‘NOC’s legacy is directly related to effective fuel supply and quality services’

Nepal Oil Corporation — the state-owned fuel supplier — has become a subject of criticism for multiple times in recent years. Including the recent charge of misappropriating funds in land acquisition process meant for the development of petroleum infrastructure, NOC had also been charged for not maintaining effective petroleum supply in the past, not adjusting fuel price properly and delaying different petroleum projects. The government recently appointed NOC’s Acting Deputy Managing Director Sushil Bhattarai as the acting chief of NOC transferring the incumbent Gopal Bahadur Khadka to the Ministry of Supplies. Sujan Dhungana of The Himalayan Times caught up with Bhattarai to discuss the progress of different petroleum projects initiated by the government, NOC’s future plans and different other issues related to the country’s petroleum sector. Excerpts:

How do you evaluate the current state of fuel industry in the country?

A major challenge to NOC at present is to maintain smooth supply of petroleum products amid the upcoming provincial and parliamentary elections. The consumption of petroleum products is increasing every year while we have not been able to expand our storage capacity accordingly. Among other fuel products, the demand for petrol and aviation turbine fuel (ATF) is on the rise significantly. We have storage facility for only 8,000 kilolitres of ATF at Tribhuvan International Airport (TIA) while the demand for ATF has been increasing rapidly with the growth in domestic aviation sector. Thus, NOC is gearing up to expand its existing infrastructure and increase fuel storage capacity across the country.

In recent years, NOC has been criticised on different issues ranging from project delays to ineffective fuel supply and fund misappropriation. How do you aim to maintain good legacy of NOC in the coming days?

The major responsibility of NOC is to maintain effective supply of petroleum products. I believe that NOC’s legacy is directly related to supply of petroleum products in the country. If we maintain uninterrupted fuel supply, consumers will have faith in us.  However, there is also a need to strengthen the internal management of NOC, upgrade technologies and develop better infrastructure in a bid to ensure smooth supply of petroleum products. NOC, which was once a debt-ridden entity, is in a better financial position at present. Thus, grabbing the opportunity of being in a sound financial position NOC is seeking to invest in subsidiary companies of NOC and also in different joint-venture companies. In the coming days, NOC will focus on maintaining better and improved relationship with petroleum customers by easing petroleum supply, reforming services at petroleum pumps and maintaining accountability at the organisation. In a bid to facilitate customers, we have been reforming all the fuel stations in the country and have been promoting model petrol pumps which are more customer-centric with ample facilities. In a nutshell, NOC will improve the quality of its services in the future.

Expansion of fuel storage capacity — a major project of NOC — has been affected in recent months due to various issues. Where has the progress of fuel storage expansion project reached?

As envisioned by the budget for fiscal 2017-18, NOC had initiated the process to develop petroleum infrastructure and expand the country’s fuel storage capacity to meet domestic demand for at least 90 days. We have already identified the locations where fuel storage facilities are to be developed and have also signed contract papers with a majority of land owners. In the meantime, the land acquisition process was embroiled in different controversies and the fuel storage project was affected slightly. I believe that there was a gap between the requirements of the project that NOC undertook and the requirement of government policies and laws. However, the projectwill now move ahead as we have concrete directions from the government, NOC board and different parliamentary committees.

It has been over two years since Nepal and India signed the petroleum pipeline agreement. However, the construction works of the project is yet to begin. What actually has been affecting the project?

The agreement on the Raxaul-Amlekhgunj pipeline project (now named as Motihari-Amlekhgunj pipeline project) was signed between Nepal and India in August of 2015 in order to help ease the supply of petroleum products to Nepal. However, works related to the project were hampered for a long time after fuel supply was interrupted during the border blockade from September 2015 to February 2016. After the fuel supply situation eased gradually, the Motihari-Amlekhgunj pipeline project got space in discussions held between NOC and Indian Oil Corporation (IOC) only after July 2016 and the project started moving ahead only after then. However, the cross-border pipeline project has moved ahead significantly in the past one year. Moreover, IOC has already started supplying required pipes for the project to Nepal and will complete supplying all the pipes by November. NOC has taken the land of Birgunj Sugar Mill on lease to store all these pipes and other equipment for the project. Moreover, import of necessary machinery for the pipeline project has already been started after the government announced customs waiver facility for imports of the pipeline project. The electric poles that are located along the finalised route of the project will also be cleared as soon as possible. Of almost 800 electric poles that have to be shifted from project route, NOC has learnt that Nepal Electricity Authority has already shifted 300 electric poles.

So, when do you think will the actual construction works of the pipeline project start?

IOC is ready to start construction works of the project as soon as we clear all the encroachments along the project route and provide encroachment free land to the IOC. I believe that almost 80 per cent of the encroachments along the project route have already been cleared. However, work regarding forest clearance is still pending. The concerned agency has already prepared the Environmental Impact Assessment (EIA) of the pipeline project and the Ministry of Population and Environment (MoPE) will soon approve the document. Once MoPE approves document, the Ministry of Forest and Soil Conservation (MoFSC) will have to give a final nod to the EIA which will open the door for IOC to begin construction work. If things go as planned, we are planning to start the construction works of the pipeline project within December.

The issue regarding Nepali LPG bullets not receiving the ‘non-explosive certificate’ from the concerned Indian authority has been unresolved since long, due to which the Nepali LPG bottling plants have not been able to ferry LPG in their own bullets. When will the issue be resolved?

The private sector has been entirely handling the supply of liquefied petroleum gas (LPG) in Nepal so far and NOC only plays the role of a facilitator. When the government

allowed the LPG bottlers to purchase their own gas bullets many Nepali bottlers did so without enough groundwork. Had they consulted with NOC regarding the non-explosive certificate issue early on, NOC could have sorted out the issue through NOC-IOC talks and negotiations. However, the issue has now reached the diplomatic level as it was raised during Prime Minister Sher Bahadur Deuba’s visit to India a few months back. The issue can now be resolved only through the diplomatic level. What we also need to be clear about is that Indian transporters will not abruptly stop supplying LPG to Nepal as mentioned by domestic gas bottlers.

NOC is also charged of not fully implementing the auto-pricing mechanism, which was introduced in 2014. What is hindering NOC from implementing the system at times?

It is not that the NOC is not implementing the auto-pricing mechanism. The auto-pricing mechanism has mandated NOC management to adjust fuel price every fortnight on the basis of the change in global fuel price. However, it is true that we have not been able to adjust the price of petroleum products every fortnight on a regular basis. This is because NOC has been adjusting fuel price only if there is significant change in the price list of petroleum products sent by IOC. Meanwhile, NOC has now planned to revise fuel price every first day and 16th day of the month as envisioned by the auto-pricing mechanism or at least issue a notice on these particular days as to why NOC has adjusted the fuel price or not. Though we had earlier implemented auto-pricing system only for petrol and diesel, we have recently introduced auto-pricing for LPG too. We are planning to implement the system for ATF also in the future.