NOC to amend automatic fuel pricing bylaw

- Post Report, Kathmandu

Feb 25, 2017-

Nepal Oil Corporation (NOC) is working to amend the Petroleum Products Auto Pricing System Bylaw with an aim to strictly impose the provision.

NOC had introduced the pricing mechanism—under which fuel prices in the domestic market are revised in line with the price list sent by its sole supplier Indian Oil Corporation—on September 29, 2014, but has failed to implement it fully for various reasons.

As a result, NOC, which had been making profits until January due to a slump in fuel prices in the international prices, has started booking losses, prompting it to amend the bylaw and enforce the auto pricing system strictly.

Prem Kumar Rai, secretary at Ministry of Supplies who also heads the NOC board, said they have already prepared a draft of the amended bylaw. “We are in the process of getting it approved by Law and Finance Ministries,” he said. 

In order to contain extreme volatility in prices, NOC has set up a price stabilisation fund which now has Rs3 billion. Due to various procedures that are to be followed to make use of the fund, NOC has failed to revise petroleum prices despite facing losses for the past two months.

At present, NOC faces an estimated monthly loss of Rs570 million. On a 

cylinder of cooking gas, NOC loses Rs162.91, while faces Rs3.95 per litre loss 

in its diesel business. “Despite facing heavy losses, NOC has failed to revise the 

prices due to complications in the bylaw,” Rai said.

As per the bylaw, NOC can reduce the prices at any time at any rate, but it can increase the prices only by 2 percent at a time for petrol, diesel and kerosene, and Rs25 per cylinder for Liquefied Petroleum Gas (LPG). NOC can compensate losses even after the price hike by making use of the price stabilisation fund.

However, to use the fund, NOC has to receive approval from either Finance Ministry or the Cabinet. 

Rai said the process of getting such an approval is quite complicated. “It can take months to acquire the approval. This is why NOC is facing losses despite the implementation of the auto pricing system.”

The draft bylaw has envisioned forming a separate committee under the Supplies Minister which will issue the approval to NOC to use the fund. “The committee could promptly take decision on releasing funds,” Rai said.

Published: 25-02-2017 09:20

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