House panel for removing NOC’s infrastructure tax on petro products

Kathmandu, January 13

The House panel and the government have locked horns on the issue of Nepal Oil Corporation imposing infrastructure tax on petroleum products.

Lawmakers say the government should remove all infrastructure taxes being levied on petroleum products, as that has only burdened the consumers and the actual purpose of collecting the tax has not been fulfilled.

The government, on the other hand, insists that doing away with additional taxes is not the solution, as it will transfer financial burden on to NOC and ultimately on to the government.

The government collects additional taxes on petroleum products from consumers under headings like road maintenance, pollution control, for stabilising fuel price, petroleum infrastructure and development of Budhigandaki Hydropower Project.

NOC imposes 50 paisa per litre as infrastructure tax on the sale of petrol, diesel and aviation fuel for development of NOC’s own infrastructure and five rupees a litre for the development of Budhigandaki Hydroelectricity Project.

NOC has also been collecting 50 paisa per litre on petroleum products as pollution tax.

While admitting that the government has failed to fulfil the purpose of collecting such taxes and that the concerns of parliamentary committee are ‘genuine’, Prem Kumar Rai, secretary of Ministry of Supplies, said, “Abruptly scrapping the taxes will increase financial burden on NOC and could make it debt-ridden again.” According to him, a better option is to ensure utilisation of all the collected funds.

Lawmakers, however, claim that removing infrastructure taxes will not increase NOC’s financial burden.

“What’s the point of collecting taxes if the government is unable to utilise the funds for the said purpose?” asked lawmaker Subash Chandra Thakuri, who is also the coordinator of a sub-committee under Parliamentary Committee on Industry and Consumer Welfare Relations. “We wouldn’t have intervened if the government had been spending the taxes in a timely manner for their stated purpose.”

While the state-owned enterprise has come under intense pressure from the parliamentary committee to remove the infrastructure taxes being imposed on petroleum products, NOC sources claim the corporation has not made any preparations in this regard.

“At a time when we come under fire every time we have to raise the prices of petroleum products, even if they are in line with the prices sent by our sole supplier, doing away with the taxes will definitely increase NOC’s financial burden,” said an NOC source, requesting anonymity.

But according to Thakuri, NOC should not have to face any financial burden simply because such infrastructure taxes are removed. This is because the fuel auto pricing mechanism has already been in place since September 2014.

“The whole point of introducing the mechanism was to allow NOC to adjust prices of petroleum products scientifically as per the international market rates. How can it incur loss if the mechanism is implemented properly?” he asked.

He said the government had failed to properly utilise the Price Stabilisation Fund, which has accumulated more than Rs 3 billion over two-and-a-half years.