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Hopeful fuel importers apply for permission

- Post Report, Kathmandu

Jul 8, 2016-

Sixteen private firms have applied for permission to import gasoline and cooking gas following the government’s call for applications in a move aimed at breaking the monopoly of state-owned Nepal Oil Corporation (NOC) and expanding the public’s buying choices.

The government has received 13 applications to import oil and three applications to import liquefied petroleum gas (LPG) from the prospective importers which include controversial Birat Petroleum.

Gokul Prasad Dhital, director general of the Department of Supply Management, said they were studying the documents submitted by the hopeful firms.

“If they fulfill the government’s requirement, they will be granted licences to import fuel,” said Dhital, who is also the member-secretary of a committee formed under the chairmanship of the secretary of the Supplies Ministry to look after the issues of petroleum importers and fix the price of fuel imported by them.

Malika Petroleum, Petrolimex, Birat Petroleum, Blue Lotus, One Capital Holdings, Himalayan Enterprises, National Petroleum, Downtown Investment Company, Aryan Petroleum, Karmam Bhagyam Company, Otex International, Trans Himalayan Corporation and Sonapur Mineral and Oil have applied for licenses to import fuel.

Malika Petroleum’s application has been approved and it is in the process of fulfilling the necessary requirements. Malika, Petrolimex and Avinash Energy have applied to import cooking gas.

In October 2015, amid a severe fuel crisis triggered by India’s trade embargo, the government had temporarily allowed 39 private companies to import and distribute petroleum products by enforcing the Petroleum and Gas Transaction (Regulatory) Orders 2013.

The government cancelled its decision to allow private firms to import oil last March following a public outcry against overcharging by Birat Petroleum.

As per the criteria set by the government, hopeful oil importers are required to have a paid-up capital of Rs250 million while LPG importers need to have a paid-up capital of Rs200 million.

Oil importers have to raise their capital to Rs5 billion within five years of receiving a licence. Likewise, LPG importers have to jack up their capital to Rs3 billion.

In addition, importers are required to build their own storage plants and outlets within two years after getting their import licences. Companies failing to fulfill the requirements will lose their permits, Dhital said.

UNSTABLE POLICY

In September 2012, the government had decided to smash NOC’s four-decade-old fuel import monopoly by permitting Chandi Lumbini Gas to procure LPG from Malaysian petroleum giant Petronas. But the firm failed to import any gas.

In March 2013, the government published regulatory orders in the Nepal Gazette opening the way for the private sector to engage in oil refining and trading.

But the regulatory orders, envisaged to open the petroleum business to private investment, were criticised by gasoline dealers and experts who said that they couldn’t be effectively implemented in the absence of relevant laws.

Experts have expressed doubts that the regulatory orders will attract private investment and address potential risks. The orders are too weak to govern the petroleum business which has a high investment risk and is volatile in nature, they said.

In 2009-10, the Commerce Ministry had tabled a Petroleum Act at Parliament, but it was sent back. Experts questioned the provision of allowing private firms to import fuel without the necessary laws in place. “The government can revoke a company’s licence at any time if its performance is found to be unsatisfactory,” said an expert.

A high-ranking NOC official said that it was positive about inducting private firms into the petroleum business, but cautioned that permitting a large number of importers could invite problems too.

“There is a question of sustainability of such a large number

of fuel importers,” he said.

“The business requires a large

capital outlay.” Besides, private firms may only want to distribute fuel on which there is a high

profit margin, he said. “In such a case, it could give rise to market anomalies.”

 

 

 

Published: 08-07-2016 09:02

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