Nepal Oil Corporation loss to touch Rs 1billion in Feb

Nepal Oil Corporation (NOC) has said that its loss in January could jump to Rs 968.3 million in February, as the sole supplier of fuel for Nepal -- Indian Oil Corporation -- jacked up the supply rates citing rise in crude prices.

“The loss has jumped to almost Rs 1 billion, but the government still continues to turn deaf ears to our calls to adjust prices,” said Digambar Jha, managing director of NOC.

The corporation has estimated the loss based on its projection that it will import 111,000 kiloliters of fossil fuel during the month.

According to the import rates issued by the IOC on Tuesday, NOC´s loss on petrol has jumped to Rs 4.94 per liter, widening by more than a rupee than what it was seeing in January. Likewise, loss on diesel too has widened by more than Rs 2 to Rs 9.06 per liter. “This is a massive loss, especially given that more than two-thirds of fuel we consume is diesel,” Jha added.

The new rate has shrunk NOC´s loss on liquefied petroleum gas (LPG). But the shrink is too nominal to make significant positive impact. According to the new rates, NOC will now suffer a loss of Rs 357 per cylinder (14.2 kg) of LPG, down from previous loss of Rs 363 per cylinder.

While the new rates have widened loss on major products, it has also reduced profit margin that NOC was enjoying on products like kerosene and aviation fuel.
“Our profit on kerosene has dropped to 80 paisa per liter from Rs 5 per liter,” said Jha.

Likewise, the profit on aviation fuel too has shrunk to Rs 11.40 per liter.

“The new rates have made petrol in Nepal cheaper by Rs 10.73 per liter than in bordering Indian towns. We fear this will trigger illegal outflow of the fuel to India,” said Jha.

The new rates have also made aviation fuel in Nepal cheaper by Rs 13.59 per liter than India. This could encourage international airlines to refill more fuel in Nepal, adding pressure on NOC´s weak supply capacity.

Given the situation, NOC has requested the government to allow it adjust fuel prices, mainly petrol.

“Clearly, NOC neither has the capacity to absorb loss nor manage the impact the loss will have on import and inventory management,” Jha said, urging the government to take a concrete decision at the earliest.