Dealers seek compensation for losses due to revision in fuel prices

Published On: April 3, 2020 04:16 AM NPT By: Republica  | @RepublicaNepal


KATHMANDU, April 3: Petroleum dealers have sought compensation from the Nepal Oil Corporation (NOC), stating that the petroleum monopoly's decision to cut petroleum prices significantly will inflict huge loss on them.

The NOC on Wednesday reduced petrol, diesel and kerosene prices by Rs 10 per liter. This is probably the biggest price cut in the history of NOC. The state-owned enterprise took the decision amid widespread criticism for its reluctance to reduce price despite the free fall of oil prices in the international market.

Submitting a memorandum to the NOC on Thursday, Nepal Petroleum Dealers' National Association said that dealers across the country will face combined loss of Rs 300-400 million with the fresh revision in petroleum prices. “NOC, which initially compelled us to increase stock of petroleum products citing lockdown, has made the dealers face huge losses with the drop in prices,” reads the memorandum.

The association also came down heavily against the NOC for breaching its Auto Pricing System Bylaw and working guideline. The bylaw does not allow the NOC to revise the fuel price by more than 2% of the prevailing prices at a time. The association has also expressed its dissatisfaction over the NOC's sudden move at a time when the petroleum dealers have been seeing a slump in their business due to lockdown since last week.

Talking to Republica, Nagendra Sah, deputy managing director of the NOC, said there is no provision to compensate petroleum dealers for the loss due to fluctuation in the fuel prices. “As per the existing laws, it is solely the liability of the petrol pumps whether they earn profit or face loss with the change in fuel prices,” said Sah.

According to Sah, the NOC had provided compensation to the petroleum dealers in 2005.

As per the bylaw, the NOC previously used to revise the fuel prices nominally which did not cause much loss to the dealers even when the price is reduced. But this time, the sellers are largely affected as they are having large quantity in stock along with the heavy reduction in prices by the enterprise, according to Sah.

“The NOC board, however, will be the final decision maker on whether to address the grievance of the petrol pumps this time,” he said.

Due to multiple reasons, including impacts of COVID-19 and the price war between Saudi Arabia and Russia, prices of petroleum products are lately on a free fall in the global market. The crude oil price has fallen as low as $ 20.09 a barrel – the lowest since November, 2002.

Just before the lockdown came into force, petroleum dealers had not purchased petroleum from the NOC citing possible drop in fuel prices. This had even created artificial shortage in the market.


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