Nepal | July 24, 2019

Automatic LPG pricing after Tihar

Sujan Dhungana
Nepal Oil Corporation tanker fuel supply

Nepal Oil Corporation tanker. Photo: THT

Kathmandu, October 28

Nepal Oil Corporation has said it will introduce automatic pricing mechanism to determine the price of liquefied petroleum gas soon after Tihar.

Implementation of the system will align the LPG price in the domestic market with its price in the international market.

Currently, this system is applicable for petrol, diesel and kerosene only.

“We are on the verge of implementing the automatic pricing mechanism in the price of cooking fuel too,” Gopal Bahadur Khadka, managing director of NOC said, adding that NOC will take the proposal to its board for approval immediately after Tihar.

Under this mechanism, NOC revises prices of petroleum products as per the tariff rate provided by its sole supplier — Indian Oil Corporation. IOC reviews the prices of petrol, diesel and kerosene every fortnight.

However, it reviews the price of LPG and Aviation Turbine Fuel only once a month.

NOC has been facing criticism from various quarters, including the Parliamentary Committee for Commerce, Industry and Consumer Welfare Protection for not implementing the automatic pricing mechanism in LPG gas and for not slashing its price as per the worldwide price.

Moreover, NOC is also often criticised for making negligible adjustment in the prices of diesel, petrol and kerosene at a time when their prices have gone down significantly in the global market.

NOC had adopted automatic pricing mechanism in September 2014.

NOC has been able to make a huge profit following implementation of the mechanism as the price of petroleum products dropped to a decade’s low of around $35 per barrel earlier this year. In a short span of just two years, the debt-ridden NOC has cleared more than Rs 36 billion in dues that it owed to the government and other financial institutions.

NOC had been providing subsidy of around Rs 900 per cylinder on LPG to customers two years ago, which was a major factor that led to loss of more than Rs 1.5 billion every month for NOC.

However, NOC is currently making a profit of more than Rs 140 million a month. As per IOC’s rate for the month of October, NOC makes profit of Rs 1.94 per litre on petrol, Rs 1.65 per litre on diesel, Rs 14.06 per litre on kerosene and Rs 10.71 per litre on ATF.

Similarly, the oil monopoly makes 74 paisa on the sale of each LPG cylinder.

As all its debts have been cleared, Khadka said that NOC will now inject all its profit to developing petroleum storage infrastructure and managing effective supply of petroleum products.


A version of this article appears in print on October 29, 2016 of The Himalayan Times.


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