NOC Back to Loss-Making Days

With global oil prices bouncing back, Nepal Oil Corporation (NOC) has entered in loss trajectory after eight months of relief and is set to post a net loss of Rs 190 million in September.

The situation emerged after Indian Oil Corporation (IOC) jacked up the prices of major petroleum products, citing international price rise. The state-owned petroleum monopolist was operating at break even position till last month.

“The loss has soared mainly because of the rise in the import prices of diesel and liquefied petroleum gas (LPG),” NOC spokesperson Mukunda Dhungel told myrepublica.com. At the September 1 import prices, he elaborated the corporation would incur a loss of Rs 4.19 per liter of diesel and Rs 87.24 per cylinder of LPG at the present sales rate.

The corporation is still earning a profit of Rs 1.80 per liter of petrol, Rs 3.22 on a liter of kerosene and over Rs 13 on a liter of aviation fuel. However, given the voluminous sales of diesel, which stands at 55,000 kiloliters a months and makes up about two-third of present oil consumption, the profit from other products simply fail to make up for the loss.

The latest trend has jeopardized the corporation´s schedule to repay past loans, which stand at over Rs 10 billion. “With loss, there is no way the corporation will be able to generate Rs 550 million needed to pay to our lenders this month,” said Dhungel.

Instead, to avoid depletion of fund, NOC head office has instructed its depots to slow down diesel imports and maintain supplies through the stock. The corporation presently has fuel stock worth about Rs 2.5 billion.

At the same time, it has also instructed depots to bring in as much petrol as possible for instant supplies and also building stock, anticipating that it might soon start losing fund on petrol as well. The corporation has planned to devise a new fund and inventory management strategy only after it receives new import rates on Sept 16. “This will only be the temporary way out though. Permanent solution to this problem can only come through price adjustment,” said another NOC official.

But given the rift between parties in the government and the Maoist in opposition, officials doubt the government will show strong political will and character. “Sadly, it could prove unfortunate for the people,” he added.

Sensing adverse situation in near future, the NOC has already started knocking the doors of Supplies Ministry to push for the adjustment of prices. NOC has mainly argued that minor change in rates now will prevent the looming crisis, or else the situation might rapidly go out of government´s hand.