Halt NOC bonus

It is ridiculous that Nepal Oil Corporation (NOC), the insolvent state-owned petroleum monopoly that regularly needs loans and price hikes to finance imports, has decided to distribute Rs 198.8 million as bonus to its staff, citing profit for fiscal year 2008/09. The profit came not due to reforms and innovative business ideas but due to the fact that the corporation had maintained average retail prices equivalent to average crude price of US$ 75 even when the international price dropped to US$ 40. The corporation and its parent agency, Ministry of Commerce and Supplies, had argued higher retail price was necessary in order to enable NOC to repay huge loans it owes. They had further promised that they would use profit to settle outstanding loans and improve the financial health of the corporation.



But unfortunate for consumers, instead of using the profit to improve its alarming financial outlook with cumulative loss of Rs 7.63 billion and negative net worth Rs 7.92 billion, the corporation has decided to transfer the benefits to its staff. The very fact that the corporation is still dependent on loans to import fuel renders the decision to declare a bonus a financial malfeasance. But what is also unfortunate is that country’s law allows distribution of bonus to the staff on the basis of profit made in a specific fiscal year despite having accumulated loss. We think this is nonsensical and we urge the government to immediately correct this faulty provision that rewards incompetent institutions like NOC, whose cost of operation during 2008/09 jumped to 43 percent. The year also marked series of anomalies and corruption in the corporation. During the same year, NOC’s leakages had touched a record high.



Hence, we urge the government to instantly order NOC to revoke its decision. In this regard, we welcome the step taken by the Commission for the Investigation of Abuse of Authority (CIAA), which in response to Republica’s news intervened into the case and instructed the NOC to stay its decision. But such one-time intervention will not change corrupt mindset and ensure fair play and transparency in the corporation. The only way out of this mess is liberalization. Therefore, the government must instantly put the derailed petroleum sector reform on track. Only by ending the monopoly and instigating competition in the sector can we compel the NOC to be efficient, transparent and competitive. Introduction of private sector into the business, thus, has become very necessary to enable consumers enjoy the benefit. Also instituting an independent regulator, disallowing NOC to function as sectoral regulator, is crucial to monitor the anomalies and corruption in the corporation as well as the sector as a whole. This is important for protecting consumers’ interest as well.

Related story

NOC to distribute Rs 58 million as bonus to its employees