Indra Gurung

Kathmandu, March 9:

Due to the widening disparity between domestic and international prices of petroleum products, Nepal Oil Corporation (NOC) has been suffering a monthly loss of over Rs 300 million, for the last three months.

"NOC has to bear the brunt of the loss, which amounts to a daily loss of about Rs 8 to 10 million since December last year. The total amount has already crossed over Rs 800 billion," a senior NOC official told The Himalayan Times.

According to him, the international prices of petroleum products have soared by 10 to 15 per cent during the period, whereas prices in Nepal have remained the same for the past one year.

The sorry financial state of the state-owned monopoly oil supplier is mainly due to the huge disparity in prices, increased smuggling to India and lack of timely price adjustment measures.

Though NOC makes a slight profit from petrol, it takes a severe beating on the sale of diesel, kerosene and LPG, the official added. While, kerosene is sold for Rs 24 a litre, diesel is priced at Rs 34 a litre and a 14.2 kg LPG cylinder costs Rs 700.

In contrast to the lower price in Nepal, the price of petro-products in bordering Indian towns are high. This is leading to its back-flow to India. A latest price list shows that petrol in Raxaul is sold at Rs 55.14 a litre and diesel for Rs 35.60. A litre of kerosene is priced at Rs 27.23.

The figure itself shows that NOC is bearing a monthly loss of about Rs 70 million on LPG, whereas loss on account of kerosene is around Rs 100 million. Diesel adds a huge loss of about Rs 120 million.

"These losses are only due to price difference," the NOC official said, adding that current losses will continue to swing upward, if the artificially lower prices are not adjusted in time. He indicated that price hike is needed in major petroleum products by 8 to 14 per cent, to put them at par with international prices. However, NOC has no control over the price at which it buys petroleum products from India or sells it in Nepal. The prices are set by the government.

Monthly loss on LPG is estimated to be around Rs 70 million, which is directly incurred by the sale LPG to bottling plants. The current procurement cost stands at Rs 696.24 per cylinder, while NOC sells them at a fixed rate of Rs 532.35 a cylinder to private bottling plants. "Thus NOC is bearing a loss of Rs 163.89 per cylinder, whereas the private bottling plants are making a profit of Rs 167.65 on each cylinder, as its retail price has been fixed at Rs 700," admits the official.

"A handful of bottling plants are killing both the government entity and consumers, as they buy at lower price and sell at the fixed rate," says Harendra Bahadur Shrestha, president of Nepal Consumer Forum and also a member of Price Determination Committee. He also revealed that the committee has already suggested the government to hike prices.

Petroleum prices have seen an upward swing in the international market recently. International news agencies have reported that the price of benchmark Brent North Sea crude oil for April delivery rose to $32.50 per barrels from $31.18 per barrel in March.

While talking to The Himalayan Times, Sudhir Prasad Upadhaya, executive chairman of NOC

said, "NOC has been pleading for a hike at least to check the spiralling losses."