However, the arrangement that it is planning to put in place for the distribution of subsidized supply lack a clear mechanism to control possible leakages, which could prevent it from realizing the desired result. [break]
Under the new arrangement that a top Ministry of Commerce and Supplies (MoCS) official said will be enforced soon, the government will supply only eight cylinders (14.2 kg) of gas at a subsidized rate to a family in a year. Students living away from the family will get four cylinders at subsidized rate every year.
“Prices for rest of the consumption will be opened, meaning it will be set at par with the import rates,” said the source. Given that NOC is presently incurring a loss of Rs 563 per cylinder, officials said the open market rates of gas could stand somewhere around Rs 2,050.
This means families consuming more than eight cylinders of gas and students consuming more than four cylinders in a year will need to pay more for the fuel.
For subsidized supply, the Ministry has even instructed the Nepal Oil Corporation (NOC) to issue consumer cards to general consumers. Only the customers holding the card will enjoy the subsidized supply and others will need to pay higher rates.
“Commercial consumers, including hotels, restaurants, factories and automobiles will not get the cards, as they will need to pay higher prices for the fuel,” said the source.
Interestingly, however, the MoCS and NOC have asked LPG bottling companies to identify and list out their consumers. They are planning to entrust the responsibility of distributing consumer cards to bottling companies.
“We do not want to complicate the process. So, we have decided to leave it to the industries to supply the subsidized fuel,” said the source.
With such a mechanism, concerned officials are hopeful they will be able to check the loss on LPG business. However, experts and sources at the NOC said the modus operandi adopted by the government was faulty and leaves scope for manipulations wide open for the companies.
As the government has not put in place a cross-checking mechanism, companies can easily create fake household consumers and supply their subsidized quota to industries at higher rates, said an NOC official. If that happened, the additional money paid by the industries will go into the pocket of the bottling companies instead of NOC.
“What if the companies over-issued the consumer cards? That will start trading of cards itself, creating black-marketing and making life difficult for both the government and NOC,” said Amrit Nakarmi, energy expert, who is also the former general manager of NOC.
Recalling the past experience when the government introduced dual pricing on kerosene, he said the haphazard distribution of consumer cards by ward offices then had suddenly sparked trading of cards, inflicting more than regular volume of loss to NOC. Failing to contain the situation, the government had withdrawn the dual pricing itself.
“If the government did not seriously devise ways to plug the leakages, we will witness mere recurrence of similar situation,” he told Republica.
Given the situation, experts said introduction of separate cylinders for household and commercial consumers is the most workable mechanism if the government wants to control loss through dual pricing.
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