IOC cuts fuel supply

REPUBLICA

KATHMANDU, Jan 20: Indian Oil Corporation (IOC) has curtailed supply of petroleum products to Nepal by 30 percent after Nepal Oil Corporation (NOC) failed to clear outstanding dues that emanated from December´s import.

“We received just around 1,700 kiloliters (KL) of fossil fuel from Raxaul on Tuesday and Wednesday. It is about 500 KL less than what we were receiving till Monday,” said NOC Managing Director Digambhar Jha.

Raxaul is the largest importing point of fuel and NOC receives some three-quarter of total fuel imports from the bordering town. The cut, however, did not have any impact in the market.

NOC officials said the present cut will not hit consumers as the state-owned petroleum monopolist has well over 38,000 KL of fuel in its stock and is in a position to pump out required volume of fuel in the market.

NOC has yet to settle dues amounting to Rs 640 million to its sole supplier. The dues had emanated largely due to ballooning loss and also because NOC imported additional quantity to replenish its stock.

Pressed by the cut, Ministry of Finance (MoF) on Wednesday agreed to arrange loans for NOC to finance imports. Following such consent, Ministry of Commerce and Supplies (MoCS) on the day forwarded a loan request proposal to the cabinet.

“We have sought loans amounting to two months equivalent of loss the corporation is incurring at present,” said a MoCS source, expressing hope that the cabinet will approve the loans soon.

Latest estimate of NOC shows that it is likely to incur a loss of Rs 743.50 million in January.

Till last week, the corporation had estimated to incur a loss of Rs 650 million. “The loss estimate has gone up because IOC jacked up the prices of petrol and diesel in its new rates forwarded to NOC on January 16,” Jha said.

According to Jha, the new rates have increased NOC´s loss on petrol to Rs 3.55 per liter and diesel to Rs 6.38 per liter.

NOC top brass continued to argue that the corporation will see no respite unless the government allowed it to adjust prices in line with international prices.

At the sub-committee meeting of the parliamentary Public Accounts Committee on the day, Jha even asked lawmakers to grant him permission to adjust prices of petrol and aviation fuel as per the international price movement.

“If is meaningless to suffer loss in petrol and aviation fuel consumed largely by middle and upper middle class,” Jha said at the meeting. “And squeezing petrol´s price is meaningless also because it has widened cross-border price gap, resulting in illegal outflow of fuel to India.”

Currently, a liter of petrol in Nepal is priced some Rs 10 cheaper than the Indian bordering towns, and Jha said it has encouraged outward smuggling.

Given the situation, NOC has even sought MoCS´ green signal to increase price of petrol by around Rs 5 per liter.