Kathmandu, May 29:

India embassy today reiterated that Nepal Oil Corporation (NOC) should make full payment for regular supplies of petroleum products on schedule and liquidate outstanding dues as agreed before.

“For smooth supply, Nepal Oil Corporation must adhere to its agreement with the Indian Oil Corporation (IOC) — make full payments for current supplies on schedule and liquidate outstanding dues at the rate of Rs 240 million per month,” said Jawed Ashraf, commerce counsellor at Indian Embassy in Kathmandu.

Ashraf reiterated that the petroleum supply issue is completely a commercial issue between the two state-run public enterprises and the problem can only be sorted out on commercial practice.

“IOC is a commercial entity, and continuous supplies in the absence of full payment is not justifiable,” he added.

He also dismissed the claims made by NOC officials and the Nepal government officials regarding reduction of supplies.

“It is misleading and inaccurate. In fact, IOC supplied 73,574 kilolitre (kl) to NOC in April, which is the highest for any month in the past two years. The reduction may at most

be around 25 per cent in relation to NOC’s current demand,” he said.

Ashraf said that the reduction in supplies to some extent was imposed after NOC became unable to commit any repayment schedule despite repeated attempts at various levels by the IOC.

As of mid-May, the NOC’s total liability crossed Rs 10 billion, the largest chunk being with IOC — accounted for Rs 4.955 billion and Rs 4.44 billion of the domestic financial institutions.

“The problem is that NOC has been increasing its demand enormously, without being in a position to pay for it,” he claimed.

Against an average monthly off take of 65,000 kl, NOC demanded 83,000 kl for April and has now demanded 94,000 kl for May this year.

“Even though there is no contractual obligation on the part of IOC, it has continued its supplies to NOC in a purely goodwill gesture even in the absence of timely payment,” Ashraf further added.

Stating that the price of petroleum products in Nepal is lower than in India, he admitted that rerouting back to India is possible.

“However, an interesting fact that no one has clearly noted is that despite the higher duty and transportation cost in Nepal compared to India, the price of petrol is lower in Nepal than in India,” he said.

According to him, duty on petrol in India is 16 per cent, whereas the same is 30 per cent in Nepal.

Even when NOC has not adhered to the agreement fully, IOC has continued its supplies.

“In addition, IOC agreed to give more concessions to NOC in recently renewed agreement. It includes the elimination of notional customs duty and education cess and additional discount of Rs 300 per kl on all petroleum products,” Ashraf said.

NOC has not been able to recover the import cost with retail prices being fixed by the government.

The state-run sole petroleum supply entity has been suffering losses for the last five years mainly due to price disparity in the retail prices against the import price.

Earlier, speaking at the same programme, Shiv Shankar Mukherjee, Indian ambassador to Nepal reiterated that India would continue to support Nepal in its socio-economic development endeavours.

In recent times NOC has become more and more incompetent and loss-making entity.