Fuel Price Hike to Affect Livelihoods in Nepal

Fuel Price Hike to Affect Livelihoods in Nepal

The everyday fuel price hike has caused inconvenience and disappointment among the general public. Prices of petrol and diesel in the domestic market have increased by 9.7% and 12% through the five revisions in the last three months (April 2 to June 2) to NPR. 113 per liter and NPR. 95 per liter, respectively.

The government has been allowing Nepal Oil Corporation, the state-owned petroleum giant to revise fuel prices almost every fortnight based on the international market trend. However, the fuel hike price will have an adverse impact on the economy. NOC has been making adjustments in fuel prices almost every fortnight in accordance with the automatic pricing mechanism that allows it to review prices of petroleum products every fortnight by up to 2% against the prices of finished petroleum products supplied by Indian Oil Corporation. However, the automatic pricing mechanism was almost defunct when the fuel price was rampantly falling in the international market.

“The hike in diesel price subsequently affects the livelihood of people, along with the increase in public transportation cost, as transportation cost affects the price of all commodities, including daily consumable groceries and vegetables,” said Nara Bahadur Thapa, executive director at Research Department of Nepal Rastra Bank. “To put it in simple words, the cost of living will be high.”

NOC has been claiming that the loss on diesel cannot be cross-subsidized from the profit of other commodities as the volume of sale of petrol, kerosene, and ATF is low. Moreover, NOC has also been facing the loss on sale of liquefied petroleum gas.

The domestic airline companies have also planned to revise their fuel surcharge, along with the latest revision in price of ATF. Public transporters will also revise transport fares as the price of diesel has increased substantially. While fixing the public transportation fare, fuel price has increased up to 35%, according to transport entrepreneurs.

In the beginning, the government allowed NOC to keep the fuel price high to clear its outstanding debt burden. Even after having cleared the dues NOC did not revise fuel prices as per the international market and generated billions of rupees in profit.

NOC has been collecting NPR. 0.50 on the sale of each liter of petrol and diesel for price stabilization fund and the government is levying five rupees on sales of each liter of petrol, diesel, and ATF to develop the Budhigandaki hydropower project.

Apart from this, in the past when the fuel price was falling, NOC had collected a substantial amount from consumers to develop its infrastructure, such as the expansion of petroleum depots. NOC has so far collected around NPR. 5 billion rupees in the price stabilization fund, which was established to safeguard consumers from the sudden rise in fuel price in the international market.

On the other hand, despite a substantial increase in the sale of petroleum products NOC has been collecting NPR. 0.60 on the sale of each liter of petroleum products and NPR. 8.52 on the sale of each cylinder of cooking gas for administrative charges, which should have been revised along with the rise in the volume of sales.


Reference: The Himalayan Times