KATHMANDU, April 8: The government has slashed taxes on petroleum products by 50 percent, but the move is unlikely to lower fuel prices for consumers. Instead, the savings will go entirely to the Nepal Oil Corporation (NOC), which has been struggling with mounting losses due to the surging price of oil in the international market.
A Cabinet meeting on Tuesday decided to reduce customs duties and infrastructure taxes on imported fuels by up to 50 percent. The infrastructure tax on diesel and petrol, previously Rs 10 per liter, will now be Rs 5 per liter. This cut alone is expected to save Rs 5 per liter on both fuels.
Similarly, the government has offered a 50 percent discount on customs duties. Currently, customs duty stands at Rs 25 per liter on petrol and Rs 12 per liter on diesel, while cooking gas imports are taxed at Rs 90 per cylinder.
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At present, consumers pay a total of Rs 66.98 per liter of petrol in various taxes, including customs duty, road maintenance fee, pollution fee, infrastructure tax, and value added tax. For diesel, the total tax burden is Rs 49.28 per liter.
Under the new provision, NOC will save Rs 17.61 per liter on petrol and Rs 11 per liter on diesel from the reduced taxes. However, the government's decision appears to benefit only the state-owned oil monopoly.
Chandika Bhatta, NOC's managing director, told Republica that the decision could help the public enterprise ease fuel supply. "However, the NOC board is yet to revise consumer prices," he said.
On Thursday, NOC set the price of petrol at Rs 202 per liter and diesel at Rs 182 per liter. Even after the price adjustment, the corporation claims it is still losing Rs 34.36 per liter on petrol, Rs 120.54 on diesel, and Rs 416.37 per cylinder on cooking gas. Overall, the state monopoly is reportedly incurring a loss of Rs 11.71 billion every two weeks.
NOC has faced financial trouble due to a sharp rise in international oil prices. According to Reuters, oil prices hovered around $110 a barrel on Tuesday as a deadline imposed by U.S. President Donald Trump loomed for Iran to open the Strait of Hormuz—or face military action.
Oil prices edged higher this week after Trump doubled down on his threat to destroy Iran's civilian infrastructure if the country does not reopen the strait. The closure has caused one of the largest supply disruptions in history, prompting nations to seek alternative sources and release emergency stocks.
In response, the Government of Nepal has introduced measures to reduce petroleum consumption and ease the financial burden on the state. A few days ago, the government enforced a two-day weekend—Saturday and Sunday—for all government offices and educational institutions, and has also cut fuel allowances for civil servants.
