The panel formed a month ago under the coordination of CPN UML chief whip Bhim Acharya has finalized its preliminary report that gives green signal to the government to open petroleum trade to the private sector.[break]
“Enactment of Petroleum Regulation Board Act and Regulations has become critical not just to manage imports and supplies, but also to ensure competition in the sector and deliver benefits to consumers,” reads the report. However, the report has failed to give clear view on fuel pricing -- the crux of the problem behind private sector´s disinterest to jump into the sector.
The report, a copy of which is obtained by Republica, suggests the government to adopt Nepal Oil Corporation (NOC) proposed post-purchase cash-refund mechanism to relieve general consumers. “This mechanism has successfully worked in Bangladesh and seems appropriate for Nepal as well,” said a member of the taskforce. However, the report does not delineate how the government can implement and monitor this mechanism, especially in the event of private sector participation.
Most importantly, the mechanism does not address real concern of the government -- how to finance import, especially as burgeoning loss has already rendered NOC cash-strapped and left fiscal front bleeding. The government has already pledged some Rs 4 billion to the corporation to finance import.
The taskforce has further pinpointed that taxes imposed on petroleum products were unsustainably high and suggested the government to rationalize it. In the last fiscal year, the government had collected Rs 12.26 billion in revenue from petroleum trade. This year, the revenue is expected to touch Rs 16 billion.
The taskforce has argued such rapid rise in tax rates have left consumers in distress. Its preliminary report also urges the government to withdraw value added tax (VAT) refund facility pledged to hotels, restaurants, industries and other VAT-registered firms consuming petroleum products.
“Providing VAT relief to business ventures is meaningless. It must be scrapped. The government should, instead, refund VAT to general consumers in a bid to relieve them,” reads the report.
The report also pushes for structural and operational level reforms in NOC to plug leakage.
Members of the taskforce said they have disseminated the preliminary report to different stakeholders for consultation and will finalize it soon after getting their feedback.
The government had formed the taskforce for policy suggestions after it failed to manage funds for importing fuel, as getting loans became difficult with NOC´s monthly loss rising amid crude price hike.
Technical studies of the past have strongly favored automatic adjustment of fuel prices in line with international trend as the only way out of the problem. But successive governments have refused to adopt such mechanism.
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