E-Kantipur

KATHMANDU, SEP 22 -

Nepal could push for importing petroleum products from India on an export parity price basis ending the existing system of import parity price when the Petroleum Supply Agreement comes up for review in March 2012. 

Nepal and India will be revising the agreement after five years. According to the Ministry of Commerce and Supplies, state-owned oil monopoly Nepal Oil Corporation (NOC) has been paying extra money to Indian Oil Corporation (IOC) while importing fuel on an import parity price basis as price adjustment factor. Hence it would be beneficial to import fuel on an export parity price basis.

Recently, a report prepared by the High-Level Petroleum Reform Taskforce had underlined that NOC had been paying an additional Rs 6.40 billion in import bills annually due to fuel imports based on an import parity price basis. The report has asked NOC to import fuel on an export parity price basis.

“We are planning to review the clause to import petroleum products on an export parity price basis as per the recommendation of the report,” said Ganesh Prasad Dhakal, spokesperson at the Commerce and Supplies Ministry. As import parity requires NOC to pay additional duty, the ministry said that the price of petroleum products could be relatively lower if the export parity price was adopted.

NOC officials said that it could be a good move to propose to IOC for the import on an export parity price basis. However, Nepal should first do a cost analysis of both factors before implementing it. “Import parity pricing is a pricing policy adopted by suppliers of products for sale to domestic customers, and IOC has put Nepal in the same category,” said an NOC official.

On July 15, the ministry had formed a committee under the coordination of the secretary of the Ministry of Commerce and Supplies to evaluate the existing Petroleum Supply Agreement and recommend improvements that could be proposed to remove past difficulties in the next accord with IOC.

The committee includes joint secretaries from the Finance, Law, Foreign Affairs ministries and representatives from NOC.

The current secretary-level committee has been formed following the charge in the High-Level Petroleum Reform Taskforce’s report that NOC and its ministry were not serious about dealing with IOC in terms of pricing, quality and the supply mechanism. 

Officials at the Ministry of Commerce and Supplies said that other topics will also be discussed minutely before signing a new oil trade deal with IOC. “Similarly, issues like enlisting other fuel suppliers for NOC and an NOC-IOC cross-border oil pipeline are among the major subjects to be discussed,” Dhakal said.

IOC has been supplying fuel to Nepal since 1974 when the two countries signed the Petroleum Supply Agreement to start formal petroleum trade between the two countries. As per the agreement, IOC is the sole exporter of petroleum products to Nepal.

Nepal’s imported petroleum products worth Rs 76 billion in last fiscal year, and NOC expects it to grow to Rs 100 billion in the current fiscal year.

Posted on: 2011-09-22 09:25

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