Kathmandu, March 19

After the government decided to scrap temporary licence for fuel import on Thursday, the Department of Commerce (DoC) has urged banks and financial institutions (BFIs) not to issue Letter of Credit (L/C) to temporary licence holders.

In the wake of the fuel crisis, the government had opened temporary licence for those firms interested to import fuel through a gazette notice on October 19. Likewise, the government had also allowed bulk consumers like industries and mega projects to import fuel in their own capacity.

Some of the firms that obtained the licence had imported and distributed fuel in Kathmandu Valley and other parts of the country. About a month before the expiry of the temporary licences, the government scrapped the licences due to the controversy of differing prices of fuel sold in the market by Nepal Oil Corporation (NOC) and privately-owned companies.

However, firms that have already opened L/C to import fuel will be granted permission to bring their last consignment, said Shambhu Prasad Koirala, director general of the DoC. Altogether, 35 firms had obtained temporary licence and some of them were engaged in petroleum trade. DoC was authorised to issue licence to firms that intended to import fuel on a temporary basis. The fee for temporary licence was fixed at just Rs 100 and there were no other specific requirements like bank guarantee, tax clearance certificate, infrastructure like storage and distributors.

The government’s decision to scrap temporary licence will encourage the private firms to import fuel on a permanent basis under the Petroleum and Gas Transaction (Regulatory) Orders 2013 (First Amendment, 2015). The government, through this law, aims to promote competition between NOC and private firms.

Till date, only one private company named Malika Petroleum Pvt Ltd has obtained the licence under the Petroleum and Gas Transaction (Regulatory) Orders.

Under the law, the government has also allowed foreign investment in joint venture for petroleum trade. Under the law, the owner needs to register a company at the Department of Industry. The law has fixed paid-up capital of Rs five billion for companies wanting to do business in petrol, diesel, kerosene and aviation turbine fuel, and Rs two billion for those who want to do business in liquefied petroleum gas (LPG).

Similarly, privately-owned companies have to renew the licence after every 10 years. The companies also have to mandatorily set up a storage facility with capacity of at least 20,000 kilolitres. The companies also need to appoint their own distributors. Currently, all the fuel stations are authorised dealers of NOC.

Malika to start business next year

KATHMANDU: Malika Petroleum Pvt Ltd has said that it will start its business from next year. “We are preparing to sign an agreement with the supplier and acquire land to establish storage facility,” said Dipak Timalsina, chairman of the company. As per the law, the company can fulfil the paid-up capital requirement in three phases. The company needs to have at least five per cent of the said paid-up capital requirement while obtaining licence, 45 per cent while starting the business and the remaining within two years from starting the business, as per the law. Malika has paid-up capital worth Rs 500 million, as per Timalsina. The company recently acquired land in Chitwan to establish storage facility. “We are planning to establish storage facility in the eastern part of the country as well,” said Timalsina. “We will start our business next year.”