Monday, March 13, 2017

NOC can import LPG from other countries

Nepal will be able to import cooking gas from countries other than India very soon.
A new clause is being inserted in the petroleum supply agreement to be signed between Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC), which is due for renewal this month.
"As the demand for cooking gas has been increasing by 20 per cent annually in India, we are including a provision that allows Nepal to import liquefied petroleum gas (LPG) from other countries as well," deputy executive director of NOC Sushil Bhattarai said at a meeting of Industry, Commerce and Consumer Welfare Committee of the parliament today. He also said that the IOC has also agreed to include such provision in the agreement. "The agreement after renewal allows Nepal to import cooking gas from other countries," he added.
Nepal currently imports around 30 tonnes of LPG from India every month.
Speaking at the meeting, NOC managing director Gopal Khadka said that the draft agreement also includes a provision that allows NOC to buy crude oil and give it to Indian refinery for processing, should IOC fail to supply fuel to Nepal as per the demand. However, NOC failed to incorporate the provision of compensation, in case IOC fails to maintain the smooth supply of petroleum products like last year during the Indian blockade for nearly six months.
The parliamentarians, on the occasion, directed the NOC to include a provision of compensation in the new Supply Agreement – since it is a commercial agreement – that would require IOC to compensate NOC at times of supply disruption from the IOC side.
"The new Supply Agreement should be signed in such a manner that it ensures uninterrupted supply from IOC to Nepal even during difficult times," coordinator of sub-committee Subash Chandra Thakuri said, adding that provision of compensation in the agreement itself will compel IOC to make supply regular.
NOC had not only incurred huge financial loss – amounting to billions of rupees – due to almost six months-long disruption in supply of petroleum products to Nepal from IOC last year, but the economy also suffered.
The NOC had then also written a letter to IOC seeking compensation for the financial loss that it incurred due to fuel supply disruption. The IOC had, however, remained mum back then.
The sub-committee also directed NOC to keep enough space in the agreement that would allows NOC to sign commercial petroleum deal with other nations and import fuel from other sources at times of difficulties. "Along with IOC, NOC also should sign commercial petroleum deals with other feasible nations,” Thakuri said, directing NOC to expedite the process of signing commercial fuel deal with China.
Though NOC and PetroChina of China had signed a memorandum of understanding a year ago to engage in commercial petroleum deal, they have not been able to materialise the historic deal that would break IOC’s monopoly in petroleum supply to Nepal.
A team from IOC had visited Kathmandu last week to hold discussion with the NOC team on the new agendas that are being included in the agreement.
The existing agreement was signed in 2012.
After the Indian blockade that ran for nearly six months, NOC is under pressure to include some provisions, including allowing Nepal to import petroleum products from other countries, compensation to NOC, if IOC failed to supply petroleum products as per the demand, in the draft. But the draft has not included these provisions, despite pressure from all quarters.
Addressing the meeting, Khadka said that the draft of the new Supply Agreement with IOC has introduced a provision that allows NOC to procure fuel from third country in case IOC is unable to supply petroleum products to Nepal as per demand.
Meanwhile, Khadka said that commercial fuel trading with China and other countries is only possible through government-level agreement. "If we are to diversify our petroleum trade, the government should hold government-to-government talks with governments of different countries," he said, hoping that the visit of Prime Minister Puspa Kamal Dahal to China next week will expedite the process for Nepal-China commercial fuel trade deal.
However, NOC has included some provisions like reducing marketing charge that IOC has been levying on fuel supplied to Nepal from 2.5 per cent to 2 per cent. It is expected to reduce NOC's cost of import by more than Rs 1 billion every year.
The review meeting of Supply Agreement between IOC and NOC held last week had decided to reduce the marketing charge in the new agreement that comes into effect from April 1.
The new agreement will be in force until March 31, 2022.
The new agreement also allows Nepal to import fuel from third countries if IOC is unable to ensure regular supply of petroleum products to Nepal.
Likewise, IOC has also agreed to waive off interest levied on NOC for delay in payment. NOC makes payment to IOC twice a month, on 8th and 23rd day of every month. IOC had been slapping penalty for every day in case of delay in payments.

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