| September 25, 2018

MoS plans to convert NOC’s Rs 3 billion debt into equity

MoS plans to convert NOC’s Rs 3 billion debt into equity Dipesh Shrestha/Republica

Nepal Oil Corporation will not distribute bonus for previous year: Supplies Secretary

KATHMANDU, June 13: The government is mulling converting the Rs 3 billion in debt that Nepal Oil Corporation (NOC) owes it into equity.
The step is being considered as it would not only wipe out NOC’s huge debt burden but also increase its capital base, according to Shreedhar Sapkota, secretary at the Ministry of Supplies (MoS).


Sapkota says MoS is preparing to send this proposal to the Ministry of Finance (MoF) for approval. 

“We should increase NOC’s capital, especially at a time when we have been talking about different infrastructure development in country’s petroleum sector,” Sapkota told Republica.

If this happens, the state-owned oil monopolist will be clear of almost a decade and half-long debt burden.

NOC started suffering losses from Fiscal Year 2003/04 and once owed the government and financial institutions as much as Rs 36.81 billion in debt. However, the corporation raked in huge profits in the last two years, owing mainly to sharp declines in global oil prices and implementation of an automatic pricing mechanism at home since September 2014. As the result, NOC has paid back all the financial institutions it owed money to. It now NOC only has a Rs 3-billion debt in it books which it owes the government. 

“Getting rid of the debt burden will mean a lot to NOC as we can shift focus to infrastructure development,” Mukunda Ghimire, NOC spokesperson, says. 

Ghimire told Republica that MoF officials have been positive about convert its remaining debt into equity. “NOC will be hopefully without debt in a few months.” 

Ghimire says benefit from NOC not being under a debt burden will also trickle down directly to consumers as NOC have been charging them Rs 3.55 per cylinder of liquefied petroleum (LP) gas and 25 paisa per liter of all other petroleum products to pay back its loans.
“These charges will be struck off once we are no longer in debts,” Ghimire says. 

This is, however, not yet completely a foregone conclusion.

Rajan Khanal, the revenue secretary at MoF, says the ministry still has to study the proposal and consider at the highlighted reasons for turning the debt into equity before making a decision. 

NOC was dragged into controversy again earlier this year for failure to reduce prices at the pump in line with the plummeting international oil prices. 

In addition, NOC proposed distributing Rs 900 million in bonuses to its employees which was labeled as unlawful by various sectors as it had accumulated a huge loss in January. 

The government had directed the NOC management not to distribute bonuses from annual profits unless its accumulated losses are first cleared. Following the direction, NOC separated the bonus amount but did not distribute any. 

Following the direction, NOC moved on to clear its dues as soon as possible so that it could distribute the separated bonuses to its staff. 
However, supplies secretary Sapkota, who is also the chairman of NOC’s board, told Republica that NOC will not be distributing bonuses for last year even if NOC clears all debts. “NOC can distribute bonuses from the new fiscal year onwards from its annual profits,” Sapkota adds.

Sujan Dhungana

Sujan Dhungana is associated with Republica English Daily since July 2013. He has been writing and reporting in business issues with primary focus on transportation, industry, commerce and supplies, gadgets, fuel and dairy reporting.    
Twitter: @mesujan888 Email This email address is being protected from spambots. You need JavaScript enabled to view it.