LPG loss to be cross-subsidised through Price Stabilisation Fund

Owing to global surge in gasoline price, Nepal Oil Corporation facing almost Rs 640m monthly loss

Kathmandu, September 4

Owing to increasing loss in liquefied petroleum gas (LPG) due to the rise in global gasoline price, Nepal Oil Corporation (NOC) is gearing up to cross-subsidise the loss incurred in cooking gas through the Price Stabilisation Fund (PSF), which has deposits of over Rs 3.5 billion.

Sushil Bhattarai, acting deputy managing director of NOC, said that though the corporation had so far been cross-subsidising the loss in LPG through profits booked in other fuel products, NOC is currently incurring loss in every fuel product except aviation turbine fuel (ATF) and kerosene, thereby adding financial pressure on the corporation.

As per the latest fuel price of Indian Oil Corporation, NOC is incurring a monthly loss of almost Rs 800 million in LPG (Rs 332 per cylinder). However, NOC’s projected monthly loss as per the new price rate is almost Rs 640 million, as the corporation has been booking Rs 18.11 per litre profit in kerosene, Rs 51.63 per litre in ATF (foreign airlines) and Rs 14.88 per litre in ATF (domestic airlines).

“In a bid not to affect LPG consumers, we have been cross-subsidising the loss in LPG via profits in ATF and kerosene. However, the price of LPG is constantly increasing and losses in diesel and petrol are also ballooning,” informed Bhattarai, adding that NOC will soon seek to use PSF to subsidise the loss in cooking gas.

The government had set up PSF in 2014 to control the excessive fluctuation of fuel price in the domestic market. The government levies extra charge on each petroleum product for the fund.

However, NOC’s plan to cross-subsidise loss in LPG through the PSF will have to be endorsed by the NOC board. NOC is expected to take a proposal to this effect to its board soon.

NOC is also preparing to implement the dual price system for LPG to cut its losses on the product. Under this scheme, the corporation will introduce separate coloured LPG cylinders for commercial and household use and charge the actual cost price of LPG for commercial use while subsidising LPG for household usages.

“Currently, we are collecting data on the consumption of LPG for commercial purpose and household use,” informed Bhattarai.

Meanwhile, the state-owned fuel supplier also hinted at a possible rise in fuel price in the coming days.

“Along with the increasing global fuel rates there has been significant appreciation of the US dollar in recent months, which is adding financial pressure on NOC,” said Birendra Goit, spokesperson for Nepal Oil Corporation.

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