on petrol, Rs 12.89 per liter on diesel, Rs 1.95 per cylinder in LP Gas, and Rs 60.24 per liter in aviation turbine fuel. It made profit of Rs 18 billion and paid Rs 18.26 billion to its supplier IOC and different lending agencies in 2014/15.

RELUCTANCE TO IMPLEMENT AUTOMATIC PRICING MECHANISM

Though NOC adopted automatic fuel pricing mechanism in September last year, it has been showing reluctance to implement it.

The mechanism clearly states that NOC should revise fuel price in accordance to the rates forwarded by IOC every fortnight, NOC has been maintaining that it would revise price only if there is major change.

This time too, NOC has not adjusted fuel prices though IOC has already sent the revised rate for the second fortnight of August. NOC officials said the price was not reviewed as there hasn't been any major change.

Wagle said fuel price has to be adjusted even if the change in price rates forwarded by IOC is nominal.

Source: Republica