Draft LPG regulation to be sent to Cabinet

- POST REPORT, Kathmandu
Draft LPG regulation to be sent to Cabinet

Dec 8, 2014-

The Ministry of Commerce and Supplies plans to submit a draft of the Supply and Distribution Orders related to LPG (liquefied petroleum gas) to the Cabinet this week for its approval. After the orders are enforced, Nepal Oil Corporation (NOC) will be able to enforce the long-planned dual pricing system on LPG.

Colour-coded LPG cylinders have been put in circulation in the market as the first step towards adopting a dual pricing system. Red cylinders are for household users and they will be sold at subsidized prices while blue cylinders are for commercial users and they will be charged the full rate.

In February 2013, the corporation hiked LPG prices by introducing a dual pricing scheme, but it was forced to withdraw its decision the very next day following widespread criticism, particularly from 11 student unions which went on the warpath demanding a price rollback.

Subsequently, on June 15, 2013, the government officially launched colour-coded LPG cylinders in the market with a view to end the subsidy given to commercial users and to enable NOC to offset its losses in its LPG business. Under the colour-coded LPG system, commercial users are not allowed to use red cylinders.

The state-owned oil monopoly had planned to enforce dual pricing within a month of implementing colour-coded LPG cylinders, but it failed to do so due to lack of proper laws. NOC believes that the scheme will help it to offset its losses and address the grievances of consumers who frequently suffer from LPG shortages.   

The corporation has been providing a subsidy of Rs 290.76 per LPG cylinder and incurring monthly losses of Rs 436.1 million. Presently, the retail price of a cylinder is Rs 1,470. “We will be finalizing the draft in the next two days and submit it to the Cabinet,” said a ministry official. “The policy is aligned with the effort to force commercial users like hotels, restaurants, factories and projects to use blue cylinders.”

The government has planned to subsidize red cylinders while users of blue cylinders will have to pay the full price. It has planned to provide one cylinder of subsidized LPG per month to a household of four members.

Meanwhile, NOC has also been drafting a working guideline to allocate LPG quotas. Under the guideline, bottlers will have to distribute 30 percent of their cylinders to commercial users like hotels, restaurants and industry.

NOC spokesperson Mukunda Ghimire said they would submit a draft of the working guideline to the NOC board after the ministry gets the go-ahead from the Cabinet. “The guideline will allow NOC to conduct effective monitoring of LPG cylinder sales.”

However, the corporation is silent over enforcing the proposed LPG consumer cards (subsidized and unsubsidized) under the government’s dual pricing scheme. In April 2012, the NOC had introduced two types of LPG users’ cards, red cards for households and blue cards for commercial establishments.

Only card-holding consumers will be eligible to buy LPG. However, no progress has been announced since then. The consumption of LPG is increasing at the rate of almost 20 percent every year. Around 1.5 million LPG cylinders are consumed across the country every month.

Published: 09-12-2014 09:57

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