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.

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)."

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)

Diesel price hike to fuel inflation

Nepal Oil Corporation (NOC) hiked kerosene and diesel price today citing loss but consumers fear that the price hike in diesel before the festivals is going to hike the price of essential goods too.
The state oil monopoly has hiked Rs 1.5 to Rs 75 per liter in kerosene and diesel. “Decision to hike kerosene and diesel price is irrational as the prices have been falling in the international market," said general secretary of Forum for Protection of Consumer Rights Nepal Jyoti Baniya.
According to him, consumer groups have taken the irrational action of the government as a ‘gift to people’ before festive season.
"Price hike in diesel will play a key role in price hike of consumer goods rising inflation to two-digit,” he said, adding that the government should reverse the decision to give relief to people in the festive season.
Another consumer activist, Prem Lal Maharjan criticised the government for adding ‘extra burden to the poor. "Kerosene is the source of energy for the poor," he said, adding that price hike in kerosene will affect poor section of the society.
According to him, the government has hiked the price when the international price of petroleum is at $76 per barrel. "Why the NOC did not hike price when the price was $126 in June," he asked. "It is ill intention of the government to suppress poor."
After the price hike, one liter diesel and kerosene will now cost Rs 75 per litre. "It will reduce NOC's loss to Rs 505.3 million from current Rs 583.8 million," said spokesperson of the state entity Mukunda Dhungel. "We are still incurring Rs 7.58 loss in a liter of diesel."

NOC hikes petrol price to Rs 102 per litre

Nepal Oil Corporation (NOC) hiked petrol price by five rupees per litre to Rs 102, from Rs 97 effective from today.
However, no changes have been made on diesel, kerosene, liquefied petroleum gas -- popularly known as cooking gas -- prices.
With the decision, the state-oil monopoly can make a profit of Rs 2.29 on a litre of petrol, spokesperson Mukunda Prasad Dhungel, said, adding that the corporation is also expecting to reduce to its losses to Rs 1.27 billion per month from current Rs Rs 1.33 billion after the petrol price hike.
The corporation had increased the price of petrol by Rs 12 to 97 on March 12 from Rs 88 per litre.
Currently, price of diesel and kerosene is fixed at Rs 68.59, while the price of cooking gas is Rs 1,325 per cylinder. The state-oil monopoly is incurring Rs 15.60 loss on a litre of diesel, Rs 8.70 loss on a litre of kerosene and Rs 385.44 loss on a cylinder of cooking gas, according to Dhungel.
Meanwhile, Nepal Oil Corporation has also decided to introduce flat commission rate to petroleum dealers. "The corporation has decided to fix flat commission rate to dealers," deputy managing director Bachchu Kumar Kafle, said, informing that the corporation has fixed commission rate at Rs 2.47 on a litre of petrol, Rs 1.75 diesel on a litre of diesel, Rs 1.17 on a litre of kerosene and Rs 56 on a cylinder of cooking has.Earlier, dealers used to get commission based on the percentage. The corporation was paying three per cent commission to the dealers.


Petrol price hike
June 12, 2011 -- Rs 102
March 12, 2011 -- Rs 97
December 6, 2010 -- Rs 88
July 6, 2010 -- Rs 85
April 22, 2010 -- Rs 82

Tanker drivers strike hits fuel supply

Scarcity of fuel has once again hit consumers as tanker drivers ferrying petroleum products started protest in the Valley against the traffic police decision to prohibit their entry into the city during daytime.

The protestors have halted transport of fuel to refilling stations since Friday, despite Nepal Oil Corporation's (NOC) promise to help them sort out the problem. The protesting drivers have warned that they will continue the strike to halt ferrying petroleum products until NOC allows them to operate in the city areas at any time of the day.

As part of their strike, they have also stopped tankers owned by dealers. Over 200 tankers are said to have been stranded due to their strike as most refilling stations in the Valley are located within the Ring Road.

The state oil monopoly yesterday sought seven days' time to hold talks with traffic police and sort out their problems.

Approximately 2,500 retail dealers throughout the nation manage the sales for petroleum products -- petrol, diesel, kerosene and LPG from NOC. There are 116 retail distributors for Kathmandu valley in particular.

The storage capacity for petrol is Kathmandu is 1,870 kiloliters, Diesel is 8,400 KL, and kerosene 4,960 KL. The products are transported from the depots to the retail dealers by tankers.

The number of transporters throughout the Nepal is 494, and 1180 tankers are engaged in transporting. The present storage capacity of NOC is 71,558 KL. However, it is just enough for 15 days only. Currently, the oil monopoly is working on developing storage facilities for petroleum products to have a storage caopacity for meeting the demand for at least 30 days

According to NOC deputy director Mohan Karki, the countrywide demand for petrol is 12,000 KL per month, diesel 60,000 KL and kerosene 7000 KL per month. "We are pretty much meeting the demand and supply ratio and there is no calamity as far as fuel is concerned," he added.

Nepal is increasingly dependent on oil for meeting its energy requirement. The demand for petroleum products is increasing by 20 per cent annually. Petroleum products constitute about 11 per cent of the total energy consumed in Nepal.

Approximately 70 per cent of all petroleum products are consumed in the central region.

NOC hikes petrol price by Rs 2.50; diesel, kerosene prices by Rs 2

Nepal Oil Corporation (NOC) today hiked petrol, diesel and kerosene prices.
"Petrol will now cost Rs 80 per litre -- dearer by Rs 2.50 -- and diesel and kerosene will now cost Rs 61 per litre -- Rs 2 dearer -- in Kathmandu Valley," said the NOC.
However, consumers have to pay a little more as Nepal Petroleum Dealers' Association (NPDA) that distributes petroleum products throughout the country always sells petroleum products after adding costs. It raised the price to stop the back flow of the petroleum products to India as there has been price difference in between Indian and Nepali markets.
The state oil monopoly has not changed the price of cooking gas, that according to the corporation, is making loss. LPG -- popularly known as cooking gas -- costs Rs 1250 per cylinder.
NOC has also not changed the Aviation Turbine Fuel (duty paid) that it is selling at Rs 75 per litre and ATF (bonded) that it is selling at $805 per 1,000 litre.
Earlier, on February 18, NOC increased the price of kerosene and diesel each by a rupee per litre making them Rs 59 per litre in the Valley. But the price in Tarai districts was increased to Rs 57.70 per litre only.
NOC had then also decided to increase the price as, according to it, the sole supplier of petroleum products had been incurring losses in both diesel and kerosene that is the poor men's fuel.
The state-owned petroleum importer had been -- after the price hike -- raking in a profit of Rs 20 million a month against its loss of Rs 37.5 million per month
NOC has been adjusting prices of petroleum products every month as since last year prices started fluctuating, pushing the state-owned corporation into the red.
Earlier, it had increased the price of kerosene and diesel by Rs 3 per litre on November 17. Then, both kerosene and diesel prices were hiked to Rs 58 per litre. NOC used to make a profit of Rs 4 on a litre of kerosene after the hike, while it incurred a loss of Rs 2.50 on a litre of diesel.
NOC had started making profit when the downward revision of prices started in October 2008, which continued till March. But the rise in prices of petroleum products in the international market again brought it to its knees.
Every month -- on 16th as per the Roman calendar -- NOC receives a new price list for petrol, diesel from the IOC -- its sole supplier. However, on the first of every month, it receives a new price list for petrol, diesel, kerosene, Air Turbine Fuel (ATF) and cooking gas.

NOC hikes kerosene, diesel prices by one rupee

Nepal Oil Corporation (NOC) increased the price of kerosene and diesel -- both -- by one rupee per liter making them Rs 59 per litre in the Valley. But the price in the Tarai districts will be Rs 57.70 per litre.

"The price hike will come into effective from Thursday," said the sole petroleum importer.

The NOC board meeting on Wednesday late night has decided to increase the price as it has been incurring losses in both diesel and kerosene that is the poor men's fuel.

The state-owned petroleum importer will -- after the price hike -- profit Rs 20 million in a month. Earlier, it has been losing Rs 37.5 million per month, it said.

NOC has been adjusting the prices of the petroleum products every month as last year the prices started fluctuating pushing the state-owned corporation into red.

Earlier, it had increased the price of kerosene and diesel by Rs 3 per litre on November 17. Then, both kerosene and diesel prices were hiked to Rs 58 per litre. The NOC used to make a profit of Rs 4 in a litre of kerosene after the hike, while, it incurred a loss of Rs 2.50 in a litre of diesel.

The NOC had started making profit when the downward revision of prices started in October 2008, which continued till March. But the rise in the prices of petroleum products in the international market had again hit it to bring down to knees.

Every month - on 16th as per the Roman calendar - the NOC receives a new price list for petrol, diesel from the IOC -- its sole supplier. However, on the first of every month, it receives the new price list for petrol, diesel, kerosene, Air turbine Fuel (ATF) and cooking gas.