Nepal Oil Corporation (NOC), the state-owned petroleum monopoly, has asked Indian Oil Corporation (IOC) to revise surcharges being imposed on petroleum products being dispatched to Nepal, in a move that could reduce fuel prices in the country.

NOC made the proposal during a bilateral meeting held two weeks ago in Mumbai, India, said a reliable source on condition of anonymity. If IOC reduces the surcharges, as requested, petroleum prices could go down by up to 10 percent in Nepal, the source said. “IOC officials have agreed to look into the matter.”

IOC has been collecting additional fee from NOC to cover transportation cost, share financial burden arising from payment of refinery and other taxes, and cover losses that may emanate from evaporation and sea piracy. 

These costs are technically referred to as “marketing margin”, which is the difference in cost that applies to a company that buys a product with the intent of reselling it. Marketing margin includes costs of equipment, transport, labour, capital, risk and management that the supplier charges from the company to which it is supplying the product. 

Lately, NOC has started saying that IOC should not impose extra charges on petroleum products sold to Nepal citing volume of fuel that NOC purchases has surged over the years.

Fuel import from India has been jumping at the rate of 10 percent annually, according to NOC. 

Nepal and India signed a memorandum of understanding (MoU) on petroleum supply in 1974, which defines import procedures. Since the signing of MoU, NOC has been importing fuel solely from IOC. The MoU is revised every five years.

Nagendra Sah, acting deputy managing director at NOC, said it was considering on formally requesting IOC to revise the surcharges during the next meeting when bilateral pact would be revised. The last time the pact was revisited was on April 27, 2012. The pact would next be reviewed on March, 2017. 

Declining to disclose the details, Sah said NOC would hold discussions with Finance Ministry and Ministry of Supplies before formally initiating discussions on the issue with IOC.