MoCS has argued LPG has already become an essential commodity and is also widely consumed by poor rural people. But its own data suggest, monthly gas consumption hovers around a million cylinders and some 45 percent of its consumers are hotels, restaurants, factories, automobiles and other commercial ventures. As such, only around 20 percent Nepalis rely on LPG to cook foods. And we all know where this population lives. But what is true is that LPG’s demand is growing rapidly. Why will it not? Today a family needs to spend Rs 68.50 for a liter of kerosene and Rs 72 on wood (to get energy yield equivalent to kerosene). On the other hand, MoCS has continued to keep LPG priced at Rs 50 per liter. Such pricing is giving boost to its consumption. This is a serious policy anomaly. Exempting VAT, on top of it, will only expand this anomaly.
Hence, instead of seeking VAT exemption on gas, we urge the MoCS to focus more on making consumers attuned to paying what it costs for the product. No consumer demands price cut on rice or lentil or edible oil even though these are much more essential than the type of fuel they use to cook them. Why? MoCS must understand this and political leaders at the helm of the ministry should stop politicizing the issue.
MoCS must repeatedly inform the public how the international oil prices are moving and put in place automatic pricing. This may take time. But it can instantly enforce differential pricing for commercial consumers. This will immediately cut its cost. Secondly, it must review the cost it is covering for the private bottlers. There must after all be a reason as to why the number of LPG bottlers almost tripled to over 50 during the last two years even as NOC suffered huge losses. MoCS must also force NOC to reform. The state-owned petroleum monopolist is infamous for corruption and leakage.
Studies conducted over the past 15 years have said NOC can reduce its cost through restructuring and reforming its operations. MoCS must shift its focus toward that.
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