The new policy has been adopted mainly because Ministry of Commerce and Supplies (MoCS) believes the entry of PEs in the petroleum sector business will help the government intervene into the market to check unfair and anti-competitive practices.[break]
“We have recently issued instruction to this regard to Nepal Oil Corporation (NOC) as well,” said Commerce Secretary Purushottam Ojha.
Nepal´s petroleum import is under state control. However, petroleum distribution is largely done through the private sector dealers. As for LPG, the private bottlers directly import LPG on behalf of NOC and distribute it in the market through their own distribution network.
Despite state´s monopoly, country´s petroleum sector reels under unfair and anti-competitive practices of the dealers and bottlers. That is not all. The syndicates of dealers and LPG bottlers have on many occasions forced the government to fulfill unfair demands, just because they could bring supplies to a grinding halt, creating havoc in the market.
“Entry of public entities like National Trading Limited into the business will help us break cartel of private players along the distribution chain,” said Ojha.
Mainly the government believes the entry of public entities in the LPG bottling business will help identify anomaly in the price subsidy that the government has been providing to the private bottlers.
“There are concerns that the subsidy we have been pledging to the private bottlers might be on the higher side. Public sector´s entry into the business will unveil the reality. If that´s the case, then we can cut the unwanted leakage of state subsidy as well,” said Ojha.
On Friday, Salt Trading Corporation (STC) formally launched its production in the market and Ojha, who inaugurated the event, said the government has requested the corporation to fix the price of its STC brand of bottled LPG lower than the market prices.
Currently, the private companies are retailing LPG at Rs 1,325 per cylinder (14.2 kg). Responding to the government´s request, STC announced that it will retail its product at Rs 5 cheaper than the market rates.
“We will retail STC brand of bottled LPG at Rs 1,320,” said Ishwori Lal Shrestha, chairman of STC, adding that they will also study their operation cost to ascertain if the price can be lowered further.
STC has set up LPG refilling plant at Thakre VDC of Dhading with an investment of Rs 250 million. Its plant is completely automatic and has a capacity to refill six cylinders in a minute.
STC officials said the company would initially circulate 30,000 refilled cylinders in the market and gradually increase that to 80,000 cylinders.
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