Nepal | May 29, 2020

Govt preparing to remove LPG subsidies

Amount to be transferred to provide subsidy on electricity

Umesh Poudel
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Kathmandu, January 4

With an aim to increase the consumption of electricity in the domestic market, the government is preparing to remove the subsidy that it has been providing to customers on liquefied petroleum gas (LPG) and transfer that amount to provide subsidy on electricity.

Minister for Energy, Water Resources and Irrigation Barsha Man Pun informed that the government has already started the process to remove subsidies on LPG. “We are going to forward the proposal to the Cabinet soon and if endorsed then the Ministry of Finance will announce such a decision through the next fiscal year’s budget,” he added.

“The subsidies being provided on LPG will now be stopped and the subsidy amount will be transferred to provide subsidy on electricity to the customers.”

As per a report prepared by the state-owned Nepal Oil Corporation (NOC) — sole importer and distributor of petroleum products in the country — it has been losing an average of Rs 380 million to Rs 450 million per month while providing subsidies on LPG.

Birendra Goit, spokesperson for NOC, informed that the corporation has been incurring a loss of Rs 160 per LPG cylinder.

However, this loss fluctuates depending on the price list forwarded by Indian Oil Corporation — sole supplier of fuel products to Nepal — every 15 days.

As per Goit, on average 2.81 million LPG cylinders are consumed by Nepali customers every month.

“After the subsidy is removed, cooking gas will be expensive and this could encourage customers to start using electric induction stoves for cooking purposes,” said Minister Pun, adding that it will help reduce the country’s trade deficit with the southern neighbour.

According to him, customers who consume more than 100 units of electricity a month will now have to pay less per unit of electricity consumed. “The tariff rate is being adjusted accordingly and will be released soon,”

Pun informed. At present, customers who use more electricity have to pay more for per unit of energy consumed.

“The proposal has already been registered at the Nepal Electricity Authority board and after its approval it will be forwarded to our ministry. After we receive the proposal we will immediately forward it to the Cabinet for its approval,” Pun mentioned.

Moreover, the government is preparing to provide 10 units of electricity free per month for those who only use up to 20 units a month. As per NEA, more than two million households still consume less than 20 units a month. There are one million households that only consume 10 units of electricity a month.

Pun further said that the Alternative Energy Promotion Centre, under the energy ministry, is planning to distribute 10,000 induction stoves at subisidised rates to households in the first phase.

A version of this article appears in print on January 05, 2020 of The Himalayan Times.

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