The government formed the Ministry of Supplies as a separate ministry by splitting then Ministry of Commerce and Supplies in December 2015, when the country was facing an unfavourable situation due to supply line disruptions from neighbouring India. During its establishment, the Ministry of Supplies had announced that it would take all necessary measures to smoothen the supply situation in the country. However, the ministry has yet to deliver any significant results. Pushpa Raj Acharya of The Himalayan Times spoke to Shreedhar Sapkota, Secretary of the Ministry of Supplies, to know more about the progress on the ministry’s initiative to maintain smooth supply in the country.

The Ministry of Supplies was formed for the smooth supply of goods across the country. What has the ministry been doing to manage effective supply?

We were facing supply side challenges when the MoS was formed as a separate ministry last year. We have started some groundwork for the smooth supply of goods so that consumers are able to get essential products easily in the market. For effective supply management, the government is preparing to increase the stock capacity of essential goods. Simultaneously, we are going to capacitate the state-owned enterprises (SOEs) like Salt Trading Corporation (STC), National Trading Ltd (NTL) and Nepal Food Corporation (NFC), among others to raise stock capacity and for needful intervention in the market by supplying goods to safeguard consumers from cartelling by private sector players. Another important issue that we have focused on is intensive market monitoring to stop hoarding, black-marketing, rampant sale of low-quality products, tampering of weighing machines and exorbitant fares/fees in services like public transportation, among others.

By when will the MoS be able to increase the stock capacity of essential goods?

We have been preparing to maintain the stock of food items like salt and sugar, and petroleum products, among others for at least 90 days and we have instructed the line agencies to work on this. Buffer stock of essential goods is critical for us due to our geographic location and also due to possible natural calamities. In the immediate aftermath of the earthquake last year, we intensely felt the importance of stock of relief materials like tents and tarpaulin sheets and dry food items. The state-owned enterprises namely, NFC, STC, NTL, Nepal Oil Corporation (NOC) and Agriculture Inputs Company Ltd (AICL) have already started the process of increasing their stocks.  NFC has warehouses to stock 100,000 tonnes and STC and NTL also have warehouses. However, some of the state-owned enterprises are financially weak for the expansion and maintenance of warehouse facility and for purchasing essential goods to stock them. MoS will talk to the Ministry of Finance and other stakeholders to resolve this issue. Not only food items, chemical fertilisers and petroleum products, we have also prioritised smooth supply of 29 categories of products including construction materials in the post-earthquake reconstruction scenario. The NFC has warehouse facility of 100,000 tonnes and we have to maintain at least 33,000 tonnes of rice (25,000 tonnes in National Buffer Stock and 8,000 tonnes for SAARC Food Bank). The rest of the storage facility can be used to store other food items like lentils and beaten rice.

The fiscal budget of 2016-17 has envisioned forming a National Supply Company through the merger of NTL, NFC, AICL and Timber Corporation of Nepal Ltd. How long do you think will it take to establish the company?

Primarily, all the aforementioned SOEs are involved in trading and are similar in nature, which is why the government has envisaged forming a National Supply Company so that administration costs can be reduced and efficiency of the institution can be strengthened.  It will be executed gradually because we will soon conduct the due diligence audit of these SOEs, but we do not have to wait for the merger of the SOEs to expand the stock capacity. These SOEs have been instructed to increase stock of essential items as per their capacity for the initial phase. But we need to finalise how the resources could be generated for this purpose. We have been talking with the Ministry of Finance (MoF) and it would be good if the MoF allocated some funds for the purpose in the beginning. It could later establish a Price Stabilisation Fund to cover the risk of price fluctuations of the mentioned commodities in which the SOEs are involved in trading and maintaining stock. The government will not have to provide the funds to maintain stock of essential commodities if we identify a suitable solution for the SOEs. The SOEs can also intervene in the market to safeguard consumers from cartelling of prices by some private sector players. For example, STC has been involved in trading of cooking gas and sugar, among other commodities. We have to also capacitate NFC to intervene in the market if the private sector players are involved in hiking the price of food items. Thus, the SOEs will be able to generate resources and deposit a certain amount of the profit in the Price Stabilisation Fund, which SOEs could spend to maintain their stocks when they face resource-crunch.

Nepal Rastra Bank, in the monetary policy, has said that it will not be able to tame inflation caused by supply side constraints. If the government is able to maintain smooth supply then only will NRB be able to keep inflation at desired level of 7.5 per cent by introducing various measures to control inflation caused by the demand side. This means the MoS should play an effective role in controlling inflation as well. What is your take on this?

Obviously, there are various dimensions of inflation. We will do our best to tame inflation caused by the supply side constraints by ensuring smooth supply of goods across the country. For this we need the support of various government agencies. Promoting competition is the fundamental principle of the free-market economy. The government should promote competition among private sector players so that consumers will be able to get the benefit of price, quality and availability of goods and services.

NOC has yet to start expansion of stock capacity despite several instructions from its parent ministry, MoS, in the aftermath of the fuel crisis. Why has the progress to expand NOC’s existing depots and installation of new depots been so slow?

The programme has been included in the government’s policy and programme and also in fiscal budget 2016-17. We have already directed NOC to build capacity to store petroleum products for at least 90 days. MoS has identified three locations to build storage depots of petroleum products and the NOC has already started feasibility study. We have also requested the Ministry of Foreign Affairs to approach foreign technicians by utilising its diplomatic channel for detailed study of these locations. We will also identify other locations to expand the storage capacity of petroleum products to 415,000 kilolitres from the existing 72,000 kilolitres.

The government has also approached neighbouring China to diversify the import of petroleum products. Why has the process stalled?

The process has not stalled actually. We have formed a committee led by joint secretary of the MoS and comprising representatives of various ministries and line agencies to study the cost of import of per litre of petroleum product from China. After we have finalised this we will move forward for petroleum trade with China.

You mentioned earlier about hoarding, black-marketing and cartelling by private sector players. The Department of Supply Management and Consumer Protection under MoS has been conducting market monitoring but it has not taken action against even those who were caught red-handed. What is your take on this?

The government has been taking action against various ill-practices in the market. We have filed cases against reputed corporate groups in the court. We have been taking action against private sector players involved in malpractices. We don’t want the private sector players to be involved in such activities and we expect free, fair and consumer friendly business from them. We have also been making the consumers aware, which is an effective tool to control such activities. To make consumers aware we have been seeking support from the media and also from consumer rights activists and private sector players. On the other hand, we have been developing Supply Management Information System (SMIS) through which we can easily crosscheck the demand in the market and supply position and our production status. SMIS is a software based system — we will obtain the database of production in the country and import of the commodity from the Ministry of Agricultural Development and Department of Customs. We will also work together with the private sector umbrella organisations like Federation of Nepalese Chambers of Commerce and Industry and Nepal Chamber of Commerce to develop the database of the demand and manage effective and efficient supply.