Nepal Oil Corporation (NOC) has said that it will clear all its debts by the end of this fiscal year. The corporation has taken massive loans from the government and various financial institutions over the years to stay afloat after running up huge losses.

According to the state-owned oil monopoly, it has repaid all the loans taken from various banks and financial institutions, and the only outstanding amount is the Rs800 million it owes the government.

NOC repaid a loan of Rs2 billion to the government last week. The cash-strapped corporation’s financial condition started improving after global oil prices went into freefall. Spokesperson for the company Mukunda Ghimire said they planned to clear the remaining dues by next week.

NOC has been in the red since 2001-02 after oil prices started climbing in the international market. According to the enterprise, prices rose to a high of $147 per barrel in 2007. Ghimire said that the corporation had been borrowing money from the government to be able to sell fuel at subsidised rates since then.

It became possible for NOC to repay its debts after starting to make profits due to falling crude prices and the automatic price mechanism it adopted in September 2014. However, it has not yet fully implemented the automatic price adjustment mechanism.

Brent crude prices fell to $27.67 per barrel last January, its lowest since 2003. 

Based on the tariff that NOC received on Friday, its monthly profit is projected to reach Rs500 million in July. “We have planned to settle the government’s dues out of the monthly profit and our reserve fund,” said Ghimire.

NOC’s total debts stood at a staggering Rs36 billion as of fiscal year 2013-14. It owed Rs12.64 billion to the government and the rest to different banks and financial institutions including the Employees Provident Fund and Citizen Investment Trust. NOC said its loans shot up due to the heavy losses it suffered by selling liquefied petroleum gas (LPG) at subsidised prices.

NOC has been providing subsidies on LPG which reached a maximum of Rs1,043 per cylinder in January 2013. “As a result, the corporation was incurring monthly losses of Rs1.5 billion,” said Ghimire. NOC had announced a dramatic turnaround in the last fiscal year posting a profit of Rs18 billion after five straight years of losses. The last time NOC made a profit was in 2008-09.

Ghimire said that they were not in a position to distribute bonuses to the employees even after making large profits. He said the NOC board had been waiting for the Finance Ministry’s go-ahead to distribute dividends. 

In August 2010, the company’s decision to distribute Rs198.8 million in bonuses to its employees from its profit of Rs3.31 billion for the fiscal year 2008-09 was struck down by the Commission for the Investigation of Abuse of Authority. As the corporation was facing cumulative losses, it was prevented from handing out bonuses.

Again in January this year, despite accumulated losses, NOC had provisioned Rs900 million in bonuses to its employees. The plan was again rejected by the Finance Ministry.

NOC had proposed to the government to capitalise the Rs12 billion it owed to the Finance Ministry. However, it was told to repay the loans instead as it was making profits due to falling international fuel prices.

NOC, IOC hold talks

KATHMANDU: Nepal Oil Corporation (NOC) held tal-ks with delegates of Indian Oil Corporation (IOC) to renew the bilateral oil agre-ement that will end next March. NOC Spokesperson Mukunda Ghimire said they held talks with the delegation led by IOC Executive Director Sri Harsha P Shivaji. The team will stay in Nepal till July 4. According to Ghimire, the meeting decided to form separate committees of NOC and IOC to draft a new agreement.