Fuel price

Nepal Oil Corporation (NOC), the sole importer of petroleum products in the country, has announced an unexpected and hefty hike in the price of petrol and aviation fuel on Sunday. The latest price rise, according to the NOC, will bring down the monthly loss to Rs 1.13 billion from Rs 1.34 billion. Understandably, with the oil loss piling up, there was no alternative to revising the domestic oil prices.



But the enormity of hike was something disturbing to common consumers. There is little doubt that the NOC, one of the financially bankrupt public utilities, had been bearing unrecoverable losses due to widening gap between domestic and international oil prices. The volume of loss in the oil trade was so alarming that its outstanding loss has crossed Rs 10 billion. Being a public enterprise, no other entity but the state was bearing the NOC’s loss as indirect subsidy in petroleum products.



We have been opposing the government’s fuel policy, as we believe it is unwise to use valuable resources to finance loss in a commodity which is mostly consumed by those who have the capacity to afford it. Being one of the poorest countries, Nepal has many other urgent obligations to fulfill -- like expanding basic health services and building primary schools in remote areas.



So, Republica has argued many times that there was no other option than to revise the domestic oil price upward. But time and again we have said price rise should be introduced gradually, not in the huge and rapid way NOC has lately done. It is important because a gradual and sober price rise provides time for consumers to adjust their expenditure patterns, thereby lessening possible public anger. Unfortunately, the government has followed past precedents -- tolerating loss to the maximum and announcing a big hike when all options end. We have seen such tactics prove counterproductive as such decisions have sparked demonstration and riots, compelling the government to roll back the price hike decision.



Many countries have successfully managed the oil loss by creating of an oil fund to deal with shocks coming from frequent changes in domestic oil price. Though with net loss, the creation of a fund, where a portion of profits is put, seems unfeasible at present. But still we urge the government to think of creating such a fund that can come into operation once the NOC starts generating profits from oil trade.

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