Nepal Oil Corporation (NOC) has planned to implement a dual price system for liquefied petroleum gas (LPG) by mid-August after a series of failed attempts. The state-owned oil monopoly expects to cut its losses on LPG sales by 30 percent under the new scheme.
As a prelude to launching the dual price system, NOC has told its gas dealers to distribute colour-coded cylinders to their customers, red cylinders for household users and blue cylinders for commercial users.
After the dual price system goes into effect, commercial users will have to pay Rs 2,130 per cylinder and household users Rs 1,470 per cylinder.
NOC said that it had prepared a final draft of the working guideline for the purpose. “We will be submitting it to the Ministry of Commerce and Supplies for its approval,” said NOC Spokesperson Mukunda Prasad Ghimire.
The company has been trying to implement a dual cylinder system since June 15, 2013 in a bid to sell LPG to commercial users at the actual rate and home users at a subsidized rate. The plan got nowhere due to vehement protests from gas dealers and the government’s weak enforcement capacity.
NOC has been suffering heavy losses on LPG due to the policy of providing cooking fuel at a low rate to the masses. It loses Rs 589.88 per cylinder or around Rs 880 million monthly. The corporation’s overall losses come to Rs 432.8 million per month.
The company has stayed afloat with loans and government bailouts. It owes around Rs 35 billion to various financial institutions out of which it owes Rs 12.64 billion to the government and the rest to other organisations including the Employees Provident Fund and Citizens Investment Trust.
According to Ghimire, the working guideline focuses on controlling potential problems that could arise after implementing the dual cylinder system.
“We are mainly concerned that traders may force home users to buy the more expensive blue cylinders,” said Ghimire. Gas depots could hide the red cylinders so that they can sell the blue ones at a higher price, he added.
NOC’s working guideline has envisaged using stickers on gas cylinders to prevent sellers from changing their colour. “This could prevent bottling plants from putting blue paint on red cylinders to make abnormal profits.”
The corporation has also planned to issue 30 percent of the LPG at the actual price while issuing purchase delivery orders. It has estimated that about 30 percent of the LPG is being purchased for commercial purposes.
NOC has issued 653,000 cards to home users so far. It said the cards issued earlier would be verified by local bodies to prevent their misuse. “We will coordinate with the municipalities and village development committees to ensure that the cards are not misused.”
Consumer rights activists have expressed scepticism over the effective implementation of the pricing system. “As NOC lacks an effective monitoring mechanism, possibilities of irregularities are high and ordinary users may face artificial shortages of LPG,” said Madhav Timalsina, president of Consumer Rights Investigation Forum.