Sunday, November 30, 2008

Exports up sixfold but imports far behind: NRB

Exports surged six-fold while imports more than doubled in the first quarter (Q1) of the current fiscal year in comparison to the same period the last fiscal year.
In the first three months of 2008-09 fiscal, exports went up by 27.1 per cent in comparison to a rise of just 4.3 per cent in the corresponding period for the previous year, according to the first quarter report of the Nepal Rastra Bank (NRB), the central bank. At the same time, total imports also increased by 30.6 per cent in the same period in comparison to a lower increase of 13.1 per cent in the Q1 of last fiscal year.
"Of the total exports, export to India increased by 10.1 per cent in comparison to an increase of 0.6 per cent in the same period last fiscal year. Exports to other countries alo soared by 58.3 per cent compared to an increase of 11.9 per cent in the same period of the previous year," said the report 'Recent Macroeconomic Situation' based on Q1.
The report attributes the rise in exports to India to the upsurge in exports of readymade garments, shoes and sandals, polyester yarn, copper wire, rod and GI pipe. Likewise, the rise in exports to other countries was ascribed to the upsurge in exports of pulses, woolen carpets, pashmina, herbs and tanned hides.
Meanwhile, imports from India augmented by 19.3 per cent in the review period compared to a growth of 13.7 per cent in the corresponding period the last fiscal year. Imports from other countries expanded by 48.5 per cent compared to just 12.1 per cent last fiscal, said NRB.An increase in the import of petroleum products, vehicles & spare parts, cold-rolled sheet in coil, hot-rolled sheet in coil and cement, among others, from India and gold, MS billet, telecommunication equipment & parts, computer & parts and polythene granules, among others, from other countries led to the surge in imports in Q1.
Overall Balance of Payment (BoP) recorded a surplus of Rs 7.7 billion in the first three months of this fiscal year in contrast to a deficit of Rs 5.6 billion in the same period last fiscal. According to the central bank, the current account also posted a surplus of Rs 8.8 billion in the period as against a deficit of Rs 6.6 billion in the corresponding period of the previous fiscal year. Such current account surplus was primarily attributed to the surge in net transfers by 75.5 per cent in the first three months. Under transfers, workers' remittances soared by 80.7 per cent compared to a growth of only 17.2 per cent in the same period last fiscal year.
Gross foreign exchange reserves stood at Rs 230.8 billion by mid-October, an upsurge by 8.5 per cent compared to the level as in mid-July 2008. Such reserves had gone down by 4.1 per cent in the same period of the preceding year.
However, in terms of the US dollar, gross foreign exchange reserves declined by 3.9 per cent to $3 billion in mid-October. In the same period the previous year, such reserves had gone down by 1.6 per cent. The current level of reserves is adequate for financing merchandise imports for 10.1 months and merchandise and service imports for eight months.

Finance Minister asks WB to lend budgetary support

Finance minister Dr Baburam Bhattarai has asked the World Bank (WB) to extend budgetary support to Nepal.
Talking to Justin Lin, senior vice-president and chief economist of the World Bank on the sidelines of the 'Follow-up International Conference on Financing for Development' seminar in Doha, Qatar, Dr Bhattarai also apprised him of the strategic and development direction that Nepal is taking.
Lin, on the other hand, suggested creating a conducive industrial environment that will help modernise the agriculture sector, attract foreign direct investment and encourage public private partnership. Lin assured him of continued support from the World Bank in the days to come.
Dr Bhattarai also informed the World Bank representative that Nepal is organising a Nepal Development Forum meeting in March 2009 and that it expects a high level representation from the Bank. "Dr Bhattarai also briefed Lin on the current fiscal year's budget programmes," said a press release adding that he requested World Bank to extend budgetary support to Nepal for eradicating poverty, reducing inequality and integrating peace into development -Peace for Development and Development for Peace.
The finance minister urged World Bank to adopt a flexible approach in formulating and adopting a Country Assistance Strategy after adequately considering the unique mode of Nepal's transformation. He also called on the international community to pay serious attention towards mobilising women's potential for economic growth and development.
Addressing a sideline seminar of 'Follow up International Conference on Financing for Development' in Doha, he emphasised the need for enhancing capacity. He reiterated that the present practice of ignoring economic value of work performed by women while determining the national income does not reflect the contribution of women in gross national product (GNP) of any country. "A comprehensive statistical system should be adopted at both the global and local levels for such measure," he said.
Ban-Ki-Moon, secretary general of the United Nations was the keynote speaker at the seminar chaired by Eric Solheim, Norway's minister of environment and development cooperation.
Dr Bhattarai, along with a team of three representatives, is in Doha to participate in the seminar that will go on till December 2. Some 500 delegates from member countries of the UN, civil society groups and business communities are attending this global event.
The programme will discuss the implementation of Monterrey Consensus, an agreement reached during 2002 at Monterrey in Mexico. The conference is organised by the United Nations.

Saturday, November 29, 2008

HONEYMOON DAYS: Finance ministry pegs away but scant to show

The Finance Ministry, in its honeymoon period, has tried to live up to its commitments spelled out in the budget.
The ministry unleashed a deluge of working manuals and directives, like Small Farmers' Loan Waiver Manual, Controlling Government Expenditure Directives and Working Manual for the Finance Ministry for smooth functioning of customs and revenue collection.
The finance ministry was successful in collecting targetted revenue as it has exceeded its target by 105.44 per cent to Rs 32.98 billion by November 15 as against its target of Rs 31.28 billion. The ministry, to encourage customs officials, has also raised their pay and perks. Its an indication that the ministry has taken the task of revenue collection seriously as it was rapped for setting an ambitious revenue target in the budget for the fiscal year 2008-09.
But the ministry is still engaged in preparing manuals and time is running out as the budget itself was presented two months later than its usual schedule. While the ministry has only six months to implement its plans and programmes, not a single development work -- promised in the budget -- has been started by the end of honeymoon period.
Contrary to popular belief, the ministry has been successful in convincing donors as the donors have pledged Rs 19 billion foreign aid, grants and loan to the Moaists-led government. However, it's another issue that the government has not received a single penny over than that already committed for undergoing projects during this period.
Finance Minister Dr Baburam Bhattarai is optimistic that the ministry under him is moving on the right track. "I am not completely satisfied, but things are moving on track. However, we need to speed up things," he admitted. "Anyway, we have been able to boost the people's morale with as many as 60-people oriented programmes," said the first finance minister of the youngest Republic, adding, "Still, it is true that the people have higher aspirations and the government has a long way to go."
"Policywise, everyone is happy. The only doubt has been over implementation of the budget," Dr Bhattarai said adding that by January 15 all paperwork would be complete and development works would start.
Critics, however, point to the fact that time is running out for one of the key ideologue of the Maoists. Worst of all, the government has totally failed in controlling the price hike. While it stands to reason that creating more jobs will be its major challenge, the downside is that more and more industries are closing down leading to increasing unemployment.

Highs
* Revenue rake-in rose by 105.44 per cent to 32.98 billion.
* Open liquor sales controlled from November 18.
* Donors pledged above Rs 19 billion in aid, grants and loans.
* Small Farmers' Loan Waiver manual passed by cabinet.

Lows
* Government failed to control price hike.
* Development works nil.
* Employment creation nil.

Friday, November 28, 2008

Banks are the new alters, now

Not very long ago, there were more temples than houses in Nepal. However, times have changed. Nepal is no longer a country of temples, it's a land of rapidly mushrooming financial institutions - with nearly three dozen commercial banks, five dozen development banks, over six dozen finance companies and hundreds of cooperatives already chugging along at full steam. Currently, there are 160 licenced deposit- taking institutions and many more - at least two dozen financial institutions including five A-class commercial banks - are in the pipeline.
The wonder of it is that a small economy like Nepal that is largely dependent on imports, with little industrial base at a time when majority of the industries are downing their shutters, sustains all these financial institutions. The mystery has spawned questions and doubts. "It is high time Nepal Rastra Bank (NRB), the regulatory authority authority of the financial market, analysed the impact of mushrooming financial institutions," Radhesh Pant, president of Nepal Bankers' Association (NBA), said, adding that setting criteria was not enough.
There is so much money in the market that the criteria of Rs 2 billion paid up capital for a commercial bank cannot stop people from opening even commercial banks. People's Bank Nepal Ltd (proposed) - with 898 promoters and Guru Prasad Neupane as its chairman - has a paid up capital of Rs 2 billion.
Mero Bank Ltd (proposed) - with authorised capital of Rs 4 billion and paid up capital of Rs 2.45 billion - has a 1,328 promoters. Century Commercial Bank (proposed) - with authorised capital of Rs 2.5 billion, paid up capital of Rs 2.23 billion (with promoters' Rs 1.561 billion) - is waiting for Letter of Intent (LoI) from the regulatory authority. It has 618 promoters including Dr Prafulla Kumar Kafle, former deputy governor and Nirmal Pradhan.
"Opportunities are decreasing and the number of financial institutions is increasing. I wonder where they will invest," Pant voiced concern. "If we are hit by a financial crisis, the government won't be able to inject money to rescue them, like in the US."
Kamal Gyawali, chief executive officer of Kist Merchant Banking and Finance Ltd that is ready to be upgraded to A-class commercial bank argues that the central bank should make licencing policy more stringent but once a financial institution gets licence it should be allowed free space to survive.
"However, NRB should not rescue sick financial institutions," he said adding that rather it should disseminate information of a bank's financial health promptly to the people. "The central bank sits on all the data but people get to know only when any bank sinks into bad shape," he added. "People have the right to know the condition of their bank."
According to NRB sources, the central bank is serious about the matter and taking stock of the situation. Some experts have even suggested stopping the granting of new licences until existing institutions are analysed. "Let's have a risk-analysis and prepare short, medium and long term policies," Pant added.
The International Monetary Fund (IMF) also showed warned that Nepal is over-banked. "The increase in the number of financial institutions has led to unhealthy competition," it has said. Experts also have said that as the size of the market pie is not increasing, the survival chance of some banks is slim.
Apart from new commercial banks seeking operating licence, existing two C-class finance companies - Kist Merchant Banking and Finance Ltd and Nepal Share Markets - are also ready to be upgraded, making it a total of 30 commercial banks.

Licenced Commercial Banks
1. Nepal Bank Ltd (November 15, 1937)
2. Rastriya Banijya Bank (January 23, 1966)
3. Nabil Bank Ltd (July 16, 1984)
4. Nepal Investment Bank Ltd (February 27, 1986)
5. Standard Chartered Bank Nepal Ltd (January 24, 1986)
6. Himalayan Bank Ltd (January 18, 1993)
7. Nepal SBI Bank Ltd (July 7, 1993)
8. Nepal Bangladesh Bank Ltd (June 6, 1994)
9. Everest Bank Ltd (October 18, 1994)
10. Bank of Kathmandu Ltd (March 3, 1995)
11. Nepal Credit and Commerce Bank (October 14, 1996)
12. Lumbini Bank Ltd (July 17, 1998)
13. NIC Bank Ltd (July 21, 1998)
14. Kumari Bank Ltd (April 3, 2001)
15. Machhapuchhre Bank Ltd (October 3, 2000)
16. Laxmi Bank Ltd (April 3, 2002)
17. Siddhartha Bank Ltd (December 24, 2002)
18. Agriculture Development Bank Ltd (January 21, 1968)
19. Global Bank Ltd (January 2, 2007)
20. Citizens' International Bank Ltd (April 20, 2007)
21. Prime Commercial Bank (September 24, 2007)
22. Bank of Asia Nepal Ltd (October 12, 2007)
23. Sunrise Bank Ltd (October 12, 2007)
24. Development Credit Bank Ltd (Upgraded in 2007)
25. NMB Bank Ltd (Established in 1996/Upgraded on June 2, 2007)

Proposed
* (Proposed) Peoples' Bank Nepal Ltd
* (Proposed) Mero Bank Ltd
* (Proposed) Century Commercial Bank

To be upgraded
* Kist Merchant and Finance Ltd (Established in February 21, 2003)
* Nepal Share Markets and Finance Ltd (

Wednesday, November 26, 2008

Heads rolling in Finance Ministry

The Finance Ministry is reeling from the ruling Maoist's intervention. The act claimed two victims today. Bowing to the Maoist's pressure, Dr Chiranjivi Nepal, chairman, Securities' Board of Nepal (Sebon) and Devendra Pratap Shah, chairman, Insurance Board (Beema Samiti), put in their papers today.
Sources said that both were urged to 'cooperate with the government' by stepping down from their respective posts.
The ruling coalition has sacked political appointees under various ministries since it assumed office around 100 days ago. Now, it has zeroed in on the Finance Ministry with a vengeance.
"At a time when the capital market is going through a critical phase, the Finance Ministry doesn't seem to be serious towards its development. The government apathy has compelled me to resign," explained the chairman of Sebon.
Dr Nepal, an economist, and Shah, the former general manager of Agriculture Development Bank, Nepal, were appointed in August, 2007, by the then Nepali Congress-led government.
Sebon had brought in five regulations to better manage the capital market under the able guidance of Dr Nepal.
Similarly, Shah had ushered in a slew of reforms in the insurance sector. "The World Bank has evinced interest in reforms in our traditional insurance sector. A report on these lines is being prepared. I strongly feel that reforms shouldn't be stalled at any cost," said Shah.
It is learnt that the Finance Ministry would see a lot of churning in the coming days.

Tuesday, November 25, 2008

Sebon grants licence to more Merchant Banks

Securities Board of Nepal (Sebon) granted permission to three more financial institutions to work as the Merchant Banks whereas three others are in pipeline.
Development Credit Bank Ltd (DCBL), Vibor Bank Ltd (VBL) and Nepal Housing and Merchant Finance Ltd (NHMFL) got the licence to work as Merchant Banks making it to a total of 11 financial institutions working as Merchant Banks.
"With more companies floating their shares, number of Merchant Banks has also increased," said Dr Chiranjivi Nepal, chairman of the Sebon, the regulatory authority of the capital market.The Merchant banks can work as Issue and sales Manager, Share Registrar, Underwriter and Portofolio Manager, according to the Merchant Banker Regulation-2064 that has come into effect from February 15 to help better manage capital market.
The regulation has clearly defined - Issue Manager, Underwriter, Share Registrar and Portfolio Manager - four entities. They all have to get licences from the board before operating. "A company can also work as all the four," according to the regulation.
Issue Manager manages issues of shares, Underwriter underwrites shares that are not sold and buys unsold shares, Share Registrar keeps all the records of shareholders and helps register shares, while Portfolio Manager helps investors to manage their portfolio. They all have to get licence separately to operate as either one of the four, or all from the regulatory authority, the Sebon.
In case, any company wants to operate as all the four, it must have a paid up capital of Rs 70 million. However, the paid up capital for Issuer Manager is Rs 30 million, Underwriter is Rs 40 million, Share Registrar is Rs 10 million and Portfolio Manager is Rs 10 million.
According to the regulation, Merchant Banks must disclose their annual report within the three months after the end of fiscal year to maintain transparency. They also have to submit their half-yearly report within the 60 days of half yearly closing to the Sebon."They are regulated by the board," said Nepal adding that earlier due to dual regulation of Nepal Rastra Bank (NRB) and the board, there had been some confusion.
However, Issue managers have been in trouble regarding the allotment of Initial Public Offerings (IPOs) of some financial institutions recently.
NIDC Capital Markets Ltd faced wrath from the investors during the allotment of Global Bank's shares. A week ago that NMB Bank had also faced the similar situation during the allotment of Clean Energy Development Bank's shares.

Capital market under scanner
The Securities Board of Nepal (Sebon) is keeping its eye open and carefully monitoring the capital market. "It is investigating current phenomenon in the market," said Dr Chiranjivi Nepal, chairman of the Sebon. "When we'll have enough evidence, we'll take action against those involved in malpractise," he assured.
Nepse today dropped below 700 points. It lost 27.66 points to 698.81 points, after almost four months of bullish trend. It has been floating above 800-point mark for long. However, Nepal telecom shares have pulled the Nepse down to below 700 points. Excluding NT shares, the Nepse is still around 900-point mark. NT shares were traded as low as Rs 531 today, a loss of Rs 69 per share in its minimum bidding price of Rs 600. Some investors have even bidded over Rs 2,500 per unit of the NT share.
All major bull markets go through three distinct stages and this is particularly true of Nepse as well. According to the experts, the first is the 'stealth' phase. This is when the bull market is flying under the radar and most investors are unaware it has even started. The next stage is characterised by 'disbelief'. The upward slope is easy to see on the charts but most investors don't believe the trend will continue. During this stage, the investing public is frozen with uncertainty. This stage of the bull market can carry on for years and it is often marked by deep corrections and long periods of consolidation. And its the time for correction, said Sebon.
"The Nepse index is decreasing as it is affected by rumours," Sebon said, adding that the negative flow of information in the market regarding the share pulls the Nepse down.
However, the regulator of the capital market is keeping its eye open and supervising the trading online. "The board is committed in controlling the illegal activities in the market and keep the market fair," commits Sebon.
According to Sebon, the investors should not be nervous as the securities market in Nepal does not have any foreign investment and the current global financial crisis will not affect it.

Monday, November 24, 2008

Global crisis may engulf Nepal too

Nepali economists sound optimistic despite the global financial crisis. However, they have warned that Nepal also might land up in a financial soup if domestic problems get out of hand. According to them, the global crisis has also highlighted the role of regulator and the negative aspects of rising consumerism.
The global meltdown has not had any impact on our economy till date, said finance secretary Rameshwor Khanal while speaking at a programme 'Growing economic slowdown and its impact on Nepal' organised by Manmohan Memorial Academy here today.
"The indicators of tourism, remmittance and exports, the key factors that could be affected by the global economic crisis are still in positive mode," he said adding that the government has been seriously studying the crisis and the probability of its impact on Nepal.
"The crisis can have both positive and negative impact on our economy," said Constituent Assembly (CA) member and industrialist Binod Kumar Chaudhary while commenting on the paper of former finance minister Bharat Mohan Adhikari. "Domestic and foreign investments of banks should be scrutinised," he said adding that this was the right time to delink Nepali rupee from Indian currency.
Dr Raghav Dhoj Pant, a veteran economist, agreed that the exchange rate between India and Nepal needs review. "Due to the weak Indian rupee against the US dollar, the Nepali rupee is also suffering," he said adding that remittance may see increase due to weak rupee but that will encourage consumerism leading to more imports and trade imbalance which would be fatal for Nepal's financial system.
Deependra Bahadur Chhetri, former National Planning Commission (NPC) member urged the government to create more jobs. "The government should invest heavily in infrastructure projects to create more jobs and thus avert any possible crisis," he said, giving the example of the US recession of the '30s.
In the US also, the government is punping in money to rescue financial institutions and even the auto industry. "There are deep-rooted fundamental issues that need correction," Dr Ram Sharan Mahat, former finance minister said. "However, fundamental correction will take time," he said adding that the global crisis would have its impact on Nepal's economy.
"The domestic banking sectors' exposure and their portfolio have to be seriously monitored as the role of the regulator like Nepal Rastra Bank (NRB) was key in averting such crisis, he opined. "If real estate prices come down, financial institutions may face problems even if real estate was only 12 to 13 per cent of their total loan portfolio."
Presenting his paper, UML leader Bharat Mohan Adhikari showed serious concern over the foreign aid and repayment of foreign aid due to financial crisis in donor countries.

Sunday, November 23, 2008

Real estate rate may cause banking to abate

Nepal is over-banked and agressive lending as well as large exposure of the financial sector to real estate could harm the financial health of the country, warned a visiting International Monetary Fund (IMF) team.
"With some 160 licenced deposit-taking institutions, Nepal is over-banked," said Braian J Aitken, Deputy Division Chief of Asia and Pacific department of IMF.
"Aggressive lending practices of many of the financial institutions expose their depositors to excessive risk. This underscores the urgency of significantly ramping up Nepal Rastra Bank's (NRB) regulatory enforcement," IMF team leader Aitken said adding that the central bank might find it difficult to supervise the increasing number of financial institutions. "Thus, the central bank's supervisory capacity has to be increased," he added.
IMF has also shown serious concern over the rapidly growing real estate price. "The biggest short-run concern is rapidly growing real estate price. Given the large exposure of the financial sector to real estate, a decline in real estate prices would have negative effects on banks and ultimately on output growth," said the IMF team.
The IMF blames the loose monetary policy for this development in the real estate market. "Development in the real estate market has been fuelled in part by a loose monetary policy," IMF said. "However, NRB recognises the risks and has recently taken some modest steps to tighten monetary policy but more tightening may be needed."
The central bank has announced a cautious Monetary Policy - that was a regular Seventh Policy - for the fiscal year 2008-09 on September 29. NRB has claimed that it has brought a rigid Monetary Policy that has increased the cash reserve ratio (CRR) by half a percentage point to 5.5 per cent. The CRR has been five per cent since 2004.
The IMF team's visit is focused on the recently approved budget and current financial and macro-economic conditions. The team held marathon discussions with Finance Minister Dr Baburam Bhattarai, finance ministry officials and the acting governor of the central bank over the last two weeks. "Nepal's macro-economic situation is good but subject to risks. Its outlook broadly remains stable, but the average inflation could increase to around 11 per cent," according to IMF.
This year's Monetary Policy has also been designed largely to maintain macro-economic stability and price rise control. But it has not been able to crack the whip on rising inflation. "Inflation in Nepal is largely catalysed by conditions in India," said Aitken, adding that Nepal's inflation could well be called imported.
The IMF also termed the recently approved budget as ambitious. "Revenue is budgeted to increase by 1.75 per cent of the GDP in part based on improved tax administration," the IMF team said. "Higher revenue forecast accomodates a sizable rise in budgeted recurrent spending. The government has taken impressive steps in an effort to achieve its revenue target. Revenue remains buoyant at this stage, but there is still the risk that if planned revenue fails to materialise the sustainability of the budget could be threatened," summed the IMF team that visits Nepal twice a year to access the country's fiscal and monetary policies.

Saturday, November 22, 2008

The rise and fall of Nepse

The huge volume of new Initial Public Offerings (IPOs), bonus and rights shares and debentures of various financial institutions worth billions flooded the secondary market, pulling Nepal Stock Exchange (Nepse) down. This week, Nepse plunged by 36.53 points to 770.37 points from last week's closure of 806.90 points.
This week's closing of 770.37 points - from August 31, when Nepse touched a record high of 1175.8 points - is a fall by almost 35 per cent or 405.43 points in these three months. However, market experts do not agree that this whopping fall of 405.43 points is a crash. They blame over-priced Nepal Telecom (NT) shares, book closing of major market propellers - the financial institutions - and deluge of shares in the secondary market for the continuous fall in Nepse.
Nepal Telecom (NT) share is, primarily, blamed for the fall in Nepse. The NT shares - listed on August 14 - started trading from August 17. NT shares scaled as high as Rs 1400 per unit, pushing Nepse beyond 1100 points - a climb of 300 points. But, as of today NT shares are traded at around Rs 600 per unit - that closed at Rs 629 on Thursday.
NT's share listing is the largest-ever, worth Rs 15 billion - that was 150 million-unit shares after Butwal Power Company (BPC) listed its 84,00,000-unit shares worth Rs 840 million at the secondary market. After listing of NT shares, the financial institutions dominating the capital market were expected to diversify giving option to investors but these institutions remained the market propellers.
Secondarily, some experts also see flow-back of money to land from shares. They point out that one of the reasons of the unnatural climb by Nepse was that people had been selling off land and invest the money in shares.
Thirdly, there is still the possibility of Nepse further plunging as some of the financial insititutions are yet to announce their book closing. This they will be doing soon.
This week Nepse - in its five-day session - wound up in negative territory for three days. The market opened in the red on Sunday as it plunged by 13.04 points to 793.86 points. On Monday, it dipped further by 19.68 points to 774.18 points.
However, on Tuesday, it rose by 1.81 points to reach 775.99. On Wednesday also, Nepse closed in green while gaining 0.59 point to reach 776.58 points. However, Nepse again plunged by 6.21 points to close at 770.37 points.
In terms of monetary value, Nepal Bangladesh Bank (with Rs 144.10 million), Bank of Kathmandu (with Rs 39.02 million), Nepal Investment Bank (with Rs 27.28 million), Standard Chartered Bank Nepal (with Rs 27.07 million) and Nepal SBI Bank (with Rs 17.59 million) are this week's top gainers.
In terms of numbers of share units traded and number of transactions also, Nepal Bangladesh Bank topped the chart with 1,99,000-unit shares and 503 transactions. Except the insurance companies group, all other groups wound up in negative territory this week because investors lost confidence. Nepal Bangladesh Bank has the negative networth.
The contribution of A-category companies this week was only 54.20 per cent and the float index - the real secondary market barometer - lost 2.45 points.

Tuesday, November 18, 2008

Cost of getting by getting too high

The price of grains and cereal products doubled while that of rice and rice products more than doubled in comparison to last October. As matters stand, there seems to be no end in sight to the price spiral. Rice and rice products, grains and cereal products, pulses, meat, fish and eggs, restaurant meals, milk and milk products - you name it, all are getting costlier.
Grains and cereal products witnessed a year-on-year (y-o-y) price rise of 21.3 per cent in the review period compared to an increase of 11.2 per cent in the same period last fiscal year. Price of rice and rice products of this sub-group increased at a higher rate of 25.1 per cent compared to an increase of 12.3 per cent a year ago. Indices of pulses, meat, fish and eggs, restaurant meals, milk and milk products and spices rose by 24.7, 22, 17.2, 16.7 and 13.4 per cent respectively in the review period against a rise of 14.6, 5.3, 4.2, 5.9 and 7.3 per cent respectively in mid-October 2007, Nepal Rastra Bank data reveals.
The significant rise in food and beverages prices pushed y-o-y consumer inflation to 14.1 per cent in mid-October from 6.3 per cent in the same period last year.
"Food and beverages group price rose by 15.2 per cent, and non-food and services group price rose by 12.9 per cent in the review period against 9.5 per cent and 2.9 per cent respectively a year ago," it said.
In the food and beverages group, price indices of sugar and sugar-related products as well as oil and ghee sub-groups increased by a whopping 39.5 per cent and 35.4 per cent respectively on a y-o-y basis in mid-October compared to an increase of -18.4 per cent and 12.8 per cent respectively last year.
In the group of non-food and services, index of transport and communication, housing goods and services as well as tobacco and related products rose by 23.1, 18.3 and 12.7 per cent in mid-October 2008 compared to a rise of -0.5, 2.5 and 3.2 per cent respectively during the same period of last year.
In the review period, y-o-y core inflation rose to 13.1 per cent from 4.7 per cent a year ago. The price of construction material also increased almost four-fold. "Of imported commodities, the price index of petroleum products and coal increased by a whopping 39.4 per cent on a y-o-y basis in mid-October compared to an increase of 1.9 per cent a year ago, said the NRB report.
However, the salary and wage rates are going down. The overall y-o-y salary and wage rate index rose by 9.1 per cent in mid-October 2008 compared to a rise of 11.9 per cent a year ago. Of the salary and wage rate indices, the salary index remained unchanged in the review period compared to a rise of 10.9 per cent in the corresponding period the previous year.

Monday, November 17, 2008

Another EPS batch off to South Korea

The 14th batch of Nepali migrant workers left for a much-sought after destination, South Korea, today to work under the Employment Permit System (EPS).
"Every week, a group of workers has been leaving for South Korea," said Laxmi Sharan Ghimire, director at the EPS Section under the Department of Labour and Employment Promotion (DoLEP). Today, 136 Nepalis left for South Korea making it a total of 1,250 of those who have gone there. "The majority of workers is assigned to the manufacturing and agriculture while a few are employed in hotels," he said.
Unlike in the beginning stage, Korean Air flies them directly to South Korea every Monday. Earlier, Nepal Airlines Corporation (NAC) used to fly them to Bangkok from where Korean Air used to take them to South Korea.
The department had called the airline companies for a bid asking which airlines could fly the selected ones at a cheaper rate to South Korea. Universal Tours and Travels, the GSA of Korean Air, bid the lowest and was handed the job.
After receiving HRD-Korea's final letter with the names of job aspirants, the department had begun flying them to Korea from August 10. Till date, the EPS section at DoLEP has received 1,764 certificates of conformation of visa issuance (CCVI). The name-list that HRD-Korea sent was according to the CCVI list.
Earlier, the job aspirants underwent a 15-day orientation after sailing through the medical tests. As per EPS rules, the first step for employment in South Korea under EPS is the Korean Language Test (KLT) and a subsequent stringent medical test.
"After government sealed an agreement with the Korean government to send the workers under EPS, Nepalis are flying to Korea in $970 (about Rs 63,000)," Ghimire added. Before the manpower agencies used to charge hefty amounts.Meanwhile, 125 manpower agnecies have been blacklisted. Department of Labour has sent them letters asking for clarification and 42 agencies have replied to the department. If their reply is not justified and remaining of 83 not reply within stipulated time, their licence will be terminated.

ADBI honours Nepali journo

Mallika Aryal, a Nepali journalist has been awarded the Young Development Journalist of the Year award for her story, 'Revisiting a multi-purpose Melamchi'.
"Journalists from India, Indonesia, Nepal, and the Philippines received the top prizes in the 2008 Developing Asia Journalism Awards," according to a press release. The winners were selected from among nearly 240 entries from across ADB's developing member countries.
Twenty-two finalists from 13 developing countries in Asia also attended a four-day workshop in Tokyo that was organised by Asian Development Bank Institute (ADBI). The programme culminated in the awards ceremony on November 14 at the Foreign Correspondents' Club of Japan.
The award recognises excellence in journalistic reporting by those covering development trends and issues in the region. The winners were chosen by a distinguished panel of four independent judges. The Tokyo-based ADBI was established in 1997 to help build capacity and knowledge related to poverty reduction and other areas that support long-term growth in developing economies in the Asia and Pacific region.

Sunday, November 16, 2008

Hunt for new export routes, transit points

Diversification of transit route is a must for generating more trade to lure more investment, said Purushottam Ojha, trade secretary addressing an interaction on 'Jwaharlal Nehru Port, Mumbai - an alternative transit corridor for Nepal's Exim Trade with Third Countries,' organised here today by Nepal Intermodal Transport Development Board (NITDB) in association with Enhancing Nepal's Trade Related Capacity (ENTRec), Ministry of Commerce and Supplies and UNDP.
"Exploration of alternative transit route is the need of the hour," he said adding that until Nepal manages its transit facilities, it cannot exploit its competitive advantages. Cost of trade and on time delivery are the keys to export trade that depends solely on transit routes.
In principle, the South Asian regional block has agreed on transport connectivity to enhance regional trade. "A decade has elapsed but we are still working on the feasibility of the Jawaharlal Nehru Port, Mumbai," said Uday Raj Pandey, acting president of Garment Association of Nepal (GAN) that exports 60 per cent of its products to US markets. During all these years, Nepal has been using Kolkata Port that is the shortest distance for Nepal to transit its exports.
"However, there are various problems in Kolkata port," Pandey said adding that procedural hassles were hindering the exports-imports (ExIm) trade.
"Jawaharlal Nehru Port, Mumbai, may not be able to handle Nepal's exports as it is already handling India's 65 per cent container traffic," he said.
Agreed S K Mudigonda, IRTS (retd), consultant for the feasibility study of Jawaharlal Nehru Port, Mumbai. "The traffic offering at JNPT, the busiest port, is growing on a fast track," he said adding that the rail route connecting Birgunj Dry Port and JNPT is approximately 1947 km, more than the double the distance from Birgunj to Kolkata Port.
He also suggested alternative ports like Mundra, Pipavau and Kandla on the west coast and Vishakhapatanam Port on the east coast that are about 2,315-km, 2,373-km, 2,263-km and 1,420-km respectively from Birgunj. "However, transit costs are cheaper by INRs 4,000 to 5000 for 20 containers and INRs 2,000 in case of 40 containers," he said adding that the difference in terminal handling charges among the suggested ports was not significant compared to the transit costs.
Indian has also agreed in principle to allow Nepal use JNPT, Mumbai "but has asked for more concrete proposals," said Shiv Raj Bhatta, National Programme Manager at the Enhancing Nepal's Trade Related Capacity Project.
A land-locked country like Nepal has its own troubles while doing trade," he said adding that the cost of trade and time of delivery were key. "A land-locked country cannot manage both." Depending on only one port will not help smoothen Nepal's trade. "Alternative transit route is necessary," Bhatta said.
Pandey, however, pointed out that homework was needed before going for any of the ports in view of bitter experiences in the past and added that half-baked agreements would hurt Nepali industries even more.

Trade facilitators
Inland Clearance Depot (ICD) - also called Dry Port - is a common user inland facility, other than a port or an airport, approved by a competent body, equipped with fixed installations and offering services for handling and temporary storage of any kind of goods (including container) carried under customs transit by any applicable mode of inland surface transport, placed under customs control and with customs and other agencies competent to clear goods for home use, warehousing, re-export, temporary storage for onward transit and outright export. There are three ICDs - Birgunj, Biratnagar and Bhairahawa Dry Ports while two more Mechi and Tatopani are the offing.

Saturday, November 15, 2008

NBL to get its core team soon

Nepal Bank Ltd (NBL) - the oldest bank operating under the central bank's management team at present - will soon get a chief executive officer (CEO) and a professional management team.
"A committee formed under Finance Minister Dr Baburam Bhattarai will soon bring out a blueprint of NBL's future course," said acting executive director of the central bank's supersivion department Narayan Poudel.
The confusion over the future of Nepal's first bank is affecting its employees, opined bank employees' union leaders today while speaking on the occasion of the bank's 72nd anniversary. It was established in 1936.
"Let there be no confusion over the issue of management," assured Dr Bhattarai. "We are working on the modalities of how to run the institution that is an epitome of Nepal's entry into the era of modern industrial capitalism," He added that the finance ministry was also seriously working on short-middle-and-long term policies for its development.
"The bank will be operated under PPP model and not be privatised. It will get a professional management team. However, it should focus its investments on infrastructure, industries and productive sectors instead of unproductive sectors for short-term gains," Dr Bhattarai suggested. He also urged the employess to identify and help punish those who pushed the bank into the red.
Speaking on the occasion, union leaders raised questions over the financial sector reform programme also. The bank had a foreign consultant under the financial reform programme, some 16 months ago, to rescue it. "The foreign management under the financial sector reform programme brought about some positive changes also," said Poudel.
Agreed Dr Binod Atreya, coordinator of the NRB-induced three-member management team that is looking after the bank since the last 16 months, "At least 44 of the NBL's 99 branches are computerised. NBL is providing all modern banking facilities like e-banking and SMS banking, and will soon install ATMs also."
The bank's NPA has reduced to 8.33 per cent in the first quarter of this fiscal year from 13.44 per cent in the same period the last fiscal. It has also posted more than Rs 520 million net profit by the end of the fiscal year 2007-08.
NBL has 10 per cent share (Rs 42 billion) in the total deposit of 25 commercial banks and that stands at Rs 426 billion. However, it has a meagre share of five per cent (Rs 17 billion) in the total lending of Rs 296 billion of all the commercial banks. There are 25 commercial banks, 59 development banks, 78 finance companies, five rural development banks and many cooperatives

Friday, November 14, 2008

Know Your bank-IV

Of late, the central bank has been more vigilant in monitoring financial institutions. It has directed them to maintain Capital Adequacy Ratio (CAR) every month, unlike the previous three-month stipulation. Nepal Rastra Bank (NRB) has introduced Prompt Corrective Action (PCA) - a new directive effective from October 17 - if financial institutions do not maintain minimum CAR which is an indicator of financial capital strength.
After a new directives from the NRB that a micro-credit institution (Class D financial institution) can also be upgraded to Class A, commercial bank the financial institutions may become more competent. Still the rising number of financial institutions worry experts. Let's take a look at the books of the remaining commercial banks and other financial institutions by the end of last fiscal year.

8. Nepal Bangladesh Bank Ltd (June 6, 1994)
(Management under Nepal Rastra Bank)
CEO: Basudev Ram Joshi
Paid up capital: Rs 744.10 million
Core capital: N/A
Net Profit: Rs 800.4 million
NPA: N/A
Networth: Negative
Earning Per Share: Rs. 107.57
Price Earning Ratio (P/E): 9.31 times
Branches: 17
ATMs: 4

12. Lumbini Bank Ltd (July 17, 1998)
Chairman: Prakash Shrestha
CEO: Shovan Dev Pant
Paid up capital: Rs 995.71 million
Core capital: Rs 287.55 million
Net Profit: Rs 327.65 million
NPA: 14.92 per cent
Networth: Rs 293.69 million
Earning Per Share: Rs 32.91
Price earning Ratio (P/E): 19.18
Branches: 5 Branches (Durbar Marg, Narayanghat, Butwal, Biratnagar, Hetauda)
ATMs: 0

18. Agriculture Development Bank Ltd (January 21, 1968)
Chairman: Mukund Prasad Aryal
GM: Yogeshwor Pant
Paid up capital: Rs 207,15,00,000
Core capital: Rs 5,99,42,18,000
Net Profit: Rs 1,61,8180,000
NPA: 10.40 per cent
Networth: Rs 6,14,07,71,000
Earning Per Share: Rs 77.89
Price Earning Ratio (P/E): N/A
Branches: 241
ATMs: 0

Development Bank
Ace Development Bank Ltd (November 21, 1994)
Chairman: Yogendra Shakya
CEO: Siddhant Raj Pandey
Paid up capital: Rs 416 million
Core capital: Rs 503.19 million
Net profit: Rs 53.90 million
NPA: 0.46 per cent
Networth: Rs 112
Earning Per Share: Rs 12.96
Price earning Ratio (P/E): 96 times
Number of branches: 3
Number of ATMs: 1

Finance Companies
United Finance Ltd (February 22, 1993)
Chairman: Basant Kumar Chaudhary
AGM: Naresh Singh Bohara
Paid up capital: Rs 149.75 million
Core capital: Rs 1842 million
Net profit: Rs 25.8 million
NPA: 0.81per cent
Networth: Rs 17450 million
Earning Per Share: Rs 34.35
Price Earning Ratio (P/E): 27.22
Number of branches: 0
Number of ATMs: 0

Lord Buddha Financial Institutions Ltd (November 19, 2006)
Chairman: Bharat Kumar Shrestha
CEO: Prakash Kumar Shrestha
Paid up capital: Rs 7,50,00,000
Core capital: over Rs 3 million
Net Profit: Rs 3.6 million
NPA: N/A
Networth: Rs 105
Earning Per Share: Rs 5
Price Earning Ratio (P/E): 5
Branches: 0
ATMs: 0

Kuber Merchant Bittiya Sanstha Ltd (March 24, 2006)
Chairman: Siddhi Man Basnet
GM: Gopal Ghimire
Paid up capital: Rs 50 million
Core capital: Rs 54.8 million
Net profit (2007-08): Rs 5.2 million
NPA: N/A
Networth: Rs 179
Earning Per Share: Rs 19
Price Earning Ratio (P/E): N/A
Number of branches: 0
Number of ATMs: 0

Wednesday, November 12, 2008

Quarterly accounts a must-show: Sebon

Every listed company will have to mandatorily submit its accounts to the Securities Board of Nepal (Sebon) on a quarterly basis from now on, according to the Share Registration and Issue Regulation 2065.
"Any company failing to do so will face stern action," said Dr Chiranjivi Nepal, chairman of the Sebon, the regulatory authority of capital market that has been given enough teeth to safeguard investors' interests.Sebon was busy since a year working out the modalities to make listed institutions more transparent and inform investors about the companies they have invested in. "Listed companies can now issue further Initial Public Offerings (IPOs)," director on the board Nirj Giri said adding that a company posting profit for at least two fiscals in the last five years and per share networth more than per share paid-up can further issue IPOs.
"The new regulation has also cleared the confusion over share issuance on premium," Dr Nepal said adding that a company can sell its shares adding premium not more than its networth per share that has to be verified by the external experts and due diligent audit.Share Registration and Issue Regulation 2065 is the fifth regulation brought by the board this year to make the capital market more vibrant and transparent.

Faster money back
KATHMANDU: Investors will get their money back within two months after the closing date of shares. Earlier, the maximum time for money back was three months (90 days). Now, Sebon has directed the issue managers to pay back the money within 60 days at the maximum if the number of applications exceeds 3,00,001. "If applications are under 1,00,000, issue managers must pay back within a month (30 days)," said the regulatot of the capital market. Similarly, if the number of applications is between 1,00,001 and 3,00,000, investors will get their money back within one-and-a-months (45 days).

Tuesday, November 11, 2008

Maoists set to be at helm for long: Dr Bhattarai

Dr Baburam Bhattarai, who presented the budget that is said to be a departure from the earlier policies, believes that the Maoists will lead the state for many years to come. He talks on the budget, foreign aid and many other issues.

You are a fortunate finance minister to inherit a sound economy. However, don't you think that you have squandered away the legacy?
Dr Bhattarai: No, I don't agree that the economy is sound. We are one of the poorest countries in the world. For the last 60 years, our growth rate has been very sluggish. Average population growth rate and economic growth rate just cancel each other. One third of our GDP's share is still contributed by agriculture. We have a huge trade gap that has been rising. Industrial GDP is less than 10 per cent. We are heavily dependent on foreign aid. Thus, economy is not sound. Temporarily we may have positive Balance of Payment (BoP) but that is because we have no spending capacity and no industrial investment. In that sense the BoP situation cannot be taken as a sign of positive health of the economy. We have made a radical departure from the past. This is not the continuation of the past system. This is not the continuation of the past government. That's why I don't want to use this word inherited. After the declaration of Democratic Republic, abolition of the monarchy, the feudal political structure has been more or less dismantled. But the social and economic base remains feudal, especially in the rural areas. Even in the urban areas whatever little capitalism is there that is dependent capitalism, which has no national root. We want to make a radical departure from all this. Whatever we inherited from the past is nothing to be proud of. The general people have appreciated my efforts but those who have benefited from the past policies are making all the noises. I'm not bothered about that. I am concerned with the welfare of the majority of the people -- poor, marginalised, women, Dalits, Madhesis -- who are living in the underdeveloped regions. What they say matters to me.

You used to blame the successive governments for increasing the foreign aid dependence. But in the budget instead of reducing it, you have increased it substantially?
Dr Bhattarai: We are in a transitional phase. Firstly, this is not a government totally controlled by our party. We are not free to implement all our policies. I had to make a lot of compromises. Secondly, foreign dependence is a historical process. It takes time to do away with that. Foreign dependence does not mean you don't borrow from outside or accept grants. The issue is what do you use that for. You use that for improving your capacity, building infrastructure, building industry and developing self-reliant economy. Or you accept it to increase dependence. My approach has been that I accepted loans and grants but I have tried to utilise that for economic development and to build capacity. In the coming years the dependence will be reduced. Thirdly, I have changed favourably the ratio of internal revenue to the external resources. In the coming days, it will lead to less dependence.

What do you think of the donors' conditions? Aren't you going to fall into the debt trap?
Dr Bhattarai: Of course, the conditions are there. Foreign aid does not come as charity. But we are focusing on developing self-reliant economy and learn to utilise our own resources -- natural as well as human. In the long-term we will develop self-reliant economy. We have to go through this transitional phase first.

How can you develop a self-reliant economy without more investment? We have not seen any domestic or foreign investment lately. Without more investment how can you generate employment?
Dr Bhattarai: We have been trying our best to create conducive investment climate. We have been regularly talking to the private sector as well as foreigners to invest. Some of them have shown interest also. We are sure they will invest.

But how can you be so sure when there are rising labour disputes? When domestic industries are closing down, how do you expect foreigners to come and invest?
Dr Bhattarai: Labour disputes are just 10 per cent of the total problems that our industries are facing. Around 40 per cent of their production is hampered due to load-shedding and there are other more serious issues. If the industries operate smoothly, the meagre amount of wage hike will not be any issue.

Are you sure that concept of public-private partnership will work in Nepal and there won't be socialisation of debt and privatisation of profits?
Dr Bhattarai: We have not brought public-private partnership (PPP) model only to appease private sector but it is also our conviction. Only with the cooperation of the private sector our economy can develop and the economic policy and programmes put forward by the government can be executed. We are ready to sit down with the private sector and work out the correct modality of the PPP. In the days to come, I'm quite confident that we can make it work.

Don't you think that the loan-waiver programme that you spelt in your budget will have negative impact on the total banking sector?
Dr Bhattarai: No, it won't have any adverse impact on the banking sector. We have brought this scheme to give relief to the poor peasants. This is the duty of this government to help small peasants and also small entrepreneurs whose business was destroyed during the conflict. This government will provide relief to them. Anyway they were not able to pay their loans and the banks were losing. But we have guaranteed to return the money to these banks within a time-frame.

Won't it put burden on next finance ministers?
Dr Bhattarai: We are not passing the burden to anyone because Maoists will lead the state for many years to come. There is no need to worry on this score. We'll execute this programme. We have to take the responsibility and we are fully prepared for that. People believe that it's only the Maoists who can lead this country. People want change and only the Maoist party can bring change.

The budget you presented is a deficit budget. How are you going to manage it?
Dr Bhattarai: We'll increase revenue collection. The revenue collection till October 31 was Rs 26.24 billion, a 24.3 per cent growth in comparison to the same period last year. We'll meet our revenue target and also fill the gap by collecting more revenue.

But your own cadres are being blamed for revenue leakage. How will you be able to increase revenue, if your cadres oppose the revenue officials from collecting taxes?
Dr Bhattarai: That is not true. To meet revenue target, our government is very serious. Those who have not paid taxes will have to pay. Our trade union is not involved in any revenue leakage activities and we have given strict directions that they should not side with the defaulters. As long as I am finance minister and a leader of this party nothing of this sort will happen. I'll be strict with defaulters.

Do you agree that in a cash-strapped country like Nepal capital market can be a better tool to collect dispersed small amounts of money and use the same for industrial development?
Dr Bhattarai: I don't see any dearth of capital in our country. It's only the question of management, proper utilisation, proper investment. There are some institutional bottlenecks in this regard. What I like to emphasise on is that we're changing from agriculture-based economy to industrial-based economy. During such period, we have to utilise small capital and make a correct investment in industrial and other sectors. So that capital formation goes in a correct direction. In case of Nepal, there is a lot of capital in the rural sector from remittances. But there is no proper modality to channelise and utilise it. This money should come through the banking channel. People are investing on unproductive sectors like buying land and houses. It should be invested in productive sectors like infrastructure development and industries.

Some economists have alleged that Maoists are promoting crony capitalism. What do you have to say?
Dr Bhattarai: It's a baseless claim. Those who have thrived on corruption and illegal deeds in the past are finding it difficult to come out of that frame of mind and making baseless allegation on our party. The Maoist party is a large party. People, who have supported us, voted for us do you think they do not have any economic right to invest? If they are involved in legal economic activities, it's their right.

The dispute on education tax shows that you did not do enough groundwork before coming out with it?
Dr Bhattarai: That is not true. There are two types of education systems in the country. It will take some time to change this old educational system. In the transitional period, we'll tax the private schools so that the public schools in the remote areas could benefit. We have formed a committee to resolve the dispute on modalities. Its completely new concept, people will take some time to understand.

Monday, November 10, 2008

Dr Bhattarai squandered economic legacy: Dr Mahat

Dr Ram Sharan Mahat, known for his liberal economic views speaks about the performance of the present finance minister, Dr Baburam Bhattarai, the first budget of Maoists that he presented and its implication.

Being an experienced finance minister how do you rate the performance of present finance minister?
Dr Mahat: Present finance minister is lucky to inherit such a healthy economy. No finance minister has been so fortunate. Nepal does not have any symptom of post-conflict economy. For example, last fiscal year's growth rate was 5.6 per cent, revenue growth was around 23 per cent, foreign exchange reserve was more than $3 billion, Balance of Payment situation was positive and cash surplus was about Rs 4.5 billion. Moreover, Maoists are at the helm at a time when the international petroleum prices are coming down. Last year, we had to spend more than Rs 5 billion for NOC subsidies. But instead of raising productivity and creating investment-friendly climate, the finance minister is squandering the resources in distributing programmes, strengthening and expanding their party organisation and pleasing his party cadres.

What do you mean by squandering the resources in distributing programmes?
Dr Mahat: Like various programmes of political nature; literacy campaign, allowances to co-operatives, employment generation programmes based on people's participation.

The major problem facing the country is unemployment. Government has begun programmes to create jobs. Isn't creating jobs something positive?
Dr Mahat: These programmes are being proposed without doing necessary groundwork and preparation, without doing proper feasibility study, without proper administrative infrastructure. So, ultimately these resources will be misused. Either they will not be spent or they will be misused. They will not create employment. The government will not be able to create jobs and the country will become poorer. National economy will not improve. The situation will deteriorate. To create employment, you have to create more investment opportunities. You have to create investment-friendly climate. The government must launch well thought-out public works programme, infrastructure development with proper institutional machinery, proper administration.

The government is trying to create conducive climate for investment and has assured the investors of their security. Don't you think that it is really trying hard?
Dr Mahat: But why is the private sector closing industries. The FNCCI statement says how one industry after another is closing down in the face of labour trouble, anarchic situation created by pro-Maoist organisations. Closure of domestic industries will not encourage private investment from outside. Instead there will be capital flight. Maoists and their sister organisations, trade unions and YCL, are creating this situation. They may talk of pro-investment policy but their action is anti-investment, anti-development and anti-growth. We have not seen any new investment in hydropower. Even the investors, who have committed to come to Nepal and invest feel insecure. The West Seti office was vandalised and padlocked. Our country's future depends on exploitation and development of hydropower. I hope the government will do everything possible to protect the interests of the investors. Nothing like that is happening. But I hope the situation will change.

Don't you think the government's claim is, in a way justified, as they are now accepting private sector's role in public-private partnership (PPP) model?
Dr Mahat: PPP is not a Maoist slogan. It is an internationally accepted model promoted by organisations like Asian Development Bank and the World Bank. There is nothing new about it. But again, where is the private sector coming? They must be able to attract private sector investment. PPP cannot materialise just because of a slogan. Just government slogan is not enough to encourage the PPP model of development. An investment-friendly climate is necessary, business-friendly government policy is a must.

Then why are they preaching PPP?
Dr Mahat: It is only a slogan. I don't think its their intention to mislead but they don't understand the reality of the model. Private investment does not come to your door-step just like that. You must create atmosphere, proper environment for that. Every country is offering attractive packages to invite and attract foreign investment. This is a competitive world. You must have competitive advantage to invite private investment. But what the Maoists are doing is just the opposite.

Moaists used to blame the earlier governments for making the country foreign-aid dependent. But the budget they presented has increased it. Don't you think they should have reduced it?
Dr Mahat: They used to say that they will reduce foreign aid dependence. They have blamed past governments for excessive dependence on foreign aid. But their own budget has proposed nearly 100 per cent growth in the foreign assistance. There is contradiction in what they are saying. They used to attack us for pursuing neo-liberal economic policies. Now, they go to World Bank and IMF and they say that they want to be under the IMF umbrella. The reality is they are pursuing our policies with the necessary commitment. On the other hand, their foreign aid estimation is also highly exaggerated.

What impact will the loan waiver programme have on the banking sector?
Dr Mahat: It is a and ill-conceived plan. First, it is principally wrong. It will penalise the honest borrower, who faithfully paid the loan back. It is a reward to those, who deliberately didn't pay the loans. But I don't rule out the loan-waiver to those, who genuinely suffered during insurgency. Their business was destroyed because of insurgency or natural calamities. Loan-waiver must be on selective basis, based on genuine suffering and cannot be done across the board. The budget has rewarded the dishonest and punished the honest. Secondly, the main source of small loans is micro-credit institutions not the Agriculture Development Bank, Nepal Bank or Rastriya Banijya Bank. If Dr Bhattarai genuinely wanted to give loan-waiver to small borrowers, he should have included micro-credit institutions. He has left out a large portion of the small borrowers because they borrowed from the micro-credit institutions. This will benefit those who are relatively better-off. Thirdly, the most objectionable part: he has declared the loan waiver with financial liabilities of more than Rs 9 billion. But he has not made necessary budgetary allocations, may be only Rs 400 million. More than Rs 8 billion has been left to future finance minister to pay back. Transferring the entire burden to the future governments for your purely populist and partisan programmes is not done. No finance minister in the past has been as irresponsible as Dr Bhattarai.
Fourthly, those who have borrowed from ADBN-Small Farmers' Development Programme have stopped paying back their loan. So, there is no liquidity. Banks can give fresh loans based on the payments made by the past government. Now, the past borrowers are not paying back loans and there is no fund. Even genuine borrowers have no access to bank loans. The implication of this is that they will have to borrow from the money-lenders, non-institutional sources at much higher rates. It will destroy micro-credit institutions, ADBN-Small Farmers' Development Programme due to lack of liquidity.

Those in the know blame Maoists of promoting crony-capitalism. Do you believe that?
Dr Mahat: I'm not sure but they seem to be going in that direction. But its too early to say that.

Do you really think that this budget is ambitious and unrealistic?
Dr Mahat: Every finance minister should be realistic and project realistic revenue target. These are inflated targets. The revenue target is overestimated by at least Rs 15 billion. Last year, we estimated the revenue growth of 18 per cent but we exceeded the target by more than four per cent. The revenue growth was about 22.3 per cent. Last year we met our capital expenditure target by 100 per cent. I hope Dr Bhattarai can also do the same. But his own cadres are protecting smuggling and leakage of revenue. In many places the revenue leakage is taking place under the protection of Maoists' sister organisations. They are trying to control the casinos through their cadres. Now the casinos do not pay any government revenue. There are huge unpaid taxes on account of casinos. If a tax officer goes there, there will be obstruction from the Maoist trade unions. As long as they serve the interests of their trade unions, everything is tolerable. There will be more economic trouble in the nation and culture of impunity will develop. Let Bhattarai repeat the past year's performance. I will be happy, if he can. My good wishes are with him!!!

Sunday, November 9, 2008

Bhattarai's largesse gets Mahat's goat

Finance Minister Dr Baburam Bhattarai — one of the chief architects of the ultra-red resurgence — has exuded optimism that his party, the CPN Maoist, would be a guiding force in the years to come.
"The people are convinced that only the Maoists can lead Nepal,” was Dr Bhattarai repartee to the ruling coalition's move to pass financial liabilities to future governments.
It may be recalled that the finance minister in his budget speech had spelt out a populist package. Provisions have been for complete loan, interest and fine-waiver of up to Rs 30,000. There are more goodies in store. Interests and fines have been written off for all those, who borrowed between Rs 30,000 and Rs 1 lakh from Agriculture Development Bank, Small Farmers Development Bank, Nepal Bank Ltd and Rastriya Banijya Bank. The cabinet has given its nod to Dr Bhattarai's ambitious plan last week. But, playing to the gallery will hurt the government. The state exchequer has to pick up a tab of a whopping Rs 9.18 billion.
Former finance minister Dr Ram Sharan Mahat is quick to pounce upon the populist measures. "This will transfer the entire burden to the future governments. It is unethical. He has been the most irresponsible finance minister,” alleged Dr Mahat.
Dr Bhattarai, however, countered his predecessor. "We are not passing the buck. We are the ones, who will lead the country for years to come,” said a supremely confident Dr Bhattarai. "On top of this, its our responsibility to give relief to small farmers and entrepreneurs, whose income took a huge hit during the conflict,” he reasoned.
“We are determined to settle the amount within a time frame. Either way, the financial institutions were going to lose since no one was in a position to pay,” said the finance minister, who seemed to have the nation's pulse. Interestingly, Dr Bhattarai has allocated Rs 400 million in the budget, which was tabled on September 19.
Dr Mahat picks a financial hole in the minister's scheme. “This has put the future finance minister in the dock. He has to pay more than Rs 8 billion for Dr Bhattarai's deeds,” blamed the Nepali Congress leader.
Dr Bhattarai, though, is unfazed. "We know our responsibility. No one needs to worry on this score,” he reiterated.

Saturday, November 8, 2008

Rise in food prices trotting out of hand

It's a bitter sweet story. Sugar, oil and ghee, food grains, cereals including rice and rice products - name one item whose price that hasn't touched the sky.
Prices of sugar and sugar-related products as well as oil and ghee sub-groups witnessed a whopping rise in the first two months of the current fiscal year, according to Nepal Rastra Bank (NRB).
"Price indices of sugar and sugar-related products as well as oil and ghee sub-groups rose by a whopping rate of 38.9 per cent and 36.5 per cent, respectively, on a year-on-year (y-o-y) basis in mid-September compared to a negative growth of 18.5 per cent and 11.9 per cent, respectively, a year ago," according to Current Macroeconomic Situation, based on the first two months' data of the fiscal year 2008-09.
Similarly, the sub-group of grains and cereal products witnessed a y-o-y price rise of 23.8 per cent in the review period compared to an increase of 9.8 per cent in the corresponding period of the last fiscal year.
Prices of rice and rice products in this sub-group increased at a whopping rate of 28.4 per cent compared to an increase of 9.8 per cent a year ago. The indices of pulses, restaurant meals, milk and milk products, meat, fish and eggs and spices rose by 23.7, 15.6, 14.6, 14.5 and 13.2 per cent, respectively, in the review period against a rise of 17.8, 4.2, 8.1, 7.8 and 13.2 per cent, respectively, last year.Within the group of non-food and services, the index of transportation and communication, housing goods and services as well as tobacco and related products rose by 23.1, 18.1 and 12.7 per cent respectively in mid-September 2008 compared to a negative growth of 0.5 per cent and rise of 2.5 per cent and 3.2 per cent respectively during the same period, according to the central bank's report.
Region-wise, the price rise in Kathmandu valley was 14.1 per cent followed by 13.5 per cent in the Tarai and 12.7 per cent in the Hills. Last year, the respective rates were 6.3 per cent, 7.5 per cent and 6.8 per cent.
The y-o-y consumer inflation rose to 13.5 per cent in mid-September 2008 from seven per cent in the corresponding period of the previous year.Within the group of domestic manufactured commodities, price index of construction materials and food-related products increased by 24.5 per cent and 21.8 per cent, respectively, in mid-September 2008 compared to a rise of 14.7 per cent and 5.3 per cent, respectivley, a year ago.
In the review period, y-o-y core inflation rose to 12.1 per cent from 5.4 per cent in the corresponding period of the previous year, said the report.

Thursday, November 6, 2008

Get a load of the GETF lode

It's yellow, but never gets mellow. Good old gold has always been a hot potato for Nepalis, mostly for ornaments and as insurance against that rainy day. But now, there is one more way to go golden - Gold Exchange Traded Fund (GETF).
Ace Development Bank (Ace) from today introduced GETF — an innovative product for the first time in the Nepali financial market. "GETF is paper gold that is easy to trade and incurs no risk in storage," said chief executive officer (CEO) of the bank, Siddhant Raj Pandey.
GETF — expected to address issues of higher prices, purity, costs of insurance, storage and liquidity associated with investing in tangible gold — is a much-awaited development in the domestic financial market.
"A certificate of ownership can be held by gold investors, instead of storing the actual metal," Pandey said adding that GETF allows investors to buy and sell without the inconvenience associated with the transfer of actual tangible gold.Investment in the precious yellow metal is always considered as a cushion against losses in other asset classes. "Investment in GETF will be the perfect hedge against inflation. In the paper gold concept there is no question about purity factor nor do the investors have to worry about storage and hence making the holding a safe bet," he said.
It is widely accepted that the greatest cost in owning gold in a portfolio for long term is not the buying or selling costs but the holding cost.
"On the first day today, Ace sold five kg of gold through ETF certificates," Pramod Pandeya, Ace's compliance department head said.GETF can be traded like shares also. "It will be traded on Ace Trading Floor - the secondary market - from November 9," CEO Pandey said, adding that it was most suitable for those wishing to speculate in the short term. "This is because the price of the ETF is pegged to the international price of gold.
"A customer can buy new ETF in the primary market from Ace everyday during banking hours. However, one can also trade on the Ace trading floor — in the secondary market — from 3:30 pm to 4:30 pm from Sundays to Thursdays.

Why GTEF?
Why Not? Gold is an excellent safeguard against inflation. It protects the portfolio from volatility because factors — both on the macro-economic and micro-economic fronts — that affect returns from most asset classes do not significantly influence the price of gold. Investors, who want to invest in gold, can do so in two ways: Buy tangible gold and/or invest in GETF. However, the success of GTEF in Nepal largely depends upon questions like, "How will investors include gold in their portfolio? What value will it add to their holding and overall investment strategy?" If an investor is clear about the reasons for investing in gold and the issues related to it, there is every reason to include gold as an asset in the portfolio.
So jump on, GETF may be just the ideal vehicle for the gold rush.

Wednesday, November 5, 2008

Budget blame game uncalled for: FM Bhattarai, VDI soon, Income source necessary for extra property

Talking to media persons here today at his office, Finance Minister Dr Baburam Bhattarai said that he was serious about improving revenue administration and meeting the collection target. He also said that he was unnecessarily being blamed for 'exaggerated' revenue target. "I can assure you the revenue collection till October 31 was Rs 26.24 billion — a 24.3 per cent growth in comparison to the same period last year," he said.
The first finance minister of the Maoist party that fought the 'People's War' - in their own words - for a decade to bring a sea change in the country said that he would employ a carrot-and-stick policy to check rampant corruption.
Dr Bhattarai said revenue officials should be encouraged by providing them extra facilities and perks over and above their pay in order to check corruption and plug revenue leakage. "But if any revenue official is found guilty of corruption he or she will have to face stern action," he warned. He recalled that in his budget speech he had vowed to make revenue administration efficient and transparent.
"The government is serious about strictly implementating the programmes and policies spelled out in the budget, such as the Voluntarily Declaration of Income (VDI). It will be implemented strictly from December 30," he added.Not only that, it will be mandatory for buyers of property like house, land and vehicle to disclose their income sources while making such purchases that exceed a certain limit. "The government is introducing a provision in this regard soon," Dr Bhattarai said.
While purchasing house and land worth more than Rs 5 million, a plot of land worth more than Rs 2.5 million,and a vehicle worth more than Rs 1.5 million, buyers have to mandatorily disclose their income sources.
"The major criticism is on the implementation part of the budget, which is also genuine," admitted Dr Bhattarai, one of the chief ideologues of the Maoist party. "Thus, the Finance Ministry has prepared several follow-up and minitoring mechanisms that will review on weekly and monthly bases ministry-wise, and these will on every seventh day of the month report to the Finance Ministry.
"The budget he that presented on September 19 - two months later than the normal schedule due to political transition - had projected Rs 129.21 billion from revenue, Rs 47.93 billion from foreign grants and Rs 18.70 billion from foreign loans.
Trying to clear the uncertainty about the proposed foreign aid commitment in the budget for the fiscal year 2008-09, Dr Bhattarai said that the foreign aid projected in the budget was on the basis of the commitment from the international community and donor agencies. "We are very hopeful that the foreign aid commitment will be kept," he said.
"A sound economic base is a prerequisite for a new Nepal," he said adding that without a healthy economy, the dream of building a new Nepal would not become a reality. "While revenue collection is satisfactory government spending is less than projected due to festivals," he said adding that the government has cash surplus of Rs 4.24 billion in the first quarter of the fiscal year as against Rs 1.3 billion in the same period the last fiscal.

Monday, November 3, 2008

Tourism sector's muscles building up

It' time for a tourism renaissance-cum-revival. Mystical mountains and the serene atmosphere of Nepal - after a decade long conflict - have started luring tourists here again. In October alone, more than half-a-lakh tourists came - the single largest arrival volume in a month since eight years.
According to the arrival figures gleaned by the Immigration Office, Tribhuvan International Airport (TIA), in October tourist arrivals witnessed a rise by 16.3 per cent to 50,567 tourists, the highest in a single month since 2000.
The total number of visitors till October reached 3,07,748, representing an increase of four per cent in comparison to the same period last year.
South Asian nations registered overall positive growth of 26.3 per cent, with Bangladesh and Pakistan registering arrival growth by 73.9 per cent and 35.3 per cent respectively, except for arrivals from Sri Lanka which decreased by 5.9 per cent.
India, the largest tourist generating market for Nepal, maintained a steady growth of 14 per cent in October also.
Other Asian countries - Singapore, Thailand, South Korea, Malaysia and China - maintained the upward trend with 150.4 per cent, 53.2 per cent, 24.4 per cent, 23.2 per cent and 1.6 percent, of growth respectively. However, arrivals from Japan - one of the major markets - witnessed negative growth in arrival figures by 10.9 per cent.
UK, Israel, France, Germany, the Netherlands, Norway, Switzerland and Sweden also maintained the upward trend in arrival figures. Arrivals from the United States of America and Canada also increased in October in comparison to the same month last year.
"Italy and Spain registered a decrease in arrival figures by 13.2 per cent and 7.5 per cent, respectively," according to the data.A total of 49,150 tourists - against 50,567 arrivals - departed via TIA in October.

Hiked labour rates no breather, curse rising food prices

Good news for farm workers and construction site labourers! Their wages increased by almost double over the last one year, and things would have been picture-perfect had not food prices also gone up commensurately.
"The wages of agricultural, industrial and construction site labourers increased by 19.5, 2.7 per cent and 8.9 per cent, respectively, in the first two months of this fiscal year. Last year, these wage rates had increased by 9.1 per cent, 19.4 per cent and 13.2 per cent, respectively," said Nepal Rastra Bank's (NRB) first two months' report. However, at the same time the year-on-year (y-o-y) consumer inflation also rose to 13.5 per cent whereas the salary and wage rate index rose by only 9.2 per cent.
"The y-o-y consumer inflation rose to 13.5 per cent by the end of mid-September from seven per cent in the same period last fiscal year. Inflation was driven by the significant rise in food and beverage (14.2 per cent) as well as non-food and service (12.8 per cent) groups in the review period," said the central bank's report published by its Research Department.
The rise in prices of food and beverages and non-food and service groups was 10.9 per cent and 2.8 per cent, respectively, a year ago. "In the review period, the y-o-y core inflation rose to 12.1 per cent from 5.4 per cent a year ago," said the report.
The overall y-o-y salary and wage rate index rose by 9.2 per cent by the end of mid-September compared to a rise of 12.5 per cent a year ago, said the report. Of the salary and wage rate indices, the salary index remained unchanged in the review period compared to a rise of 10.9 per cent in the corresponding period of the previous year.
"The y-o-y wage rate index increased by 12.3 per cent in the review period compared to an increase of 13.1 per cent in the same period of the previous year," said the central bank.

Anti-money laundering pact
KATHMANDU: The central banks of Nepal and Bangladesh signed a Memorandum of Understanding (MOU) to check money laundering. Dharma Raj Sapkota, department head at the Financial Information Department of Nepal Rastra Bank and Md Abul Quasim, department head at the Financial Investigation Department of the Bangladesh Bank signed the MoU on October 21 on behalf of their respective countries. According to NRB, the mutual agreement will help check money laundering. "It will also help in trade of information related to illegal financial transactions and investments," said a release.

Sunday, November 2, 2008

Rough road ahead for banks

The Nepali banking sector is likely to see fierce competition in the coming days. At a time when the market pie has not increased and over four dozen industries are lying closed across the country, the increase in number of financial institutions is leading to cut-throat competition in the domestic banking sector.
Apart from over a half dozen financial institutions - including B-class development banks and C-class finance companies - the entry of two 'big' A-class commercial banks will not only increase the number to 27 but also force them to search for new investment avenues.
The proposed Peoples' Bank Nepal Ltd - the 26th commercial bank - got the green signal on September 25. Similarly, the proposed Mero Bank Ltd - the 27th commercial bank - also recently got permission to operate after depositing five per cent of its proposed paid up capital to Nepal Rastra Bank, the central authority.
"Right after we get the operating licence, we'll start operations," said Dr Duman Thapa, coordinator of Mero Bank Ltd.With an authorised capital of Rs 4 billion and paid up capital of Rs 2.45 billion, the proposed Mero Bank Ltd has a total of 1,328 promoters.
"The promoters have 70 per cent share - that is, Rs 1.71 billion - and the rest 30 per cent share - Rs 730 million - will be floated among the public within one year of the bank beginning operations," Thapa added.
The bank that consists of five groups of promoters has industrialists, businessmen, social workers, Non-Resident Nepalis (NRNs), economists, diplomats, private school promoters, professors, doctors, lawyers, engineers and tourism entrepreneurs.A 13-member coordinating committee has been formed, with Dr Thapa as coordinator and Dr Govinda Nepal, Bhoj Bahadur Shah, Muktiram Pandey, Gopal Khadka, Gopal Khanal, Rameshwor Sapkota, Indra Bahadur Malla, Bijay Sambahamphe, Madan Acharya, Ishwor Gurung, Parmeshwor Panta, Sabhu Bikram Thapa and Tulsi Pokhrel as members.
Prof Dr Madan Kumar Dahal is chairman of the proposed bank that has - for the first time in the banking history of Nepal - an advisory council headed by former minister and diplomat Dr Bhesh Bahadur Thapa as its chairman.
People's Bank Nepal Ltd has a paid up capital of Rs 2 billion. "It is the first bank having Rs 2 billion paid up capital after the central bank increased the paid up capital limit for commercial banks," according to the bank.
The bank, with 898 promoters, has Guru Prasad Neupane as its chairman while Sailendra Guragain, Keshav Bahadur Rayamajhi, Dharmadhoj Parajuli, Nirmaljyoti Tuladhar and Chiranjeevi Dwa are its promoters. The bank is expected to come into operation by the second week of next April.

Licenced Commercial Banks
1. Nepal Bank Ltd (November 15, 1937)
2. Rastriya Banijya Bank (January 23, 1966)
3. Nabil Bank Ltd (July 16, 1984)
4. Nepal Investment Bank Ltd (February 27, 1986)
5. Standard Chartered Bank Nepal Ltd (January 24, 1986)
6. Himalayan Bank Ltd (January 18, 1993)
7. Nepal SBI Bank Ltd (July 7, 1993)
8. Nepal Bangladesh Bank Ltd (
9. Everest Bank Ltd (October 18, 1994)
10. Bank of Kathmandu Ltd (March 3, 1995)
11. Nepal Credit and Commerce Bank (October 14, 1996)
12. Lumbini Bank Ltd (July 17, 1998)
13. NIC Bank Ltd (July 21, 1998)
14. Kumari Bank Ltd (April 3, 2001)
15. Machhapuchhre Bank Ltd (October 3, 2000)
16. Laxmi Bank Ltd (April 3, 2002)
17. Siddhartha Bank Ltd (December 24, 2002)
18. Agriculture Development Bank Ltd (
19. Global Bank Ltd (January 2, 2007)
20. Citizens' International Bank Ltd (April 20, 2007)
21. Prime Commercial Bank (September 24, 2007)
22. Bank of Asia Nepal Ltd (October 12, 2007)
23. Sunrise Bank Ltd (October 12, 2007)
24. Development Credit Bank Ltd (Upgraded in 2007)
25. NMB Bank Ltd (Established in 1996/Upgraded in 2007)

Saturday, November 1, 2008

Will transportation fare go down

The price of diesel has been slashed to Rs 65 — by Rs 5 per litre from Rs 70 —and transporters are under pressure now to reduce transportation fares. The state-run Nepal Oil Corporation (NOC) — taking a global cue — slashed the price of diesel to Rs 65, with effect from tonight. Previously, whenever when the price of diesel or petrol was hiked transporters also jacked up transportation fares arbitarily. "Now the onus is on them to reduce fare rates," said Santosh Silwal, a student at Shanker Dev College. "The taxi fair and the public transportation fair has to go down now."
NOC has slashed the price of diesel to adjust it against that of kerosene. "We received myriad complaints that diesel was being adulterated," NOC managing director Digambar Jha said adding that the price difference between kerosene and diesel had lured blackmarketeers to mix kerosene in diesel, thereby creating the problem of shorter life of diesel engines.
Now that the price of diesel was at par with that of kerosene the problem of adulteration of diesel is expected to be solved, said Jha. "It will be easier for us to check adulteration of petrol as we can concentrate on only petrol," he added.
Of late, blackmarketeers have hit upon the method of adulterating petrol with turpentine — a liquid chemical used in painting. Though the government has banned turpentine it is still found in abundance in petrol, claimed the Nepal Automobile Dealers' Association (NADA). However, NOC chief Jha is hopeful that the corporation can now more effectively monitor petrol since it won't need to monitor diesel after the price adjustment of diesel and kerosene.
A litre of turpentine costs Rs 30 and a litre of petrol costs Rs 90, NADA said adding that mixing turpinetine in petrol is more profitable for blackmarketeers.
Representatives of Hansaraj Hulaschand & Company — sole distributor of Bajaj bikes, Morang Auto Works (MAW) — sole distributor of Yamaha bikes and Syakar Company Ltd — sole distributor of Hero Honda bikes, led by NADA president Sunil Khetan last week met Finance Minister Dr Baburam Bhattarai, the finance secretary and NOC top brass to apprise them of the problem. Turpentine is more deadly for the automobile engine as it causes even a new engine to seize.
NADA has urged consumers — especially bikers — to ask for receipts after filling petrol from petrol pumps. "This is so that we can take action, if the petrol is found adulterated," according to NADA. Due to rampant adulteration of petrol, bikes are having serious problems and around 15 to 20 per cent of newly-sold bikes are being returned to dealers.
Adulteration is more when there is scarcity of petroleum products. However, NOC has assured that there will be smooth supply of petroleum products including diesel and petrol. A week ago, NOC also brought uniformity in the dual price of diesel that earlier used to cost Rs 80 and Rs 70 per litre

Petroleum prices cut further

Drastic fall in international crude prices has forced the Nepal Oil Corporation (NOC) to slash petrol, diesel and Aviation Turbine Fuel prices for the second time in a week. The new prices will be applicable from midnight.
“Petrol and diesel prices have been reduced by Rs 5 to Rs 90 and Rs 65 per litre, respectively. The ATF price for international flights has been cut by $100 to $1,300 per kilolitre. For domestic flights, ATF price has come down by Rs 5 to Rs 95 a litre,” NOC Managing Director Digamber Jha said.
However, the prices of cooking gas and kerosene — widely used for domestic consumption — will not change.
Though the NOC has warned petroleum dealers not to charge more than the prices fixed by NOC, Nepal Petroleum Dealers’ Association (NPDA) has come up with its own prices. “A consumer has to pay Rs 90.25 for per litre petrol and Rs 65.30 per litre diesel in the Valley,” according to Saroj Pandey, president of NPDA.
According to Jha, after this price adjustment the state oil monopoly will make Rs 350 million profit per month at the current rate, if the full demand of 75,500 kilolitres were met. “NOC will still earn Rs 3 per litre profit in kerosene and diesel,” Jha said, adding that NOC will gain Rs 17 per litre on petrol and Rs 25 a litre on ATF, making a profit of Rs 350 million per month.
“If this rate continues, wewill be able to pay our Rs 16 billion due loan within 40 months,” informed Jha.
NOC board also decided today to adjust petroleum products’ prices on every third day of the month from December. “NOC receives a new price list from the Indian Oil Corporation (IOC) - the sole supplier of petroleum products to NOC - on the first day of every month,” Surya Prasad Silwal, joint secretary of Ministry of Commerce and Supplies said.“If the international crude prices go up or down, the domestic prices will also beadjusted accordingly,” Jha informed without spelling the formula to adjust price. Today, crude price is hovering around $67 per barrel (159 litres) in the international market.
NOC board has also decided to provide cooking gas and kerosene at subsidised rates. “One cylinder of cooking gas and 10 litres of kerosene (in urban areas) and five litres of kerosene (in VDCs) will be provided at subsidised rates per family,” Silwal said, adding, “If a family needs more than one cylinder, they will have to pay the market price that will also be adjusted soon.”
According to the NOC, it is incurring a loss of Rs 361 per LPG cylinder. “We’ll send the decision to ministry and once it gives a green signal, it will immediately come into effect,” Silwal added.