NOC to resume automatic pricing mechanism soon

Nepal Oil Corporation the state-owned petroleum company has said that it will resume the automatic pricing mechanism from the next fortnight.

This will allow the corporation to revise fuel prices every fortnight based on the international market trend.

The automatic pricing mechanism that was enforced in September 2014 was halted after the devastating earthquake of last year.

More or less the same prices of petroleum products have prevailed in the domestic market for long due to disruption in supply lines. As the supply situation has normalised, NOC is preparing to resume the mechanism.

More recently, the government levied an infrastructure tax on petroleum products through the budget for fiscal year 2016-17.

NOC has been paying five rupees on the import of each litre of all petroleum products as infrastructure tax since the budget was presented in the Parliament.

According to NOC, it can cover three rupees from the fund that was created for the payment of interest of loans that NOC had borrowed from different financial institutions and the government as NOC has substantially reduced its loan burden.

It was able to do so by capitalising on the rampant price fall of crude oil in the international market in this fiscal. NOC owes only Rs 4 billion to the government and the Ministry of Finance has pledged to finance Rs 3 billion.

“As NOC will be able to clear its loan burden from this fiscal, we will be able to compensate the newly enforced tax from the fund created for payment of interest,” said Mukunda Ghimire, spokesperson for NOC.

“The newly levied infrastructure tax will not create more burden on consumers because we already used to generate three rupees from consumers to pay interest on loans and NOC will be able to contribute another two rupees from its profit.”

The government has also said that the new tax levied on petroleum products will not affect the price of petroleum products in the domestic market.

However, NOC has said that the tax amount will be added in the consumer price if crude oil prices in international market goes up.

NOC was able to clear its loan dues worth Rs 19.88 billion in this fiscal.

NOC is preparing to resume automatic pricing mechanism, which would be a safe move for the corporation, because it can transfer the risk to the consumers if crude oil price starts to rise in the international market.

Source: THT