Fuel shortage hits Valley, Indian Oil Corporation (IOC) cuts supply

Fuel shortage hits Valley, Indian Oil Corporation (IOC) cuts supply
eKantipur.com, 9-May-07

The Indian Oil Corporation (IOC), Nepal's sole oil supplier, has curtailed the supply of petroleum products by 40 percent to Nepal, sparking a fresh round of fuel shortage in the capital.

The IOC's move came in response to the continued default in payment by Nepal Oil Corporation (NOC), which is running into billions of rupees. The NOC, which owes Rs 5.95 billion to IOC, defaulted the monthly payment for April and May, amounting to Rs 480 million.

“The latest reduction in supply that came at a time when NOC was maintaining a low stock, has caused severe disturbance in the distribution of petroleum products,” said Ichcha Bikram Thapa, spokesperson of NOC.

The current stock of petrol, diesel, and kerosene in the Kathmandu Valley is hardly adequate for two days, he added. Since last Friday, IOC began to steadily reduce the supply from Raxaul depot, which supplies around 80 percent of Nepal's import.

Talking to the Post, Sarad Bhandari, general secretary of Nepal Petroleum Dealers Association, said the scarcity in the local market erupted after NOC halted distribution of petroleum products to private refilling stations since Tuesday.

“The daily supply of petroleum products from Raxaul depot currently stands at 1,200 kiloliter, down from the normal supply of 2,000 kiloliter,” said Thapa. However, 1,700 kiloliter was supplied on Wednesday.

As a result, NOC reduced its supply to petrol pumps since Sunday. The impact became visible from Wednesday afternoon, when most of the petrol pumps hung 'No Petrol' notice. In the evening, long queues were seen in the pumps continuing distribution.

Only 72,000 liter of petrol was ferried into the capital on Wednesday, while the daily demand stands at 180,000 liter.

In an attempt to settle to ballooning arrears to IOC, the Indian supplier and NOC had agreed to a monthly payment formula, whereby the Nepali importer needs to pay Rs 240 million per month to clear the dues. The NOC paid this sum for the month of March.

Besides, NOC has yet to clear the regular bill for the supply in April, which stands at Rs 1.87 billion. “In total, we need to pay Rs 2.35 billion right now. To increase pressure for the payment, the Indian supplier heavily deducted its quantity of supply,” said Thapa.

The Indian sole supplier decreased the quantity for Nepal two times last year -- once in August and the next in December to pressurize NOC to pay off its debt.

Due to lower selling prices than the purchasing rates, NOC is incurring losses amounting to Rs 200 million monthly. Aside from IOC, the state-owned corporation owes debt of Rs 4.24 billion to various financial institutions.