KATHMANDU: Nepal Oil Corporation (NOC) — the state-owned petroleum supply monopoly — stands to make a profit for the first time this fiscal after 2008-09. Therefore, many might be wondering if NOC staffers will get bonus this year.
This question may be raised because about a week ago, the Special Court gave a clean chit to senior staffers of NOC in a verdict on a case filed by the Commission for the Investigation of Abuse of Authority (CIAA) a year ago.
CIAA — the anti-graft watchdog — had filed a case against senior staffers
of the public entity involved in bonus distribution from the profit of 2008-09, as they had overlooked the cumulative loss incurred since 2002-03. NOC employees had, however, returned the bonus immediately after the CIAA’s raid.
NOC had distributed bonus amounting to Rs 1.72 million from its single-year profit citing the provision of Bonus Act that allows distribution of bonus of up to six per cent of profit. The company had capitalised on the fact that the law is silent about cumulative loss incurred by the company.
As per NOC Spokesperson Mukunda Ghimire, the nightmare of 2013 will not return to haunt the company this year. “The Ministry of Finance, so far, has barred public entities with cumulative loss from distributing bonuses.”
Still, past experience shows there had been a long discussion among NOC staff members regarding bonus distribution from the profit earned in 2008-09. That year, NOC had earned a profit totalling Rs 3.16 billion, as oil price in the international market had dipped due to the global financial crisis. After the crisis, oil price started to shoot up and NOC again started bearing losses due to the government fixed fuel prices, which was lower than the rate in which it bought the petroleum products.
The NOC board, led by secretary of its parent ministry, Ministry of Commerce and Supplies, had barred the NOC management from distributing the bonus. However, the management had ignored the board’s directive as Bonus Act has a provision that allows bonus allotment within eight months of the fiscal year.
NOC had decided to distribute the bonus after three years, in fiscal 2011-12. The amount they distributed was only about 9.06 per cent of the amount NOC was authorised to distribute as bonus from the profit of 2008-09.
Nonetheless, NOC management paid a hefty price for ignoring the directive as the CIAA raided its office in 2013 and filed a graft case in 2014 against 20 senior level staffers after further investigation. The court, nevertheless, made a decision in favour of NOC because the staffers had returned the bonus after the CIAA raid.
Now, this fiscal, NOC has already made gross profit — that is, profit before tax — amounting to Rs eight billion in the first 10 months. As per its preliminary estimates, NOC’s net profit will stand at around Rs four billion in this fiscal.
With this, NOC’s cumulative loss which stood at Rs 34.7 billion in the previous fiscal will come down to Rs 28.16 billion, as it has made partial payments to its top lenders, namely, the Citizen Investment Trust and Employees Provident Fund.
So far, it has collected Rs 2.60 billion in the price stabilisation fund (PSF) — the fund set up to tackle fuel price volatility in the international market. NOC deposits 88 per cent of the profit it makes in petrol and 99 per cent of the profit in diesel to the PSF. NOC has been able to make profit after introducing automatic pricing mechanism, which allows NOC to fix oil price as per the international market rate.
Hence, NOC is relatively in a comfortable position when compared to fiscal 2008-09, as it has reduced its loan burden and its staffers have also received a clean chit from the court.
However, NOC may have to think long and hard before it even considers
distributing bonus again since it would take at least a few years for the public entity to eliminate all of its cumulative loss, provided the fuel price remains in the bracket of $60 to $70 per barrel (159 litres) in the international market.
So, has NOC learnt from its past mistake or will history repeat itself is yet to be seen.