Counterbalance fund of Rs 3.6b proposed for NOC
KATHMANDU, NOV 08 -
The Ministry of Commerce and Supplies has requested the Ministry of Finance to arrange Rs 3.60 billion as a counterbalance fund for the loss-making Nepal Oil Corporation ( NOC ) through a government budgetary allocation.
According to ministry spokesperson Deepak Subedi, the proposed fund will enable NOC to maintain regular supply of fuel and end the need for it to ask for cash from the government every time oil prices rise in the international market.
The ministry has proposed earmarking Rs 18 billion for NOC including Rs 10 billion for the price stabilization fund (PSF) in the upcoming budget. The government is planning to unveil the budget for the fiscal year 2012-13 in mid-November.
The high-level petroleum sector reform committee had also recommended to the government to set up the PSF. The basic idea of the fund is to stabilize domestic market prices when world prices fluctuate. “Profits will be deposited in the fund, and whenever NOC incurs losses, it can use the fund to offset losses so that the market will not panic over sudden and dramatic price hikes,” Subedi added. NOC can also use the interest earned on the PSF to compensate its losses.
As petroleum has been a political commodity, every time the government hikes fuel prices, it receives massive criticism from all sections of society. The perennially broke NOC currently owes Rs 27.60 billion in loans. Interest dues amount to Rs 160 million annually.
The loan burden is ultimately passed on to consumers. Presently, consumers are paying an extra Rs 1.67 on a litre of oil. The monthly projected loss of NOC currently stands at Rs 314 million. Of the total loss, LPG accounts for Rs 610 million. NOC has been enjoying a profit on the sale of petrol, kerosene and aviation fuel.
The corporation has also proposed to the government to write off its loans. It has borrowed Rs 12.64 billion from the government. Petroleum is Nepal’s largest import. It was valued at Rs 96.38 billion in 2011-12, up 27.2 percent from the previous year.
Source: The Kathmandu Post
