The government on Saturday officially launched colour-coded liquefied petroleum gas (LPG) cylinders in the market with a view to end subsidy given to commercial users and to enable the Nepal Oil Corporation (NOC) to offset its losses in its LPG business.
The government, however, plans to enforce dual pricing of LPG cylinders only after a month. The price of an LPG cylinder currently stands at Rs 1,470, in which Rs 363.84 is subsidised to all users. On the top of the subsidy, entrepreneurs receive VAT refunds.
According to the NOC, LPG traders have launched around 150,000 blue cylinders in Kathmandu, Jhapa, Biratnagar, Nepalgunj, Pokhara and Narayangadh as of Saturday. Finance Minister Shankar Prasad Koirala, who also looks after the Ministry of Commerce and Supplies, reintroduced the scheme amid a function here. The scheme was originally launched one and half years ago.
“The initiative will enable the NOC to be more professional as it has been relying on the government’s funding,” Koirala said. “It will also reduce the burden of the government, which has been injecting hefty amounts to finance petroleum imports.”
The scheme will also help the NOC offset its losses and address grievances of consumers who frequently suffer from LPG shortage. Under the colour-coded LPG system, commercial users are not allowed to use red cylinders.
“It’s a big initiative to differentiate LPG cylinders for commercial and household users. And, we are committed to make an effective monitoring of the system so that the scheme is not misused,” said Deepak Subedi, spokesperson for the Ministry of Commerce and Supplies.
Minister Koirala said the government will not let the NOC to rein the petroleum market monopoly and the sector will be opened for the private sector. “In principle, we have already opened the door for the private sector in petroleum trade. The government is working to settle some legal hurdles before implementing it,” Koirala said.
As the NOC has been selling petroleum products far below its purchase price, its outstanding loans to the government and different financial institutions have piled up to Rs 28.50 billion as of now.
NOC Acting Managing Director Suresh Kumar Agrawal said it has been working on the pricing of the cylinders. “It will take at least a month to differentiate the price of red- and blue-coloured LPG cylinders,” Agrawal said. By differentiating two classes of LPG consumers—subsidised and non-subsidised—under the government’s dual pricing scheme, household users will also be given consumer cards and the cardholders will get LPG at a subsidised rate. The government will provide a cylinder a month to a household of four members.
According to the NOC, the profit earned from the sale of LPG to industrial users will be used to provide subsidies to the poor and students. “We have planned to distribute the LPG consumer cards within a month,” Agrawal said, adding around 450,000 cards have been verified by the NOC and they have been sent for distribution.
NOC estimates 900,000 household cards will be required, and among them 600,000 households are based in the Capital.
The Federation of Nepalese Chambers of Commerce and Industry Vice-president Pradeep Jung Pandey said the provision will enable the NOC to reduce its losses by 50 percent. “However, the scheme should be used in a proper manner,” he said. Last fiscal year, the NOC imported petroleum products worth Rs 97 billion and it incurred Rs 5.50 billion losses, mostly contributed by LPG sales. Amid for-and-against argument between the government and LPG traders to enforce the scheme, the traders agreed on June 3 to implement the scheme after the government assured to raise the commission for LPG dealers and transporters.
The government has committed traders that their commission will be raised a week after they introduced the scheme. “The scheme has been launched in Kathmandu and six other districts across the country on Saturday,” said Shiva Prasad Ghimire, president of Nepal LPG Industry Association. “We hope the government will abide by its commitment of raising LPG dealers’ and transporters’ commission.”