End oil losses

It is unfortunate that lawmakers are still divided over deregulating oil prices. Years of oil losses, which have inflicted a huge loss on the state, siphoned away resources that would otherwise have gone to developing critical socio-human capital, infrastructure and services. Given that petroleum is consumed largely by only one-fourth of the population, using scarce state resources in cushioning them in terms of prices has been at the cost of the remaining 75 percent who are mostly poor, and particularly the poor living in the hinterland where the state struggles to provide even basic amenities. Worse still, it is eating away at development prospects and depriving people of jobs and income opportunities.



Oil losses over the last two and half years have gobbled up well over Rs 23 billion. Had this money been spent on hydropower development, it would have enabled the country to install a hydro-power plant of at least 150 MW capacity. It would also have helped build thousands of schools, even more health posts and hundreds of kilometers of road. What does the country need more -- health, education, improved connectivity and power, or cheaper prices at the petrol pump? Sadly, politicians and the government leadership are not even bothered to answer this straightforward question. As a result, the country staggers on under power crisis. Thousands of Nepalis still die every year for lack of basic health care and thousands remain deprived of education. And all this is only helping to perpetuate a vicious cycle of poverty.



Nepal Electricity Authority is supplying a meager 300 MW of electricity, and factories, firms and private individuals are producing another 500 MW or more through power captive plants and small generators fed on diesel. This has only added to petroleum consumption and the oil losses. It has exacerbated the problem. We have always protested the mismanagement of petroleum prices. And we again urge the government to get its priorities right. As a country that is completely dependent on foreign supplies and has no control over international prices or the currency exchange rate, Nepal simply cannot afford to keep on controlling domestic oil prices. We should now have the guts to say No More.



It is true unfettering the prices will be painful for consumers, but that will only be in the initial phases. They will learn to rationalize consumption and manage their fuel budget prudently. Price deregulation will also pave the way for private sector involvement. Enactment and enforcement of appropriate regulations will foster competition. This will immediately impact the market in two ways. First, Nepal Oil Corporation, notorious for its corruption, will be forced to shape up and plug leakages. That will impact prices to the benefit of consumers. Secondly, it will force the players to compete in quality as well, ensuring the advent of efficient fuel that will deliver better mileage and vehicle-engine longevity. The sector will become consumer-centered. It will also eliminate the risk of fiscal crisis, thereby improving the odds on more meaningful public spending.

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