Nepal | May 26, 2019

 ‘NOC needs legal and administrative reforms’

• Rendezvous

Sujan Dhungana

The government recently appointed Surendra Kumar Paudel as the executive director of Nepal Oil Corporation — a government- owned enterprise which has become infamous for being a corrupt enterprise. Due to lack of leadership at the corporation since long, a number of petroleum projects have also not gained momentum for a long period. Sujan Dhungana of The Himalayan Times caught up with Paudel to know more about how he plans to tackle the anomalies in the country’s fuel industry and other contemporary issues. Excerpts:

What are the challenges that you have witnessed following your appointment at Nepal Oil Corporation?

Unlike other public enterprises, running NOC is a bit more challenging as the fuel business is directly linked to the everyday lives of people. I have not been able to go into the depth of issues in the petroleum sector and NOC. However, I see that there are three challenges in front of me that need to be addressed. They are to strengthen and reform the international management of NOC, further improve the fuel distribution mechanism and cope with the fuel price challenge in the domestic market. I will focus on necessary administrative and legal reforms that are necessary to ensure uninterrupted supply of petroleum products and promote the healthy growth of the petroleum industry. Different public enterprises including the NOC are functioning in a traditional manner and mindset which need to be changed. Similarly, the Company Act that governs public enterprises including NOC does not properly address key issues of public enterprises. Thus, my focus will also be to work with the government to make necessary changes in the laws that are governing the petroleum industry and make them more contextual. Most importantly, the country still does not have Petroleum Act though the petroleum sector is very sensitive. The entire fuel industry is guided by only a few bylaws which should not be the case. Thus, my priority will also be to bring a Petroleum Act addressing all crucial issues of the fuel industry. We will soon begin consultation with experts and stakeholders regarding the act. Lastly, I also believe that some sort of reform is necessary in the structure of NOC’s board of directors.

NOC has the reputation of being a ‘corrupt enterprise’ among the public as a few corruption cases related to NOC have come to light in the past. How do you plan to maintain accountability in NOC?

Let me mention that public enterprises owned by the government are highly accountable compared to private organisations as every decision and activity of the government owned firms are regulated by laws. Moreover, I do not think that corruption has gripped the NOC. Undoubtedly, the NOC management will focus on controlling anomalies from its officials and maintain accountability in whatever we do in the future. There are huge transactions involved every day during petroleum trading. But this does not necessarily mean that huge transactions involve high corruption rate. Chances of corruption are high when a firm initiates projects. Thus, I do not believe that there is high level of corruption at NOC. However, NOC itself is not a regulator and curbing all anomalies is not solely in the hands of the corporation’s management. Other regulatory bodies, including the Nepal Bureau of Standards and Metrology (NBSM), also look into anomalies in the petroleum industry if and when they do occur.

However, a couple of years ago the NOC leadership was found to have been involved in financial irregularities while purchasing land meant for the development of fuel infrastructure. Moreover, cases of oil theft through tankers are also rising. Does this not prove that NOC is mired in corruption?

Anomalies during the land purchase process for NOC is an exceptional case and is still under the scanner of the Commission for the Investigation of Abuse of Authority (CIAA). I already mentioned that NOC management will take necessary action if its officials are found to be involved in anomalies in the future including cases of oil theft. However, penalising people for all the anomalies taking place in the petroleum industry is not under jurisdiction of NOC and I expect support from other government agencies including NBSM and District Administration Offices to control such activities in fuel industry.

You are famous for ushering in reforms in the state-owned Udaypur Cement and making it a financially sustainable enterprise. How optimistic are you about sustaining that faith at NOC?

I do not think that running Udaypur Cement and NOC are two distinct things. In fact, the fundamentals of reform are common in every public enterprise. My approach to NOC will be the same as it was in the cement factory. To be honest, handling Udaypur Cement was more challenging for me than running NOC at the moment. The one major challenge that I see in NOC is to ensure uninterrupted supply of fuel.

The government’s plan to expand fuel storage capacity across the country has been affected following lack of leadership at NOC since the past few years. How do you plan to expedite the project?

Expanding the fuel storage capacity of the country is not only the responsibility of NOC. It can be done through a collaborative effort from all stakeholders, especially the government. As the budget itself has announced to expand fuel storage capacity of the country which can cater to the domestic demand for at least three months, the project has to be expedited now. Expansion of the fuel storage capacity is necessary also to ensure smooth supply of petroleum products in the market. However, it is to note that the scam related to the land purchase deal meant for the development of fuel storage capacity is still under investigation of CIAA. I have personally urged CIAA to resolve the issue soon. As soon as the CIAA gives a nod, we will take necessary steps to expedite the project.

NOC is also charged with not adjusting fuel prices in the domestic market in line with the international market. What do you have to say on this?

It is not true because we have been adjusting fuel price time and again as mandated by different laws. However, we need to understand that NOC is still a sick enterprise as it has liability worth almost Rs 17 billion as of today while its reserve is merely Rs six billion. Thus, we also need to ensure that financial position of NOC does not get damaged further. Meanwhile, we are also planning to introduce a new fuel pricing mechanism in the near future.

Lastly, NOC has been claiming that the construction of the much-hyped Motihari-Amlekhgunj Petroleum Pipeline Project will be completed within next few months. How optimistic are you on this target?

I am optimistic. However, the government has a big role to play in helping NOC clear the trees that lie along the project route as soon as possible. If the tree clearance work goes ahead smoothly, then the construction of the oil pipeline project will be completed soon. The Cabinet has already given its nod to cut down the necessary trees. Now it is the responsibility of the Ministry of Forests and Environment to clear the trees for the project development.


A version of this article appears in print on January 22, 2019 of The Himalayan Times.


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