The parliamentary committee that was formed to recommend moves to reform petroleum business is considering suggesting waiver of taxes, preferably VAT, on cooking gas.
The 11-member committee has been taking stock of the tens of billions of fuel business and discussing on possibility of private sector involvement in petroleum business, construction of Nepal-India cross-border oil pipeline, reforms in NOC and interest rates for NOC loans.
Since VAT has been sucking profits of state oil monopoly and making holes in the consumers’ pocket, it needs to be revisited, a member of the committee said, adding that the committee will submit the report to the government with recommendations to streamline fuel business.
Liquefied Petroleum Gas (LPG) – popularly known as cooking gas – has been eating the NOC profits also due to heavy VAT on it, according to NOC spokesperson Mukund Ghimire.
The tax waiver in cooking gas will reduce some Rs 330 million monthly losses of NOC, he said, adding that in most of the countries in the world do not impose taxes on cooking gas.
The government mobilises Rs 251.91 – in VAT and customs duty – on a cylinder of cooking gas. However, the NOC is losing Rs 681.91 in a cylinder of cooking gas, though it has been making Rs 212 million monthly profits on petrol, Rs 304.7 million on aviation fuel (international), Rs 108.9 million on aviation fuel (domestic) and Rs 28.1 million on kerosene.
But the monthly losses on diesel that stands at Rs 259.9 million could be managed if the loss in cooking gas could be reduced, the state oil monopoly said.
Likewise, they are also discussing on cross-border pipeline that will not only ensure smooth supply but also reduces transportation cost, apart from helping NOC to take its stand as and when transporters strike to increase their commission.
The pipeline project – first proposed by IOC in 1995 – is estimated to cost Rs 1.6 billion, except land acquisition cost. A pre feasibility study in 2004 and a technical study in 2006 termed the project economically viable on condition the pipeline is operated unhindered for 20 years. It is estimated to save Rs 300 million to Rs 350 million annually in transportation costs alone for NOC. The NOC currently spends around Rs 500 million annually to transport petroleum products from Raxaul to Amalekhgunj.
According to the estimate, the annual operation cost of the pipeline will come to Rs 120 million.