Saturday, June 15, 2013

Government to waive Rs 12 billion NOC loans

The Finance Ministry is planning to waive loans worth Rs 12 billion extended by the government to Nepal Oil Corporation (NOC).
The Ministry of Commerce and Supplies – through a minister-level decision – had forwarded the decision to Finance Ministry requesting to waive NOC’s outstanding loan worth Rs 12 billion, according to Finance Minister Shankar Koirala, who is also the Minister for Commerce and Supplies.
The loss making state oil monopoly has borrowed around Rs 28 billion from various banks and financial institutions, including Rs 12 billion from the government. NOC owes around Rs 12 billion to the government and the remaining of around Rs 16 billion to Employees’ Provident Fund (EPF), Citizens Investment Trust (CIT) and Rastriya Banijya Bank (RBB).
Earlier, the Finance Ministry had rejected the proposal to convert the government´s loan investment in the state-owned company into equities.
The loan waiver will give a technically bankrupt NOC a free hand on implementation of Automatic Price Adjustment system, which will change the price automatically on the basis of its buying price. The price will go up when the price in international market goes up and come down, when it comes down in the international market.
According to the Finance Ministry sources, the ministry has also advised the Ministry of Commerce and Supplies also to work on Price Stabilising Fund that could work as a cushion, during the price fluctuation in the international market. The budget is going announce a seed fund for the
Price Stabilising Fund that will also help ease supply situation. Dogged by red-tape, mismanagement and huge leakage, the NOC incurs a cumulative loss of Rs 26 billion, whereas the petroleum dealers, distributors and petrol pumps are racking huge profits.

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