Petroleum dealers, experts flay petroleum regulatory orders
KATHMANDU, MAR 26 -
The recently released Petroleum and Gas Transaction (Regulatory) Orders 2013, envisaged to open the petroleum business to private investment, has drawn flak from gasoline dealers and experts over its effective implementation without related legislation.
On March 13, the government published the regulatory orders in the Nepal Gazette, opening the way for the private sector to engage in oil refining and trading and ending the state-owned Nepal Oil Corporation’s (NOC) four-decade-old monopoly.
Experts have expressed doubts that the regulatory orders will attract massive private investment and address potential risks. According to them, the orders are too weak to govern the petroleum business which has a high investment risk and is volatile in nature.
“How can the government draw massive investments by just issuing regulatory orders?” said Purushottam Ojha, former secretary at the Ministry of Commerce and Supplies. “As petroleum is a very high risk business, the regulatory orders cannot govern its consequences. The government should have brought a Petroleum Act through an ordinance instead of issuing regulatory orders,” he added.
The minimum paid-up capital required for refining companies, petroleum trading firms, LPG importing firms and LPG bottling plants has been set at Rs 20 billion, Rs 10 billion, Rs 5 billion and Rs 50 million respectively by the regulatory orders.
Private companies dealing in petrol, diesel and kerosene are required to install a depot with a capacity of 20,000 kl while LPG bottling plants are required to have a stock capacity of 500 tonnes.
Meanwhile, experts have pointed out that the orders have not ensured the investment of the financiers as the Nepal government can suspend their license at any time.
“For example, if a minister is not satisfied with an investor, he is allowed to suspend the license over even a small issue,” said Ojha. “The base of the regulatory orders is too fragile to assure investors who will need to invest billions. Hence, there is a need for an act.”
Some three years ago, the Commerce Ministry had tabled a Petroleum Act at Parliament, but it was sent back for further consultation. Government officials said that four to five rounds of consultations had been held since then on the proposed act.
Energy expert Amrit Nakarmi said that the government has entrusted regulatory work to a unit of the Department of Commerce. “It is doubtful how effective the orders will be when a small unit has been assigned to look after such a volatile and high investment business,” he added.
“The government should have brought a Petroleum Act. However, as there is no Parliament at present, it should have formed an independent regulatory body to look after it,” said Nakarmi, who is also a former general manager of NOC.
Concurring with Ojha, Nakarmi said that a big question can be raised over the provision allowing the government to revoke a company’s license if its work is found to be unsatisfactory. “It can be stated that the orders lack wider consultation. The oil business is a very competitive business, and Nepal being a land-locked country which is totally dependent on imports, there is a need for a Petroleum Act,” he said.
Both Ojha and Nakarmi rejected the idea that gasoline dealers and retailers had opposed the regulatory orders because they felt the need for an act. The sellers will naturally look after their interest, but it is the government that needs to examine logically whether it can govern the petroleum business through a regulatory order, they said.
Meanwhile, the Nepal Petroleum Dealers National Association (NPDNA), the Nepal LPG Industry Association (NLPGIA) and the Nepal Petroleum Transport Entrepreneurs Federation (NPTEF) have closed ranks to oppose the government’s decision. They have threatened to stop fuel sales from April 1 if the government does not revoke the regulatory orders.
“We have submitted a memorandum to the Prime Minister’s Office asking it to revoke the orders,” said NPTEF president Khageshore Bohara. “The government has issued regulatory orders instead of an act, and we are not satisfied with that,” Bohara said. The orders will hurt the dealers and retailers, he added.
According to him, the ministry has issued the orders unilaterally without holding extensive discussions first. “If the petrol pumps were to comply with the orders, there won’t be a single one remaining in the Kathmandu valley,” he said. As per the orders, gasoline stations cannot be established within a 500-m radius of each other. Similarly, the maximum age limit for fuel tankers has been brought down to 15 years from 25 years.
Bohara said that there were a number of provisions in the orders that traders would not be able to fulfil. “We are not against the entry of private players, but the orders are solely aimed at displacing the existing traders,” Bohara added.
Nakarmi said that the government’s move was positive, but it lacks proper homework. “The entry of the private sector will make the market competitive and also attract multinational companies.”
Experts said that only four oil companies would be feasible here considering the size of the market. In order to bring private investment, the government should end subsidies on petroleum, but it is a difficult thing to do as it has always been a political agenda, they said.
The petroleum business in Nepal is worth Rs 97 billion annually. Demand has been rising at the rate of 15-20 percent annually due to extended load-shedding hours and development activities.
Source: The Kathmandu Post
