The committee’s report said that the petroleum sector, which is now worth more than Rs 107 billion, could not be governed by laws made in 1983. It has asked the government to create a new law within three months.

The report, which was submitted to Parliament last week, is the 12th in the series of  reports submitted to the government at different times to recommend reforms in Nepal’s petroleum sector.

On March 13, 2013, the government had issued the Petroleum and Gas Transaction (Regulatory) Orders 2013 with the view of involving the private sector in the oil business. However, the orders were cancelled following widespread criticism from experts that they were too weak to deal with the petroleum sector which has a high investment risk and is volatile in nature.

“The petroleum sector needs to be administered by an act as per the needs of the times,” the report said. It has recommended implementing an auto price mechanism in fuel sales by enforcing the proposed act.

The report said that there had been two views regarding involving the private sector in the oil trade. One group of experts have said that the government should keep the oil business under its thumb as it is directly related to public welfare and regulating prices is part of the state’s social responsibility.

Other experts have said that the government should only play a facilitating role and work for greater participation of the private sector to ensure a healthy and competitive environment.    

“As petroleum has always been a political commodity, the government needs to accord high priority to making the oil monopoly stronger,” the report said.  

Meanwhile, the panel has suggested waiving value added tax (VAT) on liquefied petroleum gas (LPG) intended for household use.

According to the report, LPG is an “essential” household commodity, and considering that Saarc countries do not charge VAT, Nepal should also cancel it. The government collects Rs 245 as VAT per cylinder of LPG.  

The report has recommended immediate implementation of the colour-coded LPG cylinders and dual pricing system. Under this longstanding plan, LPG would be sold in red and blue cylinders at different prices-red cylinders for household users and blue cylinders for commercial users.

The government would subsidise the LPG sold in red cylinders to household users but charge commercial users the actual market rate. The grand scheme was launched on June 15, 2013, but enforcement has been a failure.

The parliamentary panel has also suggested different capacities for the red and blue cylinders-14.2 kg and 19 kg respectively.

Meanwhile, debt-ridden NOC’s projected losses have bloated to Rs 839.6 million monthly on LPG alone as per the tariff sent by its sole supplier Indian Oil Corporation (IOC) on June 1.

NOC figures show that consumption of LPG has jumped 213 percent over 10 years. Sales started rising after 2007-08 and soared 19.59 percent in 2008-09 to 115,813 tonnes. Consumption surged to 207,038 tonnes in 2012-13 and demand has been growing rapidly due to extended load-shedding hours.  

The panel has recommended reducing the existing interest rate charged by the Employees Provident Fund and Citizens Investment Trust, major lenders to NOC. The interest of these two state-owned enterprises stands at 12.5 percent per annum which means the cash-strapped corporation is saddled with another burden of Rs 2.66 billion in interest payments annually. This is passed on to the consumers. As of now, NOC owes Rs 39.16 billion to the government,

banks and financial institutions and IOC.

The high-level parliamentary panel has asked the government to start the construction of the proposed 40-km Raxaul-Amlekhgunj oil pipeline in the next fiscal year with its own money. The much talked about Nepal-India pipeline project has been lingering for 19 years largely due to the indecision of the Nepal government.

A pre-feasibility study done in 2004 and a technical study done in 2006 had determined that the pipeline project would be economically viable if it were to be operated unhindered for 20 years.

The project, which was first proposed by IOC in 1995, is projected to reduce fuel transportation costs by over 50 percent. On Feb 17, 2010, the Cabinet had approved NOC’s new action plan for its construction but it has been put on ice.

The report has suggested conducting a feasibility study of the pipeline on the planned Kathmandu-Hetauda fast track project under a long-term vision. Prompted by a rise in oil theft from tankers, the report has suggested installing mechanical locks and GPS tracking of the trucks.

The panel has also recommended expanding the storage capacity of NOC’s

fuel depots. The existing capacity can fulfil the country’s requirement for only a few days.

“Hence, it is necessary to increase the existing storage capacity in the Capital and other major cities to be able to store at least a month’s supply. Other cities should have at least a week’s supply,” the report said.

The panel has also suggested developing bulk LPG storage facilities in the Eastern, Central and Western regions, and said that private bottling plants should have an LPG storage capacity of 300 tonnes.