By now Kathmanduites are used to seeing the seemingly endless queues outside local petrol stations. They are as used to haggling over public transport fares. It does not surprise them anymore that the Rs 15 bus fare they had been paying has, overnight, ticked up to Rs 17 because there is no diesel in the market. Public taxies refuse to run on meters, the drivers nonchalantly blubbering out a random figure at least one and a half times the normal fare. The causes for the shortage and the resultant extra burden on the pockets of consumers are well known. First, the huge state subsidies: currently, Nepal Oil Corporation (NOC), the country’s sole supplier of petro-products, is losing money hand over fist, its monthly loss totaling a whopping Rs 1.28 billion. It loses Rs 342 on every LPG cylinder; Rs 18 on a liter of petrol/diesel and Rs 12 in a kilogram of kerosene.
Another well known reason for the NOC’s colossal losses is rampant political meddling. The loss-making NOC, rather than being treated for an ailing giant in need of fresh ideas, has come to be seen as a cash-cow for political parties which jostle for the Ministry of Supplies every time there is a change in government. While NOC’s losses mount, the party in control of the oil bureaucracy tends to milk it dry. It isn’t surprising they blame state subsidies for NOC’s failings. They do have a point. No organization can afford such losses. If it were a private enterprise, the price of petrol products would have been brought in line with the international market price long-long ago. But as a government body responsible for providing citizens one of their vital needs, many of whom cannot afford unsubsidized petro products, it has limited options.
Running a state company while also satisfying the consumer base is indeed a delicate balancing act. But we see no reason why some of the more obvious measures cannot be taken to revive NOC. For instance, it makes no business sense whatsoever to rely solely on Indian Oil Corporation for all of the country’s oil imports. Even in India there are other options available. Nepal should also explore import options from China, coincidentally home to Chinese National Petroleum Corporation, the second biggest company in the world in terms of market capitalization. Perhaps PM Bhattarai could put in a good word with Premier Jiabao during his expected Nepal visit?
Things have to change drastically within NOC as well. Anywhere between 20-30 percent petroleum products (depends on whom you believe) are lost to ‘leakages’, the NOC bureaucratese which can mean anything from petty pilferage by tank operators to ‘technical losses’ incurred by NOC depots around the country. It goes without saying that a radical reform of the oil mechanism is long overdue, but unlikely given that it is treated more as a bargaining chip during political negotiations rather than the sole supplier of one of the vital public necessities sorely in need of an overhaul.
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