Nepal Oil Corporation is set to pay around Rs17 billion to Indian Oil Corporation to reduce the outstanding dues of over Rs30 billion, according to a senior official at the state-owned oil monopoly.

After receiving certain loans, Value Added Tax (VAT) returns and reimbursement of infrastructure development fee from the government, Nepal Oil decided to make payment to the Indian oil supplier.

According to the NOC, it currently has outstanding dues of Rs31 billion to be paid to the IOC.

“We are making a payment of INR 10.5 billion (Rs16.8 billion) to the IOC on Monday,” Nagendra Sah, deputy managing director of the finance/administration section of the NOC. “After this payment, our dues to the IOC will still remain at around Rs14 billion.”

The state-owned oil monopoly was failing to make full payment of supplied oil for the last few months due to rising international prices of petroleum products and its failure to adjust the prices at home accordingly amid fears of public backlash and inflation fears.

Its outstanding dues to IOC stood at Rs22 billion till June 23 and it increased to over Rs30 billion by July 8 after it reduced diesel and petrol prices.

On June 25, as instructed by the government, the NOC had decreased diesel and petrol prices by Rs29 and Rs20 per litre, respectively. Though the government had announced that it would reduce tax equivalent to losses caused by price reduction, the government didn’t implement its own announcement. Instead, the Finance Ministry assured the NOC that the ministry would compensate the losses incurred due to price reduction, through reimbursement of cash.

Instead, the Cabinet on July 15 decided to provide Rs7 billion in the form of loans investment. “We have to repay the loans to the government in the next five years,” said Sah. “The interest rate is five percent.”

Despite being in the loan form, the NOC received the cash from the government. Likewise, it also received an extra Rs2.75 billion in VAT return and Rs590 million as reimbursement of infrastructure development fee as per the Cabinet decision on July 15.

“We also received loans amounting to Rs3 billion from Rastriya Banijya Bank,” said Sah. “We are adding our own financial resources to the cash we have received to make the payment to the Indian supplier.”

Though the government has continued to ignore implementation of its announcement of reducing taxes, the NOC is optimistic that international prices of petroleum products will go down in the days to come.

Amid fears of a global recession, fuel prices have started to come down in recent days. As a result, the cost price of petrol, diesel and aviation fuel decreased for NOC as per the price list sent by the IOC on July 15 compared to one sent on July 1.

According to the NOC, the cost price of petrol decreased by Rs15.92 per litre, diesel by Rs16.69 per litre, aviation fuel ( internal) Rs16.73 per litre and aviation fuel (external) by Rs17.11 per litre. There is no change in the cost price of kerosene while the cost price of cooking gas increased by Rs10.64 per cylinder, according to NOC.

Despite reduced cost prices, NOC didn’t reduce the prices of petroleum products on Sunday arguing that the state-owned oil monopoly is incurring losses in petrol, diesel and cooking gas.

“The NOC is projected to see a monthly loss of Rs4.32 billion a month for keeping the same price maintained on July 4,” the NOC said in a press statement on Sunday.