Thursday, April 4, 2013

Petroleum traders take country hostage

Consumers are again going to feel the heat as petroleum traders have threatened to take the country hostage from April 7, by completely halting the distribution of petroleum products, if the government does not roll back the Petroleum and Gas Trading Monitoring Directives-2013.
The traders' — Nepal LP Gas Industries Association, Nepal Petroleum Dealers’ Association and Nepal Petroleum Transporters’ Association — threat against the entry of the private sector in the petroleum business is not only going to hit consumers hard but will also test the incumbent technocrat government's capacity to handle the petroleum business-syndicate that has plagued the country since long, making the public suffer time and again.
Currently, the traders are — with full cooperation of Nepal Oil Corporation — socialising the losses and privatising the profits.
According to a report of the Auditor General for fiscal year 2010-11, the state oil monopoly has been incurring losses since long and as of the end of fiscal year 2010-11, it had a negative networth of Rs 12.70 billion, besides a suspicious investment of Rs 48.68 million. "The additional burden of the interests of the Rs 7.61 billion loan would also add up to its liability," the report had stated.
However, consumers have always been paying for NOC's incompetency and the red tapism in the petroleum business.
"NOC and traders are currently taking benefit by socialising the losses as they have been passing it over to consumers but after the entry of the private sector, they will not be able to enjoy the privilege," according to a source at NOC.
"Their commission could also come down as they will not be able to bargain with private companies like what they have been doing with NOC," the source said, adding that they might also have to work on lower margins as there will be more competition, unlike the current monopoly of NOC.
Every time traders threaten to halt petroleum distribution, NOC and the Ministry of Commerce and Supplies — that overlooks the technically insolvent NOC — bow down to them, bleeding the national coffers and burning a deeper hole in the consumers' pocket. "But the entry of the private sector will make it harder for them to bargain," he added.
According to former managing director of NOC Digambar Jha, the entry of the private sector will ensure smooth supply of petroleum products.
Despite the profits that NOC is making currently in all petroleum products, except LGP, consumers still have to queue at petrol stations.
According to NOC's projection, its monthly loss has come down to Rs 95 million for this month. Consumption of LPG — the only loss making product — will decrease in summer months bringing the losses lower. "Yet, consumers have not been getting petroleum products smoothly," said Jha, blaming the incompetent state oil monopoly and its mismanagement that has made it necessary for the private sector's entry in the business.
However, it would have been better had the government brought an ordinance — due to the absence of a Parliament — of Petroleum Act instead of directives, he opined.
The Petroleum Act was presented in the House during late Girija Prasad Koirala's premiership too, but it could not get through, he said, adding that the country needs a strong Petroleum Regulatory Board — with a legal teeth that is Petroleum Act — to monitor the private sector in the competitive market.
In the absence of competition in the market, traders and NOC officials are currently minting money, whereas consumers have been suffering.
Three days back, when traders announced the complete halt of petroleum products, NOC quietly increased their commission. "Traders have collected Rs nine million to influence NOC and ministry officials to increase the commission," according to the source at NOC. "Though the hike in commission was recommended by an expert committee, a lot of money has been involved in influencing the decision."
A three-member expert committee led by Dr Puskar Bajracharya had suggested an increase of Rs 0.23 commission for a litre of diesel and kerosene, and Rs 0.40 for a litre of petrol.

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