INTERVIEW


We are for price automation of petroleum products The government needs to introduce multiple Value Added Tax (VAT) system and reduce VAT on petroleum imports. The government should scrap the VAT credit provision to industrialists after introducing the multiple VAT system.


Saroj Prasad Pandey
President
Nepal Petroleum Dealers' Association (NPDA)



Saroj Prasad Pandey is the President of Nepal Petroleum Dealers' Association (NPDA) since 2009. Prior to this, he served as the General Secretary at NPDA for 12 years. He also worked as the Spokesperson at the Association for two years. He has been involved in the Association at different positions for the last 23 years. Pandey is also the President of L P Gas Industries Association, Birgunj. In an interview with Rozina Nepal of The Corporate, Pandey expressed his views on Nepal's seeming never-ending petroleum crisis and the reasons behind it. Excerpts:


Scarcity of petroleum products keeps hitting Nepal time and again. Why can't we have a smooth supply?


Nepal Oil Corporation (NOC) is responsible for importing, transporting, storing and distributing all kinds of petroleum products in the country. So, the NOC is supposed to maintain a regular supply of all petroleum products. NOC has been trying to solve the problems faced by the petroleum sector, but the government's inefficiency has always been a hurdle. Inappropriate petro-policies and government's indecisiveness are the major problems.


It has been 100 years that petroleum products were first introduced in the country. It has been 42 years since the NOC was formed. But still the government struggles to ensure a smooth supply of petroleum products in the country because of the lack of concrete national-level policy and law. The supply and distribution of petroleum products has always been done on an ad hoc basis due to the imperviousness of the government.


What do you think are the reasons behind the present petroleum crisis?


The main reason is that the NOC has been selling petrol and diesel at lower rates than it buys with the Indian Oil Corporation (IOC). The price of crude oil in the international market has gone up. The US dollar, too, has been rising. Due to this, the buying price of petroleum products has been continuously increasing. On the other hand, the tax structure of the government has also increased proportionately. The government used to collect Rs 7-8 billion revenue from NOC in the past but it collected about Rs 16 billion in FY 2010/11. Over politicisation of NOC is another major problem. There is a need to keep the NOC free from all kinds of political interferences. For this, an independent committee should be established for the execution of the policies introduced for the petroleum sector. The committee should be represented by both public and private sectors. This committee should give advices to the government on the import, quality maintenance and distribution of petroleum products and the government should work accordingly. The government needs to introduce multiple Value Added Tax (VAT) system and reduce VAT on petroleum imports. The government should scrap the VAT credit provision to industrialists after introducing the multiple VAT system.


There have been talks about allowing the private sector to import petroleum. Where has the process reached?


I feel that the condition for the private sector to import as well as supply petroleum products is not yet favourable. The private sector cannot do so given the current price structure. The private sector is not that efficient to work in this sector at present and it cannot take the risk as well. We can see that in most of the countries worldwide, the government implements a control mechanism in the petroleum sector not the private sector. In the Nepali context, the role of the private sector in the petroleum sector can be transporting, supplying and distributing the petroleum products. The private sector can only help in these functions of state-owned enterprises. Before the establishment of the NOC, there were many dealers who distributed and supplied the petroleum products. But the governments of the past with communist ideologies have always discouraged the private sector involvement in the petroleum sector.


They have made the general public believe that the sector can be handled only by the government. But whatever may be the condition, the state-owned petrol pumps are still not that capable to compete with the private sector pumps. The private sector seems to be confident in what they have been doing. But, the private sector is not prepared for petroleum import at present.


What is the role of NPDA to solve the problems like hoarding and supply cartels of petroleum products by the dealers?


There has been active participation of the government, NOC and NPDA for solving the issues like hoarding and supply cartels of petroleum products. As we can see, government’s active monitoring in the sectors like foods, dairy and petroleum products. Out of 2,200 petrol pumps, the problems were found in only two petrol pumps. The positive thing is that, the problem found during the evaluation and monitoring of petrol pumps is not the one related to quality.


The problem is that the team which is responsible for the monitoring and evaluation lacks technical understandings about the sector. They are not aware about the nitty-gritty of this sector.


They have blamed the pumps without knowing the truth. I guarantee that there is no hoarding in any of the petrol pumps. Petrol pumps are now facing security threat due to this baseless accusation of hoarding.


Adulteration of petrol is rampant these days. Why is the NPDA always against the measures that are meant to control it?


I totally disagree with this. NPDA has always supported measures to control the adulteration in petroleum products. In the past, the petrol imported in the country did not meet the quality standard required for the Euro 3 cars. Due to this, the knocking value (power) required by the engine was not met. Also, the difference in the prices of diesel and kerosene had some impact on the quality. Since 1997, we have been continuously urging the NOC to fix the same price of diesel and kerosene in order to maintain the quality. To maintain the quality of the petroleum products, the government introduced a policy in 2009 according to which the price of diesel and kerosene was made equal. This move addressed the problem of diesel adulteration. As far as the question of adulteration in petrol is concerned, it is just an allegation. It is only sold mostly in the urban areas. Both the government and the NPDA have been seriously monitoring the quality of the petrol. There is no problem of adulteration in the petrol sold by the pumps.


What has prevented the implementation of an automatic pricing mechanism in the petroleum sector?


The only reason that is preventing the implementation of APM is the unwillingness of the government. The government, in many ways, is hesitating to do so. The price of petroleum is lowered in Nepal according to the international rates, but the same is not true when the international rates go up.


NDPA has been demanding 5% commission from NOC and also threatened to shut down the petrol pumps and stop fuel distribution. But the SC has prohibited all kinds of strikes in the supply and distribution of petroleum products. What will you do then?


Yes, we have demanded five percent commission from NOC. Also, we had threatened to shut down the petrol pumps and stop fuel distribution. But we have now dropped the idea of closing down the petrol pump as per the order of the Supreme Court (SC). We also had a meeting with the government about the issue and our demand for five percent commission is still there. This is because the policy which NOC has been implementing regarding the supply and distribution of the petroleum products is a problematic policy. The policy itself has created the crisis.