LPG firms make a killing, flout safety norms

KATHMANDU, Oct 8: Though Liquefied Petroleum Gas (LPG) bottling companies are making a hefty profit and claiming exorbitant amounts from Nepal Oil Corporation (NOC), they are found to be not fulfilling their responsibilities as per the payments made to them by the state-owned petroleum monopolist under various expenditure heads.

In addition to allocation of a profit margin, NOC has been setting aside certain amounts for various expenditures incurred by the companies, from transportation of the LPG to its distribution. NOC has allowed the companies to sell the LPG at a profit margin of Rs 28 per cylinder.

NOC has been bearing the cost for transportation from Barauni refinery to Kathmandu and local transportation, as well as working loss and overhead such as distribution and maintenance of gas cylinders to ensure their quality.

“Though the LPG companies are claiming exorbitant amounts -- around Rs 100 per cylinder -- against the expenditures, they are not fulfilling the responsibility of maintain the quality of the cylinders, thereby putting lives at risk through accidents,” said a source.

It is mandatory for LPG companies to carry out hydrostatic tests to ensure that the gas cylinders are leakage-free, but they are ignoring this. The government has directed all bottling companies to inform within three months whether they have installed hydrostatic testing machinery.

However, no company has showed up at Nepal Bureau of Standards and Metrology (NBSM) even though the deadline for doing so expired recently. “No company has submitted their status regarding hydrostatic testing of gas cylinders,” Manoj Upadhyaya, chemist at NBSM, told Republica on Thursday.

As per records at NBSM a few month back, only half the total of 32 companies had installed hydrostatic testing at their filling plants.

Violating the existing provision on replacing cylinders older than five years with new ones, they are selling years-old cylinders instead of scrapping them.

Under overhead expenses, the companies are supposed to carry out regular maintenance of the gas cylinders including painting and checking parts such as safety valves. NOC has been paying Rs 50 per cylinder for overhead.

“However, most of the companies are ignoring their responsibility and expending a negligible amount on overhead although they are making a profit of around Rs 25 per cylinder as overhead,” the source said.

NOC has been bearing a loss of Rs 104 per cylinder to subsidize LPG. The government had provided Rs 1.7 billion as subsidy for LPG last year.

State-owned NOC has been bearing a cost of Rs 80 for transportation from Barauni refinery to Kathmandu, Rs 25 for local transportation to dealers, Rs 50 for overhead and Rs 28 as profit.

However, the companies are making a profit of Rs 28 per cylinder under the head of transportation from Barauni to Kathmandu, Rs 15 under local transportation, Rs 1.39 under working loss or loss in handling the cylinders, Rs 28 as profit allowed by NOC and Rs 25 as overhead.

The gas companies are also making a profit from the residue paste at the bottom of the gas cylinders as the space occupied by the paste means they have to fill less gas.

A source at NOC said that with the rise in the number of gas-filling companies, their strength for bargaining with NOC grows. “They are demanding more facilities with every passing year."

"Worse, they are also demanding that NOC bear the cost of third party insurance for any gas tanker accident, which is unacceptable,” the source said. Two years back, NOC was compelled to bear the expense of Rs 1.39 per cylinder as working loss due to mounting pressure from the gas companies, the source added.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=24115