NOC claims profit, decides Rs 200m staff bonus

KATHMANDU, July 20: Nepal Oil Corporation (NOC), the insolvent state-owned petroleum supply monopoly that still relies on loans and price hikes to finance imports, has decided to distribute Rs 198.8 million as bonus to its staff for fiscal year 2008/09.

The amount is equal to the cumulative staff salaries and perks for over 17 months. NOC has not yet distributed the bonus, though.

That is not all. NOC has also set aside an additional Rs 184.89 million for staff housing arrangements.

The decision on the bonus has been taken despite NOC incurring an accumulated loss of Rs 7.92 billion and suffering a negative net worth of Rs 7.63 billion as of the end of 2008/09.

The corporation had suffered a loss of well over Rs 22 billion over seven consecutive years till 2007/09. As of the end of fiscal year 2008/09, it had Rs 11.19 billion in outstanding loans to settle with the government, the Employees Provident Fund and the Citizens Investment Trust.

Worse still, NOC´s provisional financial statement for 2009/10 shows it incurring a loss of well over Rs 1 billion. It continues to rely on loans to maintain imports and supplies. Just three weeks ago, it had taken out an additional loan of Rs 800 million from the government for maintaining the fund flow.

"Clearly, the money for bonus and housing arrangements should have been used to service the loans and improve the financial health of the corporation," said a source.

However, NOC´s influential managers, who got the bonus endorsed by the board as well as by the recent annual general meeting (AGM), argued that staff were entitled to bonus because of a NOC profit of Rs 3.31 billion during the year.

Their claim is in line with the Bonus Act, which allows any corporation to distribute bonus of up to 8 percent of profit even if it has a cumulative loss.

However, the Ministry of Finance (MoF) has already tagged this provision as faulty. But its efforts to amend it have not yet succeeded.

Senior MoF officials and consumer rights activists decried the NOC decision as foul play.

Consumer rights activists noted that the corporation showed a profit because it did not transfer the benefits of the crude price dip to consumers. "This (profit retention) was done in the national interest; to enable NOC to repay its loans. It was not meant for distributing bonus to staff," said Jyoti Baniya of Nepal Consumers´ Rights Forum.

During 2008-2009, crude price had plummeted from $ 147 to $ 40 per barrel, but the corporation retailed fuel at prices averaging at $ 75 per barrel.

NOC Chairman Purushottam Ojha and Managing Director Digambhar Jha had said then that charging consumers extra was necessary given the huge dues and loans repayable by NOC. "We will use the profit to clear those dues," they had stated.

Unfortunately for consumers, the corporation is using the extra money that they paid for their fuel to distribute a handsome bonus to staff once again.

"This has disclosed the character of the NOC board and management. The government must ask NOC to roll back the decision," stated Baniya.

Interestingly, NOC board members who endorsed its financial statement that clearly speaks about the bonus said they have no idea about NOC provisioning bonus for its staff.

Even Jha denied any bonus in his initial response. "We have not set aside anything for bonus. The AGM did not even mention the b of bonus," he told Republica.

But he changed his line as soon as Republica produced the financial statement and the AGM minutes. "We had to provision it because we made a profit during the year. But I will not distribute it," he later said.

Jha said he will not distribute bonus till the corporation´s cumulative losses end. However, sources noted that as the bonus has already been endorsed by the AGM, the corporation can go ahead and distribute it as and when it deems appropriate.

NOC´s Financial Health (FY 2008/09)

Net Worth Rs 7.63 billion (Negative)
Accumulated Loss Rs 7.92 billion
Outstanding Loans Rs 11.19 billion
Annual Profit Rs 3.31 billion
Dividend to Shareholders Nil
Bonus to Staff Rs 198.8 million

Present Status (FY 2008/09 estimates)

Annual Loss Over Rs 1.10 billion
· Still dependent on loans to finance imports
· Govt issued loan of Rs 800 million just two weeks ago to enable NOC to maintain supplies


Source: http://www.myrepublica.com/portal/index.php?action=news_details&news_id=21223