PSF finally comes into operation

KATHMANDU:

The Economic and Infrastructure Affairs Committee of the Cabinet led by Finance Minister Ram Sharan Mahat has endorsed the required regulation to utilise the Price Stabilisation Fund (PSF), two months after it was sent to the Cabinet for approval.

The fund was created with an aim to keep fuel prices stable in the domestic market against price fluctuations in the international market. The automatic pricing mechanism (for petrol, diesel and kerosene) that was introduced in September last year allows increase or reduction in fuel prices by up to two

per cent from the existing prices.

Nepal Oil Corporation (NOC) — the state-owned petroleum supply monopoly — raised Rs 2.25 billion for the PSF between August 2014 and February 2015, when fuel prices continuously fell in the international market. However, it had been unable to make use of the fund as the regulation had not been approved.

PSF is also an alternative mechanism for NOC to receive funds (as loan) instead of getting loans from state-owned financial institutions like Citizen Investment Trust (CIT) and Employment Provident Fund (EPF). NOC owes Rs 10.85 billion to EPF and Rs 5.93 billion to CIT.

The government had earmarked Rs 500 million from fiscal budget 2014-15 for the PSF and asked NOC to raise money for the fund at a time when fuel prices were declining in the international market.

With the rise in fuel prices in the international market, NOC has not been able to adjust prices accordingly though it had reduced prices for nine consecutive times since September 29 last year to February 3 this year, according to Mukunda Ghimire, spokesperson for the NOC.

NOC has reportedly been facing difficulties in adjusting the fuel price in the domestic market according to the revised rates since last fortnight.

With the regulation now in place, NOC will be able to dip into the fund in times of crisis. A commerce and supplies minister-led committee will oversee operation of the fund. The committee also comprises a secretary from the Office of the Prime Minister and Council of Ministers, commerce secretary, finance secretary, National Planning Commission’s secretary, and president of Federation of Nepalese Chambers of Commerce as members. The regulation has named managing director of NOC as member secretary of the committee.As per the regulation, the fund can increase the base amount by investing in beneficial sectors.

Source: THT