By Sudeshna Sarkar, IANS
Kathmandu : Plagued with persistent fuel scarcity and facing mounting criticism from parliament and the public, Nepal’s Prime Minister Girja Prasad Koirala has asked the finance ministry to bail out state-owned sole oil importer, Nepal Oil Corp (NOC), by paying off its 2.7 billion Nepali rupees ($42 million) dues to Indian Oil Corp(IOC).
Nepal’s oil economy has been in shambles for decades due to the government’s policy of buying fuel from IOC at prices based on international market prices but selling them in Nepal at a high subsidy.
As a result, NOC was losing 400 million Nepali rupees every month.
Although the Koirala government finally took the plunge about two months ago and raised fuel prices, hoping to stem losses to about 70 million Nepali rupees monthly, oil prices shot up in the world market since then, neutralising the rise.
“Last month, we incurred a loss of 370 million Nepali rupees,” Digambar Jha, managing director of NOC, told IANS. “This month, it went up to 640 million Nepali rupees.”
NOC currently owes a staggering 9.88 billion Nepali rupees, which includes its dues to IOC as well as loans taken from various commercial organisations to pay for the oil it bought from the Indian company.
After it agreed to pay IOC 24 million Nepali rupees every month in addition to clearing past dues, the debt to IOC has come down from 5 billion to 2.7 billion Nepali rupees.
However, while in the past the IOC had been supplying oil on credit, after Nepal failed to hold the critical constituent assembly election twice – the reason for which it had delayed an oil price hike – IOC began reducing supplies, causing an acute scarcity in Nepal.
Serpentine queues at gas stations have become a regular sight, causing the government to draw heavy flak, both from legislators and the enraged public.
Jha said currently, against the present requirement of 80,000 kilolitre per month, IOC has been providing about 60-65,000 kilolitre.
To pay the arrears, NOC has urged the ministry of industry, commerce and supplies to help it pay the dues in one or two instalments.
“We are also asking the government to either subsidise the loss we are incurring or free us so that we can fix oil prices according to market prices,” Jha said.
Next month, with global oil prices going down to $89 per barrel from the current $99, NOC’s losses would be about 500 million Nepali rupees.
“So even if we pay off IOC’s old dues, our losses and problems would continue until prices are adjusted again,” Jha said.
The political instability gripping the Himalayan kingdom for over four years now has aggravated Nepal’s fuel woes.
In two years, there have been three commerce ministers and in five years, seven governments.
In the past, NOC had planned to build a pipeline from Amlekhganj in Nepal to Raxaul in India to bring in oil supplies.
The pipeline would have cut down pilferage and transport cost but is yet to materialise because Nepal has no money.
“Right now, we are scrambling to pay our monthly bills,” Jha said. “We are in no position to plan new projects.”