NOC's gas loss widens

NOC's gas loss widens
eKantipur.com, 16-Apr-2007

Per cylinder loss to the state-owned Nepal Oil Corporation (NOC) has increased by Rs 15.38 after it decided to reduce import prices for gas companies as part of deal reached with the agitating gas suppliers to end the month long protest.

However, following the agreement, NOC has started pushing for hike in retail prices of gas by Rs 200 per cylinder, to cope up with widened loss for the state-owned import monopolist.

“As the retail price has remained unchanged, the new rate has widened the corporation's loss per cylinder to Rs 262 from Rs 247,” Biswa Nath Goyal, NOC chief told the Post, seeking rise in retail prices of gas.

He added that the price rise was also necessary because the latest rise in import quota would further balloon monthly loss for corporation from existing Rs 150 million.

Ichchha Bikram Thapa, NOC spokesperson, told the Post that NOC agreed to slash import prices for gas companies by 19 percent, raising transportation subsidy coverage for them. The corporation on Sunday also agreed to raise import quota to 9,000 tons from previous 7,200 tons.

Going by the agreement, NOC from Monday issued Purchase Delivery Order (PDO) to gas companies at the rate of Rs 703 per cylinder.

NOC officials said that subsequent to the latest agreement with the gas companies, the corporation has proposed the government to raise retail prices of gas by Rs 200 per cylinder. “We have floated two options for the government to consider,” said Goyal.

Under the first option, the corporation has requested the government to raise prices of gas by Rs 50 per month for four consecutive months.

As an alternative of the first option, NOC has suggested the government to go for wholesale pricing system, whereby it should deregulate the retail prices.

“Under this mechanism, we have has recommended the government to scrap subsidy and fix the wholesale price, opening companies to add further cost and decide on consumer prices,” said Goyal.

Sources said that the corporation has mainly pushed for the second option, as its enforcement would deregulate retail prices, enable companies to compete on end prices and pave way for the private sector to import gas from other sources as well.

“This will facilitate the government to enforce its decision to end NOC's import monopoly and open gas import to the private companies,” said the source.

Even though the government took a decision to that regard in February 2006, the private sector has shied away from venturing into gas import business due mainly to subsidy and administered retail pricing.

“However, serious discussion on NOC's fresh proposals is yet to begin,” said the source.