Nepal Oil Corporation is considering selling cooking gas at differentiated price for household users and commercial users, citing to lessen the financial burden that it has been facing from the business of the liquefied petroleum gas (LPG).

Although the government failed in a similar initiative it vowed over a decade ago, it is considering reviving differentiated pricings of the LPG. Manoj Thakur, spokesperson for the NOC, told Republica that the public enterprise has started its homework to enforce differentiated pricings for households and business entities.

According to Thakur, the government will continue the subsidy amount in LPG to be used by households while the relief will be withdrawn on commercial use of LPG after the proposed program is implemented. “The households that purchase LPG at the listed price can reimburse the subsidy amount from the designated bank,” he said.

The state-owned oil monopoly has been developing separate software to track the household users of cooking gas. “The consumers in this group will get a refund of the government subsidy from Rastriya Banijya Bank,” Thakur added.

The NOC initiated the program of selling the color-coded cylinders (red for households and blue for commercial use) back in 2013 when the state-owned fuel monopoly was making losses. The plan was revived in 2018 as the NOC was still making losses. Citing the high risk of leakage due to lack of proper monitoring mechanism, the NOC dropped its plan.

At present, the NOC faces an estimated loss of Rs 322 per cylinder in LPG business. The consumers, both households and business entities, are provided the LPG at the rate of Rs 1,910 per 14.2 kg cylinder. “In the proposed system, the subsidy amount will be withdrawn from commercial users,” said Thakur.

According to the Population Census 2021, a total of 44 percent of the population are relying on LPG for daily cooking purposes. The NOC records show that around 450,000-500,000 tons LPG is consumed annually in Nepal.

The NOC currently assumes a financial burden of around Rs 11 billion while providing subsidy on LPG. After differentiated pricing is implemented, it is expected to reduce the financial burden to Rs 9 billion per annum.

Thakur said a family with four members will be provided with eight cylinders of subsidized LPG per year. “Provided the related software is prepared and necessary processes are accomplished, the new provision is expected to come online by mid-March,” he added.

Nepal imported 524,274 tons of LPG in fiscal year 2023/24, which was 1.9 percent more than the amount imported in the previous FY. LPG is the main source of energy supply in the average Nepali kitchen.