Oil Price Hike in Nepal
The oil crisis has become an annual occurrence. International petroleum product prices are rising, as are petroleum import costs, oil finances are under pressure, and the government is delaying the increase for a while.
Then there’s the ever-increasing cost of gasoline, diesel, kerosene, cooking gas, and aviation fuel. As the price of petroleum in the worldwide market has risen, the Nepal Oil Corporation (NOC) has increased the price of petroleum goods in less than two weeks.
The company has also raised the prices of gasoline, diesel, kerosene, aviation fuel, and LP gas. The government of Nepal has raised the price of petrol, gasoline, and kerosene by Rs 3 per liter, and cooking gas by Rs 75 per cylinder.
In addition, the price of fuel in the Kathmandu Valley has risen to Rs 136 per liter, gasoline and kerosene to Rs 119 per liter, and an LP gas cylinder for cooking to Rs 1575. Domestic aviation fuel prices have also been raised by Rs 5 per liter.
The price of aviation fuel has now risen to Rs 101 as a result of the price hike.
International aviation fuel prices have also been increased to $895 per kiloliter. With effect from 12 p.m. on November 8, the corporation has increased the price.
For the second time in the previous 12 days, Nepal Oil Corporation has raised the price of petroleum goods. According to the revised price list sent by the Indian Oil Corporation (IOC) on September 15, the corporation’s 15-day deficit had reached Rs 2.22 billion.
The price per cylinder had risen by Rs 50. The corporation has indicated that the price has increased somewhat because the corporation’s loss will reach Rs 3.2 billion in 15 days if the current price hike is not corrected.
The Indian Oil Corporation received an average price of Rs 7.42 per liter for petrol, Rs 3.92 per liter for diesel, Rs 11.49 per liter for kerosene, and Rs 4.11 per liter for aviation fuel, according to a price list sent on November 3.
The price of LP gas has increased by Rs 246.97 per cylinder, according to the corporation. According to the corporation, the price adjustment was undertaken after the 15-day deficit on the basis of the newly higher price topped Rs 3 billion (i.e. a monthly average of Rs 6 billion).
Because inflation affects the production of products and services, transportation, and consumer prices, the rate of inflation is likely to rise. This might make meeting the government’s 6.5 percent inflation target this year challenging.
Meanwhile, Akhil (Revolutionary) has urged that the price hike in petroleum goods be reversed immediately. Rather than providing help to those affected by the Covid epidemic, they have asked that the price spike be reversed.
They have severely opposed the price hikes and warned that if the government does not reverse its decision, a conflict will ensue.
Students, parents, teachers, employees, farmers, and youngsters have all been urged to join the robust fight against price increases by the student union.
From a political standpoint, the price of petroleum products has been kept low in most countries. It is not an exaggeration to say that this has proven to be a unique path in the inflation chain, as it has been deregulated in recent years as a result of the implementation of cross-subsidy policy.
Although it is not the government’s responsibility to trade, and it is not compelled to sell its property to India at a high price and then sell it cheaply, the government might have brought the price level to “par” by removing income equal to customs, but it did not.
The government has failed to recognize its social obligations to the people. The government’s role in the petroleum sector must be redefined, and the market must be liberalized. However, it does not appear that a climate has been created in which sensitive things such as petroleum products can be relied on only by the private sector.
As a result, on the one hand, corporations must be regulated by the government, while on the other hand, the private sector must be able to participate. No one should have a complete monopoly, but the private sector must be allowed to enter the petroleum business and compete while being governed by the law.
In this environment, the market for petroleum products is so sensitive that changes in the international market price can result in profits or losses of crores of rupees in a matter of minutes. Entrepreneurs in Nepal’s private sector are unable to take such a risk.
It is clear that in the absence of oil, the country’s momentum will stabilize. Therefore, when the private sector is involved in sensitive matters, the private sector may act dynamically only at favorable times, but in adverse circumstances, the exact opposite can happen.
As a result, when the private sector is required to participate in the petroleum products business, both the corporation and the private sector should be given an equal chance to compete, with the corporation being able to compete only if it is provided with adequate storage capacity, regional infrastructure, and a stable investment base.
The government’s role is limited to that of a facilitator by developing suitable policies, while an independent regulating agency should focus on price, service quality, and other consumer concerns.
However, in the current difficult position in the country as a result of Covid, the poor are frequently on the receiving end. The Indian Oil Corporation (IOC) has been buying petroleum for a long time. On the 1st and 16th of each month, the IOC gives the corporation updated pricing lists based on international price variations.
The firm establishes the new price and, in the case of the customer, the retail price based on the same pricing. To adjust the international market price, it has employed an automatic pricing mechanism or modality.
Even though the international market price had reduced, the business had increased the price because the cost was not less than the cost price.
The firm was also chastised at the time for claiming that the price of the Nepali market had increased while the price of the foreign market had decreased. The company’s financial situation is deteriorating as a result of ongoing losses.
International pricing, as well as domestic taxes and fees, have increased the company’s costs, yet the loss has been growing as the gasoline needs to be sold at a lower price than its cost price. Due to the high tax load on petroleum goods in Nepal, consumers are compelled to pay expensive rates.
On the basis of fuel costs, the government has been collecting money under numerous titles. However, whether the funds obtained in this manner were wisely utilized will remain a topic of debate.
Alternative actions to prevent the rise in the price of petroleum products may have been adopted, such as: when the price of diesel rises, the overall freight rises, and the cost and price of all sectors rise.
Every home has a gas connection in the kitchen. Because it impacts the poor’s kitchen, why not find another means to raise the price? The management cost per liter must be lowered after the increase in consumption.
What is the role of the Oil Corporation? What role does the Price Stabilization Fund play? Why not make use of it? Shouldn’t the government’s tax be cut in such a short period of time? What’s the point of taxing more than it costs? The infrastructure tax has been abolished, and the funds have been unused.
The price of oil in the country has been automatically adjusted due to rising international prices, and the Oil Corporation has not had to face financial losses in recent decades.
Instead of gradually raising the price of petroleum goods, it appears that the Nepalese government could have lowered total use by implementing a variety of energy-saving or alternative initiatives.
Rising oil prices in the Indian market, as well as the open Nepal-India border, make it typical for oil to be exported to India, regardless of how efficient the theft monitoring is.
At the same time, due to the vast number of businesses participating in this market who want to get rich quick by mixing low-cost petroleum goods with high-cost petroleum products, equal attention must be paid to the distribution of quality petrol in Nepal.
Is the grant a boon to the economy?
The newest suggestion for an increase in oil prices, as well as its implications for the overall price level, the budget, and the balance of payments position, will be a major setback for the Nepalese people.
Because the lower income group (LIG) consumes more petroleum goods and gas than the medium income group (MIG) and higher income group (HIG), it is apparent that the proposed price rise will have a direct impact on them.
Fuel, petrol, and kerosene prices have risen in the international market, and neighboring India, particularly the government, has raised diesel, petrol, and kerosene prices in Nepal.
In the face of changing settings and the influence of Covid, fuel prices can have major consequences. Subsidies, on the other hand, are not a long-term economic boon.
READ ALSOPrevious Next