KATHMANDU, Nov 20: Nepal Oil Corporation (NOC) has said it would finalize the Guidelines on Distribution of Subsidy on Liquefied Petroleum Gas (LPG) within a week so that the much-touted introduction of dual cylinder and dual pricing on LPG could be enforced as soon as possible.
“We will complete exercises on the guidelines and forward it to the Ministry of Commerce and Supplies (MoCS) within a week,” said Suresh Kumar Agrawal, acting chief of the state-owned petroleum monopolist.
Though he did not elaborate further, sources said NOC in the guidelines was proposing the government to provide subsidy only to the household consumers and also limit the quantity of subsidized supply to a cylinder (of 14.2 kg) a month per household.
“If the government endorsed it, each family will get a total of 12 cylinders of LPG at the subsidized rate. Those consuming more will need to pay more for the supply,” said the source. NOC´s argument is that those consuming more can afford to pay more for the fuel.
Moreover, the proposal, if came into implementation, will prevent hotels, restaurants, LPG-run automobile operators and factories, among others, from getting the subsidized supply.
“Given that some 40 percent of LPG import is consumed by the commercial users, we expect the new policy decision to slash our loss by more than Rs 366 million a month,” said the source.
Presently, NOC is suffering a loss of Rs 610.7 million a month from LPG trade because the government has refrained from adjusting the price of the popular cooking fuel in line with the international trend.
In a bid to enforce the subsidy, NOC is pushing the government to go on with its previously proposed model of post-purchase cash refund. “Under this model, customers will get the subsidy in the form of cash refund. For this, they will need to produce the receipt of their purchase,” said the source.
Moreover, the corporation, in the guidelines, also stands firm on its stance that such refund should be done based on the customers card that will be issued to each households. Also it maintains that cylinders to be supplied to the household consumers should be different that that used by the commercial users.
“So our proposal is; the bottlers should use red colored cylinders to supply LPG to household consumers and blue colored cylinders to distribute LPG among commercial ventures,” said the source.
NOC says issuance of customer card and circulation of different cylinders in the market would be crucial, for without clear database of customers and mechanism to differentiate household and commercial supply it would not be able to check leakages. MoCS officials agree to it.
However, LPG bottlers vehemently protest the MoCS and NOC´s plan to introduce dual cylinders, saying that differentiating the cylinders would require them to invest Rs 500 million.
“Dual cylinders make sense only if the government is introducing dual pricing. But if it is to maintain uniform retail rate and distribute the subsidy in a targeted manner, we do not think differentiation of cylinder is necessary,” said Kush Kumar Malli, general secretary of Nepal LPG Industries Association (NLPGIA).
However, NOC has been pushing for it mainly because introduction of dual cylinder would enable it to eventually introduce dual pricing, thereby slashing losses on LPG trade by whopping 40 percent.
In 2011/12, NOC had suffered loss of Rs 5.5 billion on LPG business alone.