Govt extends credit line of Rs 2 billion to NOC
KATHMANDU:
The Cabinet has agreed to provide another loan of Rs two billion to the debt-ridden Nepal Oil Corporation to clear dues of Indian Oil Corporation, which sends all petroleum supplies to the country.
Of the amount, Rs one billion is being extended by the Employees Provident Fund and another Rs one billion is being provided by the Citizen Investment Trust — both state-owned entities. This decision was taken by yesterday’s Cabinet meeting, secretary at the Office of the Prime Minister and Council of Ministers Krishna Hari Banskota confirmed.
With this loan amount, NOC’s total outstanding credit hovers around Rs 32 billion, of which Rs 12.64 billion was provided by the government. Similarly, the oil company also owes the provident fund Rs 10 billion and the investment trust Rs six billion if the latest credit of Rs one billion each are included.
This is the second time the government has extended a credit line of Rs two billion to the ailing petroleum monopolist in less than one and a half months.
The oil corporation has continuously been demanding for loans as it is selling many petroleum products at loss. NOC is currently losing Rs 8.87 while selling every litre of diesel and Rs 649.01 while selling every cylinder of cooking gas.
Although the company is making a profit of Rs 7.54 while selling per litre of petrol, Rs 6.71 while selling every litre of kerosene, Rs 29.09 while selling per litre of aviation fuel to domestic airlines and Rs 32.24 while selling every litre of aviation fuel to international airlines, these gains are not enough to make up losses inflicted by sales of diesel and cooking gas.
As a result, the company is expected to post a loss of Rs 1.04 billion in the month of November.
The World Bank, in its Nepal Development Update made public in October, had asked the government to rationalise the pricing of retail petroleum products, with specific consideration for poverty impacts to bring down losses of the oil giant.
“While NOC makes a net profit on the sale of petrol, kerosene and aviation fuel, the bulk of losses are accounted for by diesel and LPG. Given that LPG is consumed essentially by urban, non-poor households and firms, and that inflationary effects would be minimised — since LPG prices do not affect transport costs — the centrepiece of a cost recovery strategy could focus on LPG pricing,” the report said.
NOC has also been trying to drive home this point. However, the government has not heeded the call as the subject is a political hot potato and could trigger protests.
In September, when the government raised prices of petrol by Rs five per litre, and kerosene and diesel by Rs three per litre, students hit the streets for weeks. At that time, domestic airline operators had also threatened to halt all flights in retaliation to the government’s decision to raise the price of domestic aviation fuel by Rs seven per litre.
To minimise losses generated from sales of cooking gas, the government had earlier decided to remove subsidy extended in sales of gas for commercial purposes that are currently being sold in blue-coloured cylinders. But that decision is yet to come into effect.
Source: THT
