Of that amount, a financial burden of Rs 3.44 billion is attributable solely to leakages and corruption at NOC. “This amount is pocketed by corrupt officials, including the managing director and chairman of NOC and the minister for commerce and supplies,” said Jyoti Baniya, member of a high-level commission that submitted its report to the government on Friday.
The report has suggested that an anti-graft body probe irregularities at NOC, the property of top brass at the corporation and the line ministry and bring the axe down on them.[break]
As for the remaining Rs 6.40 billion that consumers are forced to pay, the report says it goes to Indian Oil Corporation (IOC) as price adjustment factor (PAF). “PAF is equivalent to customs duty and taxes (charged on crude import) and such transfer of Indian duty and taxes to Nepali consumers is unfair and contrary to international trade law,” said Bhim Acharya, coordinator of the high-level commission.
IOC was transferring such customs duty and taxes to Nepal from 2002 till 2007. After NOC raised its voice, India promised to refund the amounts, but it also introduced PAF in pricing.
“The government must hold talks with India immediately for its elimination,” said Acharya.
The commission has urged the government to recover payments made under PAF. “Such amounts stand at around Rs 14 billion, almost enough to free NOC of its debt burden,” says its report.
Referring to lack of transparency in the existing pricing structure at IOC, the commission has suggested the government switch back to the system of providing crude to IOC and collecting refined oil from it, instead of directly buying the finished product.
The commission has ascertained shrinkage of fuel (technical loss due to temperature difference) as another major factor behind the unwanted financial burden of some Rs 5.04 billion a year imposed on consumers.
“We now know why the government, the Ministry of Commerce and Supplies and NOC turn a deaf ear to any news report on burgeoning technical loss. NOC transfers the shrinkage to dealers who in turn say this leaves them with no option but to manipulate the quantity supplied to consumers,” said Acharya.
The commission has also identified transport cartelling and quantity theft by liquefied petroleum gas bottlers as factors adding to the burden on consumers.
“If all these leakages are plugged, we need not hike petroleum prices,” the report further says. Nonetheless, in case NOC´s loss becames unmanageable, the commission has suggested the government hike prices in such a way as to distribute the burden equally amongt NOC, the government and consumers.
It has also asked the government to introduce structural reforms at NOC prior to any price hike. In its suggestion, the commission has asked the government to designate the vice-chairman of the National Planning Commission as chairman of NOC and appoint a chief executive through free competition.
The commission has pushed the government to enact law governing the petroleum sector, set up a Nepal Petroleum Authority as a regulatory body and adopt an automatic pricing mechanism.
The commission has pushed strongly for opening imports to the private sector. “This is necessary to end NOC´s monopoly and make it more accountable to consumers,” the report further says.
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