Nepal has opened the doors to the private sector for the first time by issuing a permanent license to Malika Petroleum Private Limited to engage in the petroleum business in the country, breaking the 45-year monopoly of Nepal Oil Corp.
The Department of Commerce and Supply Management (DoCSM) issued the license upon the recommendation of the government’s Petroleum and LP Gas Management and Regulation Committee.
Malika Petroleum is a Kathmandu-based private company chaired by Dipak Raj Timalsina.
Malika Petroleum is one of four companies that had applied for a license.
“We have issued a permanent license to Malika Petroleum as the firm appears viable for engagement in the petroleum business in Nepal,” said Shambhu Koirala, member-secretary of the Petroleum and LP Gas Management and Regulation Committee. Koirala, who is also director general of DoCSM, said that the company has committed to putting up the necessary infrastructure within two years.
Malika Petroleum has met the minimum required paid-up capital of NPR 250 million (USD 2.3 million) in the initial phase, which has to be raised to NPR 5 billion (USD 46.5 million) once the company starts operating. Malika is also required to build a 20,000-kilolitre fuel storage capacity, broken down as follows: 14,000 kilolitres for diesel fuel, 5,000 kilolitres for gasoline and 1,000 kilolitres for kerosene.
The private company is allowed under Nepal’s regulation to establish its own fuel retail prices, but within the price range determined by the Petroleum and LP Gas Management and Regulation Committee. It also is required to submit a detailed report to prove its readiness to start operating within two years of getting its license.
“The committee itself will study the final report of the private firm before recommending to DoCSM to give the ‘go-ahead’ for petroleum transactions,” Koirala said, adding, “While the company will set the fuel rates as per the international market, the government will play a regulatory role in issues related to quality.”
“We have been working in depth to manage infrastructure, and talks with a possible Indian supplier are going on every day,” said Timalsina, chairman of Malika Petroleum. “If things do not stall, we will enter into petroleum transactions in the market within one and half years,” he said.
“We aim to cover 10% of Nepal’s fuel market within the first year of entering into transactions and gradually up to 30% in a matter of some years,” Timalsina said.
Malika Petroleum has also applied for a license to trade liquefied petroleum gas or LPG, which has not yet been approved.
The government move to allow private sector firms to supply fuels follows severe supply shortages last year.