A fiasco named NOC

A fiasco named NOC
eKantipur, 15-Aug-08
BY SANJAY SHRESTHA

The state-run Nepal Oil Corporation has been in operation since January 10, 1970. We can say that the NOC has been able to maintain its vision and mission as mentioned in its profile by providing some degree of satisfaction to its unsatisfied customers with its services.

The facts show that there has been a dramatic change in the prices of gasoline in the last couple of years. It is not necessary to go back and compare the rates since its establishment. The data of the past 18 and a half years should suffice. Between 1990 and 2008, the prices of petrol, diesel and kerosene have swelled from Rs 19, Rs 7.50 and Rs 6 respectively to Rs 80, Rs 56.25 and Rs 51.20.

The NOC has always explained periodic price hikes by saying that they were unavoidable to save the corporation from the continuous losses it was suffering. Everybody knows the current price of gasoline. Even after the massive increase in the price, why has the NOC not been able to supply fuel in adequate quantities? Has it failed in its logistics that it cannot fulfill its responsibilities? The question remains unanswered. It would not be wrong now to say that the NOC has failed to carry out the vision and mission stated in its profile.

Although the NOC is said to be a semi-government enterprise, the government holds an enviable 98.36 percent of the shares with the rest owned by Rastriya Beema Sansthan (0.47 percent), National Trading Limited (0.78 percent), Nepal Bank Ltd (0.23 percent) and Rastriya Banijya Bank (0.16 percent). The NOC, therefore, can be said to be a fully government-owned company, and experiences unwanted and unhealthy intervention in its management. The government has direct control over its activities. The role of other shareholders is almost negligible.

Recently, the NOC stated publicly that it owes Rs 750 million to the Indian Oil Corporation. If that's true, we need to see evidence. The NOC has published no data about its financial activities as other companies do regularly. The secrecy has heightened public suspicion about the activities of its top management. The NOC is a monopoly. Why can't it bring out quarterly, half-yearly or yearly balance sheets if it has nothing to hide? Obviously, the government prevents it from publishing its financial statements. Why does the government keep such a strong grip on the NOC? Is it because some politicians pocket the profits?

There are many semi-government companies which the government has run into the ground by interfering with the management. Examples like Bansbari Shoe Factory, Nepal Airlines Corporation, Salt Trading Corporation, Nepal Food Corporation and Agriculture Corporation come to the fore. Among them, some have been dissolved and others pretend to be alive.

It has been a couple of days since the NOC introduced dual pricing for diesel. The corporation claims that it can cut its losses from Rs 750 million to Rs 650 million with this move. How feasible is the policy? And how effective will it be?

The NOC's storage policy provides another example of its lack of vision. Its present storage capacity is enough to fulfill the country's fuel requirement for only one and a half months. The NOC depot in Kathmandu has a capacity of 22,590 kiloliters, whereas the Amlekhgunj facility can store 23,640 kiloliters.

The NOC has been increasing the price of oil twice or thrice each fiscal year. For how much longer does it want to make the people suffer for fuel? Something is rotten in the NOC. It has racked up massive debts. Does it have any plans to make itself a debt-free company and start making money for a change? In plain language, the corporation is in need of a complete overhaul.

The Indian Oil Corporation, which is only six years older than the NOC, announced its quarterly unaudited profit of Rs 415 crore (Indian currency) in July 2008. Poor NOC announces losses every year.

The NOC should know that increasing the prices will not solve its problem. It should find long-term solutions to at least maintain a steady monetary policy without incurring losses. If the NOC is to become an efficient organization, it has to first come out from under government control. It could also issue shares to raise capital. If the NOC cannot break free of government interference, an alternative should be established.