The Nepal LP Gas Industries Association has asked the Nepal Oil Corporation to arrange an income tax exemption for gas industries seeking to merge, saying most operators in the sector are ready to consolidate provided certain provisions of the Income Tax Act, 2058 are not applied to such transactions. The demand was formally placed before the state-owned petroleum corporation in a letter submitted on Thursday. Alongside the tax demand, the association also proposed the introduction of dual-coloured LP gas cylinders, a step it said would make the sale and distribution of cooking gas in Nepal more convenient, safe and organised.

Tax relief positioned as the key to consolidation

The letter places the income tax question at the heart of the association's merger agenda. According to the association, most gas industries are willing to merge, but the application of certain provisions of the Income Tax Act, 2058, legislation that has been in force for more than two decades, stands in the way of such consolidation. The association has therefore urged the Nepal Oil Corporation to arrange an exemption so that mergers among gas industries can move ahead without the tax burden created by those provisions.

By routing the demand through the Nepal Oil Corporation, the association has positioned the corporation as the facilitator of the proposed restructuring of the sector. The corporation, which sits at the centre of the country's petroleum supply chain, is the body through which the LP gas industry's concerns are being formally channelled. As reported by RatoPati, the association made clear that the industry's readiness to merge is conditional on the removal of the tax provisions it has identified.

In effect, the association's letter puts forward the following position:

  • An income tax exemption for gas industries undertaking mergers, to be arranged through the Nepal Oil Corporation.
  • Non-application of certain provisions of the Income Tax Act, 2058, which the association describes as the condition under which most gas industries are ready to merge.
  • The introduction of dual-coloured cylinders to make the sale and distribution of LP gas more convenient, safe and organised.

Dual-coloured cylinders proposed for safer distribution

The second major element of the letter concerns the cylinders themselves. The association has proposed bringing dual-coloured LP gas cylinders into the market, arguing that such a system would make the sale and distribution of cooking gas more convenient, safe and organised. The stated objective, as set out in the proposal, is to bring greater order to the way cylinders move through the distribution chain and reach consumers.

Available reports, including Nagarik News, note the demand for the dual-colour scheme but do not detail the technical specifics of how the colour system would work. What is clear from the letter is the association's reasoning: that the current arrangements for sale and distribution can be improved, and that a dual-colour system would contribute to safety and organisation across the sector. The proposal has been submitted to the corporation at the same time as the tax demand, framing it as part of a broader push to modernise the industry's operations.

Where the demand goes from here

The letter marks a formal intervention by the LP gas industry in policy discussions affecting its structure. Cooking gas remains a staple household fuel across Nepal, and the sector's sale and distribution arrangements have a direct bearing on consumers. The association's argument is that consolidation, if the tax obstacle is addressed, would allow the industry to reorganise itself, and that the dual-colour cylinder system would complement that effort by streamlining distribution. Pradesh Khabar likewise reported the twin demands of tax exemption for mergers and the new cylinder proposal.

For now, the demands rest with the Nepal Oil Corporation, which received the letter on Thursday. The association's message to the corporation is unambiguous: the industry is ready to merge, and the single condition it has attached is that certain provisions of the Income Tax Act, 2058 should not be applied to such mergers. Whether the corporation responds by arranging the exemption the association seeks, and how the dual-coloured cylinder proposal is taken forward, will determine the next phase of this push to restructure Nepal's LP gas industry.