NOC projects profits

After almost one-and-a-half year, the bankrupt state oil monopoly has projected a profit of Rs 1.60 billion per month after a successive drop in the crude prices in the international market.

According to Nepal Oil Corporation (NOC), it now makes a profit of Rs 6.45 per liter in petrol and Rs 12 per liter in diesel at the new price rates sent by IOC on October 1. IOC sends price list every fortnight on the 1st and 15th of the Gregorian calendar.

Last March, the oil price in the international market reached as high as $125 per barrel, while it came down to $86 per barrel last week. Indian Oil Corporation (IOC), the sole supplier to the NOC has also decreased the price of fuel but the NOC has not been bringing the fuel price down, though it claimed to implement the automated price system. “The NOC has been misusing the automated price system as it increases the price of fuel when the price list sent by IOC increases but it has not been decreasing the price, when the price list has lower price,” complained the consumer rights activists. 

The NOC has been claiming that it has borrowed from the government to pay the IOC, and it owes around Rs 40 billion to various government bodies.

NOC suggests to implement quota on fuel purchase

The bankrupt state oil monopoly has again recommended the government to implement the already failed two-day weekly off and quota in fuel purchase.

Citing shortage of funds to pay to the Indian oil Corporation (IOC) amid soaring financial loss, Nepal Oil Corporation (NOC) today wrote a formal letter to the Prime Minister, Industry and Commerce Minister and Home Minister, and suggested to re-implement the two-day weekly holiday, and apply quota on fuel purchase.

Among the 10-point suggestions, the NOC wrote the government to curb the purchase of maximum 5 litre of petrol to the two-wheelers, and 20 litres to the four-wheelers, apart from enforcing an odd-even system on vehicle use. Likewise, it has asked the government to ban the import of the fuel-operated vehicles, restrict the use of vehicles on holidays, and promote the walking culture for short distance, in order to check the rising fuel import. The NOC has also suggested the government to encourage the use of electric vehicles and set up charging stations along the national highways, and various places to make people easy to charge their electric vehicles.

NOC claimed that its outstanding dues to the IOC, it sole petroleum products’ supplier, has reached Rs 22 billion, which could cross Rs 30 billion from July 8. “While the monthly loss of NOC now stands at Rs 10 billion, the cumulative loss will reach Rs 55 billion by the end of this fiscal year,” the NOC letter reads.

The ongoing war between Russia and Ukraine has disturbed the smooth supply of fuel pushing its price to historic high in the international market. According to NOC, its loss amount is increasing as it is unable to adjust the fuel price in the line of the prices in the international market.

Nepal imports more than 200 billion worth petroleum products annually, from India. As the country’s largest import petroleum products’ bill is much larger than the total export earnings of the country, the NOC has long been pushing the government to implement a number of measures to check rising consumption of petroleum products, and also to reduce its losses.

Nepal Oil Corporation jacks up fuel prices to record level

Nepal Oil Corporation (NOC) has increased the prices of petrol by Rs 21 to Rs 199 per liter and diesel and kerosene by Rs 27 to Rs 192 per litre, effective from midnight.

This is the highest increment ever made by the state oil monopoly, as the bankrupt NOC failed to pay its sole supplier.

Likewise, the corporation has also increased aviation turbine fuel (ATF)-domestic by Rs 19 to Rs 185 per liter, and ATF – international by $100 to Rs $1,645 per kiloliter.

The price of the Liquefied Petroleum Gas (LPG), popularly known as cooking gas, has not been hiked, though it also incurs loss, according to the NOC that has been incurring losses despite the rise in the petroleum prices. The corporation said that it is incurring a loss of Rs 2.28 billion in LPG alone. A cylinder of LPG now costs Rs 1800.

Claiming that it has hiked the prices of petroleum products in line with the international price, the corporation said it is still facing an extreme financial crisis. The NOC will have Rs 22 billion due to be paid to Indian Oil Corporation (IOC) for the purchase of petroleum products by June 23.

Despite the hike, the corporation will be facing a monthly loss of around Rs 4.70 billion, it claimed, adding that the accumulated losses have been expected to reach Rs 55 billion by June end.

The continuous rise in the price of petroleum products has pushed the inflation up, beyond the control of the government and central bank.

According to Nepal Rastra Bank (NRB), the year-on-year consumer price inflation jumped to 7.87 per cent in May, hitting a 69-month high.

The Russia-Ukraine war has affected the international fuel market forcing the global market adjust price. On Thursday (June 16), the sole supplier of fuel to the NOC, IOC had sent an increased price list. According to the new price list sent by IOC on Thursday, the price of petrol, diesel and aviation fuel was increased by Rs 6.52, Rs 19.3 and Rs 91.91 per liter, respectively.

NOC saves Rs 3 billion due to pipeline but consumers pay all time high

Nepal Oil Corporation (NOC) saved fuel transport costs of Rs 3 billion in last two years after the construction of 69-kilometer cross-border petroleum pipeline between Nepal and India, but the consumers have been paying all time high price.

The first petroleum pipeline that connects Motihari in India to Amlekhgunj in Nepal has been operational since September 11, 2019. "It can supply petroleum products at the rate of 294 kiloliters per hour," according to the government oil monopoly.

The pipeline is being used to transport diesel from India, the NOC informed, adding that it has been importing an average of 3,500 kl diesel daily, almost half of its capacity to transport 6.500 kl daily. "The NOC imported 1.61 billion liters of diesel through the pipeline in the fiscal years 2019-20 and 2020-21."

In almost two months of the current fiscal year, the NOC has imported a total of 124.41 million liters of diesel through the pipeline.

Likewise, the NOC also informed that it costs an average of Rs 45,000 to transport fuel from the Barauni depot of India to Amlekhgunj of Nepal. "The pipeline has helped cut the costs of fuel tankers apart from reducing technical losses," the NOC claimed. But the consumers have been got no any respite as they have been forced to pay Rs 130 per litre petrol and Rs 113 per litre diesel.

The first cross-border petroleum pipeline in South Asia was built at a total cost of Rs 5.18 billion.

Fuel prices drops after cross-border petroleum pipeline comes into operation

Nepal Oil Corporation (NOC) has reduced the price of diesel, petrol and kerosene by Rs 2 per liter effective from today noon.
The state-owned oil monopoly confirmed that after the decision to lower the price of the petroleum products, petrol will cost Rs 107 per liter in Kathmandu valley, while diesel and kerosene will cost for Rs 97 per liter each. “The decision to revise price downward has been taken after formal launch of the India-Nepal cross border petroleum pipeline from Motihari to Amlekhgunj,” the NOC said, adding that the prime ministers of Nepal and India jointly inaugurated the cross border petroleum pipeline today morning.
Jointly inaugurated by Prime Minister KP Sharma Oli from Kathmandu and Indian Prime Minister Narendra Modi from New Delhi through a remote control, the 69-kilometer petroleum pipeline has helped reduce the price of petroleum products as expected, the NOC said, adding that supply of fuel from the pipeline is estimated to save Rs 2 to Rs 5 per liter in transportation cost, apart from the guarantee of smooth supply and efficiency.
The first cross-border petroleum pipeline in South Asia can pump NOC, however, has also attributed the reduction in petroleum prices to downward revision in prices in the international market, savings from the supply of fuel through the newly inaugurated cross-border pipeline and fluctuation in foreign currency exchange.
NOC – issuing a press note today – said that the price has been revised according to its 'automated pricing mechanism' system. Under the mechanism, NOC revises the fuel prices in line with the fluctuation of prices of petroleum products in the international markets, based on the price it receives from its sole supplier Indian Oil Corporation (IOC).

PM Oli, Modi to inaugurate oil pipeline tomorrow

Prime Minister KP Sharma Oli and his Indian counterpart Narendra Modi will virtually inaugurate the first cross-border petroleum pipeline in South Asia tomorrow through video conference.
According to the Ministry of Industry, Commerce and Supplies (MoICS), the formal inauguration will be marked by pressing a switch button via remote control by the executive heads of both countries through a live video conference connected simultaneously in between the Prime Minister’s Office at Singha Durbar in Kathmandu and Office of the Indian Prime Minister in New Delhi.
“The two heads of states are scheduled to press the pipeline switch that opens the valve of the petroleum pipeline at the presence of high-level government dignitaries of both countries at the conference,” informed NOC deputy executive director Sushil Bhattarai.
The Amlekhgunj-based oil depot of Nepal Oil Corporation (NOC) and Motihari-based depot of the Indian Oil Corporation (IOC) will witness the official ceremony of inauguration on the ground by handing over a bottle of diesel from the pipeline among the officers of the IOC and NOC.
The NOC and IOC had successfully concluded the ‘testing transfer’ of the Motihari-Amlekhgunj pipeline project last month. The IOC – through its refinery in Motihari – had supplied diesel to NOC’s Amlekhgunj-based depot last month during the testing transfer. However, NOC had unloaded only 1,000 kilolitres of the 3,100 kilolitres of diesel supplied by IOC via the pipeline to test the newly constructed tanks at Amlekhgunj.
According to the NOC, the pipeline is able to supply 394 kilolitres of petroleum products per hour. “In the initial phase, NOC plans to receive only diesel, which is about the 70 per cent of total petroleum product imports, through the pipeline,” the NOC informed, adding that some 3,000 kilolitres of diesel will be imported per day through the pipeline, after the pipeline is formally inaugurated.
Though, the Motihari-Amlekhgunj oil pipeline was first proposed in 1996, it finally took off during Indian Prime Minister Modi’s visit to Kathmandu in 2014. The two governments inked an agreement to construct the first cross border pipeline – that is expected to reduce the cost of transportation of petroleum products worth Rs 1 billion – in the South Asia in August 2015. But, the project construction was again delayed due to devastating earthquake of 2015. “After the commercial operation of the pipeline, it will bring down fuel price by at least Re 1 per litre in the domestic market,” according to the NOC.

Nepal-India cross border pipeline nears ready for operation

Laying of Nepal-India cross border pipeline – connecting Motihari in India to Amlekhgunj in Nepal – is finally coming to an end.
The South Asia's first cross border petroleum pipeline that covers a distance of 70.2-km will have to tested before it starts flowing diesel, which will save around Rs 2 billion of transportation cost apart from ensuring the smooth flow of diesel even in the times of unrest in the southern plains.
Estimated to cost around Rs 2.75 billion, the petroleum pipeline covers a distance of 32.65-km from Motihri to Raxaul on the Indian side was completed a month ago, and the task of laying pipeline for a distance of 37.25-km from Raxaul to Amlekhgunj of Bara on the Nepal side is also over, according to the Nepal Oil Corporation (NOC). “The pipeline's technical examination – including hydro-test, radiography of pipes joined by welding, taking X-ray at the points where the pipes have been joined and removing the rust in the pipe through scan-plast have started with the completion of the pipeline laying works – is underway,” it informed, adding that a 25-member technical team, including NOC engineers, has left for Lucknow for training on hydro-test and other technical works of the pipeline. The sole supplier of the petroleum products to Nepal Indian Oil Corporation (IOC) is providing training to the technicians to make them capable to take care of the petroleum pipeline.
After signing an agreement to lay the pipeline on August 24, 2015, Prime Minister KP Sharma Oli and his Indian counterpart Narendra Modi during Oli's India visit jointly laid the foundation stone for Motihari-Amlekhgunj petroleum pipeline project at the Hyderabad House in New Delhi.

NOC revises petroleum prices downward, still makes hefty profits

Nepal Oil Corporation (NOC) has slashed petroleum products' prices effective from midnight. But state-owned petroleum monopoly is still making hefty profits.
The NOC has reduced price of liquefied petroleum gas (LPG) – popularly known as cooking gas – by Rs 25 per cylinder, domestic aviation fuel by Rs 4 per litre, whereas petrol, diesel and kerosene prices dropped by Rs 2 per litre.
After the downward price revision, a cooking gas cylinder will cost Rs 1,350, but the NOC is till making profit on every cylinder of LPG.
Despite the new price drop, NOC has projected that its monthly profit will stand at more than Rs 800 million.
Similarly, petrol will cost Rs 98 per litre, whereas diesel and kerosene will each cost Rs 74 per litre. Air turbine fuel (domestic) has been reduced by Rs 2 per liter for domestic airlines and by Rs 4 liter for international airlines to Rs 84 per liter (domestic) and Rs 73 (international). The domestic airliners will reduce surcharge on air fares, though the public transportation – run by both petrol and diesel will not reduce the fair.
The NOC has revised the fuel prices downwards based on the new price list that it received from Indian Oil Corporation (IOC) – the sole supplier of petroleum products to Nepal – according to the NOC spokesperson Sitaram Pokharel. He said that the Indian supplier had lowered the price in the new price list that was sent to NOC on July 1. The NOC receives the new price list fortnightly.
The fuel monopoly has reduced the price after facing criticism for not lowering price despite the drop in fuel price in the international market. It had slashed prices two weeks ago, though the price of cooking gas remained unchanged then citing loss.
 Though the NOC had claimed that it has adopted auto pricing system – based on IOC price every fortnight – it has not been regularly adjusting the prices claiming the loss it had incurred in the past.
The state-owned fuel monopoly had also claimed that lower prices in Nepal would promote fuel smuggling at the Nepal-India border. Due to huge profits it has been making, it has however separated profits for bonus, despite huge public pressure not to 'socialise the loss and privatise the profit.'
"US crude futures have slumped about 15 per cent so far this year to about $46 per barrel, and as of Friday, ended its worst half-year performance in 19 years,” according to the international market that reported that an agreement between the Organisation of Petroleum Exporting Countries (OPEC) and other producers to cut output had kept oil prices stable in the last few months. But OECD total oil inventories are still above 3 billion barrels due to an unexpected recovery in Libyan and Nigerian supplies and a rebound in US shale production.

Increased use of diesel generator sets fuel Valley pollution

Diesel generator sets have not been only increasing the cost of production of domestic industries making local products less competitive but also emitting more harmful gases than vehicles in the Kathmandu valley.

The regular power outage has made diesel generator sets a compulsion also for daily power needs in industries, households and offices but according to a study, ‘Diesel for Power Generation: Inventories and Black Carbon Emissions in Kathmandu Valley,’ the annual diesel consumption for captive power generation from generator sets in Kathmandu was around 70,715 kilolitres (kl), whereas the country had imported a total of 653,560 kl of diesel – or High Speed Diesel (HSD) as it is said – in the fiscal year 2011-12.

Around 11 per cent of the total diesel import of the country is consumed in the Kathmandu Valley, alone, by the vehicles and diesel generator sets.

Apart from the transportation, the usage of fossil fuel has seen a continuous increase in the last decade also due to regular power outage forcing the people use diesel generator sets that have contributed significantly to the pollution.

The study reveald that consumption of diesel generator sets accounted for 59 per cent of the total diesel sale in the city in the fiscal year 2011-12. “The annual emission of carbon monoxide and black carbon from the diesel generators was 1,181 and 135 tonnes respectively, while the total installed capacity for power generation was around 198 MW, which is equivalent to 28 per cent of the total energy supplied by the Nepal Electricity Authority (NEA) to the national grid,” reported the study that estimated around 200,000 generator sets being used across the country.

“Some 30 gm carbon dioxide is emitted per kilowatt (KW) per hour from diesel generator sets, which is significantly high compared to vehicular emission standards,” an environmentalist and expert in air pollution monitoring and mitigation Toran Sharma, on the occasion, said, adding that the emission from diesel generator sets can be compared with the transport sector. “But  more scientific studies could only reveal their contribution to pollution.”

Though, the Ministry of Science, Technology and Environment has fixed the standards for diesel generator sets, it has been flouted due to lack of effective monitoring,

Anjila Manandhar of Clean Air Network Nepal – a non governmental organisation that conducted the research – said that the increased use of diesel generators for power consumption has contributed significantly to pollution, with the air containing harmful substances and black carbon that have serious impacts on the public health and the climate.

“There has been an unprecedented rise in the import of diesel generator sets since the fiscal year 2008-09 as the power outage went up to as long as 18 hours a day,” she added.

The study conducted by Clean Air Network Nepal with the technical support from Kathmandu University, and supported by Ministry of Science, Technology and Environment and World Bank, focused on a more detailed collaborative data in the city.

Based on field visits, questionnaires, detailed information on the operation of diesel generator sets, fuel consumption and capacity, brand, model and efficiency of the generator sets, the research was carried out in various sectors like manufacturing industries, commercial sector, government, non government organisation, INGOs, diplomatic missions and hospitals.

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)."

Cabinet agrees 'principally' on Raxual-Amlekagunj oil pipeline construction

The cabinet yesterday ‘principally’ agreed to allow Indian Oil Corporation (IOC) — the sole supplier of petroleum products to Nepal Oil Corporation (NOC) — construct a 40-km petroleum pipeline from Raxaul depot of IOC to the Amlekhgunj depot of NOC.

However, the cabinet has also formed a committee led by vice chair of the National Planning Commission (NPC) Deependra Bahadur Kshetry to study the modality of the pipeline project. "After the committee takes a complete shape with representation from NOC and Ministry of Commerce and Supplies, we will finalise the modality and procedures," said Kshetry. "Earlier, the project was proposed to be constructed under the Build-Operate-Own-and-Transfer model, but the committee will finalise the model."

The cabinet had earlier sent the proposal to Economic Infrastructure Committee under the cabinet to discuss the ambitious project that has been in the pipeline since long to overcome the problems of frequent transportation strikes.

"The cross-border petroleum pipeline to import fuel from India is expected to help reduce transport cost by around 50 per cent and ease constraints in transportation caused by transportation strikes apart from leakage control and quality control," according to NOC.

The pipeline was estimated to cost Rs 1.60 billion excluding the cost of land acquisition. A pre-feasibility study done in 2004, and a technical study done in 2006, had concluded that the pipeline project would be economically viable within six to seven years, and the construction company will get its return on the investment. "IOC had, thus, earlier asked to sign a 10-year agreement," the corporation added.

Though Indian Oil Corporation had proposed the construction of the pipeline in 1995, NOC and IOC signed the agreement last April.

Earlier, the High-Level Petroleum Sector Reform Committee led by then Constituent Assembly member Bhim Acharya had recommended starting the project immediately as petroleum products are the largest imports of the country. In the four months of the current fiscal year 2012-13, the country has already imported petroleum products worth Rs 31.96 billion, whereas in the last fiscal year, the country had imported petroleum products worth Rs 92.25 billion from India, according to the central bank data.

Nepal is becoming more dependent on petroleum products — MS, HSD, SKO, ATF and LPG — for meeting its energy requirements with an annual increase of 20 per cent. Petroleum products constitute about 11 per cent of the total energy consumed in the country.

The Raxaul depot that caters to the energy hungry central region that consumes around 70 per cent of total petroleum imports can also supply fuel to Bhairahawa and Biratnagar which will also reduce huge costs of NOC that claims that in the future the pipeline could be linked to Barauni depot for more supply.

Currently, some 1,180 tankers of some 494 transporters ferry petroleum products across the country. But they have been creating problems for NOC by forcing it to increase transportation cost by not allowing it to issue a tender.

Petrol price down, diesel up

Date – Petrol – Diesel/Kerosene – Cooking gas
December 22 – Rs 123 –Rs 99 –Rs 1,470
September 2 – Rs 125 – Rs 97 – Rs 1,470
June 19 – Rs 120 – Rs 93 – Rs 1,415
March 26 – Rs 120 – Rs 89 – Rs 1,415
February 24 – Rs 116 – Rs 85 – Rs 1,415
January 26 – Rs 112 – Rs 81 – Rs 1,415
January 18 – Rs 115 – Rs 85 – Rs 1,500
(Price per litre except for cooking gas, which is per cylinder. Source: Nepal Oil Corporation)