Adjust fuel prices

The interim government is shamelessly watching the country being hit by the petroleum shortage. It is aware of the constant loss being incurred by the Nepal Oil Corporation. But it has neither found any solution to the crisis nor has it attempted to adjust the petroleum prices so that the country's economy would have breathed a sigh of relief. Perhaps, the government intends to trigger a crisis of petroleum products, especially petrol so that consumers will realize and demand for the hike of petroleum prices. That the government has heavily subsidized the petroleum products needs no explanation for the consumers. However, the fear is that any hike in petroleum prices will trigger a chain reaction. Then again, how long will the government afford such "irregular" supply of petroleum products that is causing adverse effect on the country's economy? Has it given any thought to the country's economy?

A couple of years ago, the government had hiked the petroleum prices to adjust with the prices of crude oil being sold in the international market. The Maoists and others made hue and cry forcing the government to roll back the prices instantly. Ultimately, the country's economy had to pay the price for the roll back. Any decision on the hiking of petroleum prices again would have earned public wrath. Last month, the prime minister met Indian ambassador to Nepal to express his inability to clear the dues owed to Indian Oil Company. He literally begged to ensure uninterrupted supply of petroleum products citing that the country is undergoing a conflict transformation. NOC has to pay 4.5 billion rupees to IOC as the latter has stopped issuing fuel on credit. On the flipside, NOC has constantly run into loss of over 230 million rupees every month.

The import-sale disparity has caused a great stress on the country's economy. The country can no longer afford such irregular supply of oil. NOC imports 1200 kiloliters of fuel per day. And the country needs at least 2000 kiloliters of fuel to meet its daily demand. The problem will not be solved unless the government hikes the petroleum prices bringing them at par with the import prices. But it must deduct some tax imposed on the import of petroleum products to boost the economic activity and prevent untoward reaction. And dues totaling 4.5 billion rupees to be paid to IOC should be cleared to bring in the required quantity of fuel. Any reluctance on the part of the government to adjust prices and ensure "uninterrupted" supply of fuel will cost country's economy dear.

Source: The Kathmandu Post, June 28, 2007