Oil utility mulls reviving dual pricing on cooking gas, insiders scepticalPrice discrimination, which will allow households to buy LPG at a subsidised price and commercial users to pay the cost price, was envisioned 10 years ago.
The government is making another attempt to bring back the 10-year-old dual pricing policy in cooking gas after several efforts ended in fiasco amid charges of fee fraud.
Sceptical consumer activists, gas dealers and bottlers have guffawed at the latest announcement, doubting anything will happen this time too.
They say talk about the dual pricing policy emerges only when Nepal Oil Corporation racks up losses, and is soon forgotten when the lone supplier starts making a profit.
Launched with great fanfare in 2012, price discrimination would allow households to buy liquefied petroleum gas (LPG) at a subsidised price while commercial users would have to pay the cost price.
They would also get colour-coded gas cylinders—red for households and blue for commercial users.
The state-owned oil monopoly even distributed consumer cards to its customers through its dealers—at a fee of Rs10 each—which would entitle them to get the special rate. The first person to receive the consumer card was the then prime minister Baburam Bhattarai.
According to officials, 632,000 hopeful customers got the cards, and paid a total of Rs6.32 million for them.
This money was reportedly in the possession of the Federation of Gas Dealers’ Associations.
Now, no one knows where it is.
Gyaneshwar Aryal, president of the Federation of Gas Dealers’ Associations, said they spent the money to print the cards. But consumer rights activists say the public's money has been embezzled.
The government had introduced the system with a view to ending the subsidy given to commercial users and allow Nepal Oil to offset its losses in the LPG business.
A year later, on June 15, 2013, Nepal Oil and gas dealers decided to launch the dual LPG cylinder system under which commercial users were not allowed to use red cylinders. But it was not implemented effectively.
In March 2014, the government company issued a notice to all LPG traders and users to implement the dual cylinder system. But the dual pricing system was not enforced.
The then chief of the Nepal Oil Corporation, Chandika Prasad Bhatta, again tried to enforce the dual cylinder system from January 29, 2015. But he was removed from the post two days before the scheduled launch, allegedly under the influence of bottlers. Following his ouster, the plan was shelved.
In 2016, the then minister for supply Ganesh Man Pun formed a four-member committee to study the implementation of a card system for the distribution of LPG with the hope that it would help check hoarding and massive sales to commercial users. That too failed.
The plan was revived in 2018, but again it ended in failure.
On June 2, the board of Nepal Oil Corporation approved the decision to form a sub-committee to study the implementation of a dual pricing policy in LPG for household consumers and commercial users in order to reduce the losses by selling cooking gas at cost price.
“This policy has been initiated several times. It is difficult to apply it, but it is the need of the hour,” said Bhatta. “The government needs to execute the policy tactfully. A proper working guideline is necessary otherwise the announcement of the policy may disrupt the market.”
Decades ago, when Nepal was short of energy, government policy was focused on promoting clean fuel; and LPG was the top choice to prevent people from burning firewood and causing environmental degradation.
In 1995-96, Nepal used to import 18,600 tonnes of LPG annually. In 2000-01, according to reports, only 7.7 percent of Nepali households were found to be using LPG as the primary fuel for cooking.
Nepalis started using LPG in a big way from 1995-96 when it was formally introduced as an alternative to kerosene in urban and semi-urban areas.
Then load-shedding began, and at the same time, the government started imposing restrictions on collecting firewood. LPG demand took off, reaching 115,813 tonnes in 2008-09. The demand kept climbing.
In the last two and a half decades, LPG imports jumped by 2,466 percent, according to Nepal Oil Corporation.
In 2020-21, Nepal spent Rs36 billion to import 477,422 tonnes of LPG. The cooking gas import bill is expected to double by the end of this fiscal year.
According to the Department of Customs, Nepal imported 441,363 tonnes of LPG worth Rs52 billion in the first 10 months of the current fiscal year ended mid-May.
The oil monopoly says it buys LPG at Rs2,551.15 per cylinder and sells it for Rs1,800, incurring a loss of Rs751.14 on every cylinder sold.
The corporation's fortnightly loss on the sale of LPG stands at Rs1.43 billion.
Sushil Bhattarai, deputy managing director of the Nepal Oil Corporation, says demand for LPG has swelled to 50,000 tonnes monthly. “That’s a huge demand.”
As the government has been subsidising LPG for all users, this has pushed the corporation into massive debt.
Demand for LPG has grown despite Nepal earning the status of an energy-surplus country. The corporation says that currently 3.5 million cylinders are sold in the market monthly.
“We have decided to bring back the dual pricing policy. A study is being done. This time we have planned to bring a concrete policy,” said Bhattarai.
He said that for decades, all types of consumers paid the same price for LPG. “There is no need to give subsidies to commercial users. However, to introduce the policy, it might take some time," he told the Post.
LPG bottlers caution that the dual pricing policy could cause anomalies in the market.
Krishna Bhakta Shrestha, general secretary of the Nepal LPG Industry Association, an association of gas bottlers, says that if the policy is implemented, there is room for anomalies.
“Instead, the local government can give LPG subsidies to needy households,” he said.
The work procedure on the dual cylinder system was published in the Nepal Gazette in 2015.
"Currently, every customer is enjoying a cash subsidy of around Rs700 per cylinder," said Bhattarai, the Nepal Oil official, adding that gas dealers were reluctant to implement the dual pricing policy.
According to Aryal, the president of the gas dealers, the dual pricing policy is impossible.
“The market is not managed,” he said, “and it is a hassle segregating the cylinders and prices.”