Petroleum products shortage to continue

It might take a few more days for petroleum supply to ease also due to the state oil monopoly's apathy towards importing more fuel.

"The decrease in the import of petroleum products will also reduce Nepal Oil Corporation's (NOC) losses, which is one of the key reasons the state oil monopoly is reluctant in increasing imports that has created fuel shortage in recent days," according to a source at NOC.

"Currently, NOC has projected a loss of Rs 732.80 million for March and apart from reducing its losses, creating a shortage will also prepare ground for a price hike of petroleum products," he said, adding that besides NOC's hidden agendas, there are some valid reasons too for the short supply.

Oil tankers that ferry petroleum products are not going to Barauni depot to import fuel after a tanker staff was murdered around 15 days back on the way to Barauni depot, and Raxaul depot, which is currently under renovation, is unable to supply according to NOC's demand.

NOC imports from five depots and terminals of IOC in India. Apart from Barauni and Raxaul depots, it imports fuel from Betalpur depot at Mugalsarai Terminal, and Gonda depot and Banthara depot of Allahabad Terminal for different regions.

Likewise, another key reason for dwindling supply is lack of NOC's timely payment to its sole supplier Indian Oil Corporation (IOC). "NOC has to pay Rs two billion to IOC, at present," he said, adding that it could also be the reason behind reduced supply, though IOC had promised not to cut supply a fortnight ago.

Besides supply constraints, NOC has also not increased its storage capacity since long. "Increasing storage capacity according to the rising market demand is key," the source said, adding that the present storage capacity of 71,558 kl is just enough for 15 days, according to projected sales in 2009. But the current demand and projected sales have increased in the last three years.

The country had imported petroleum products worth Rs 30.65 billion in the first six months of fiscal year 2010-11 and in the last two years, it has increased to Rs 49.48 billion, in the same period of the current fiscal year 2012-13, according to the central bank data. The import of petroleum products is projected to cross Rs 100 billion in the current fiscal year.

Despite NOC's repeated promise to expand storage facilities, it has not been able to develop storage facilities to meet the current demand of at least 30 days, he said.

Likewise, NOC has become a technically insolvent agency as it has never been able to manage its income and expenses due to regular political bickering after 1990 and rampant corruption, the source added.

At the current selling price, LPG — popularly known as cooking gas — and diesel contributes more to NOC's losses as it incurs a loss of Rs 513.14 per cylinder of cooking gas and Rs 5.43 per litre of diesel, according to March 1 price list of IOC. "But it has been making a profit on petrol (Rs 2.27 per litre), kerosene (Rs 9.16 per litre) and both Aviation Turbine Fuels — domestic (Rs 20.24 per litre) and international (Rs 24.97 per litre)."