Petro prices go down

KATHMANDU: Nepal Oil Corporation (NOC) has slashed the prices of major petroleum products by Rs 5 per liter and imposed a pollution control tax of 50 paisa in the Kathmandu Valley. The reduction, the third for the past six weeks, has brought retail prices of petrol down to Rs 85.50 per liter, and diesel and kerosene to Rs 60.50 per liter. Likewise, the price of aviation turbine fuel (ATF) has lowered to Rs 90. The price of ATF for international flight supply has also decreased from 1,300 to USD 1,200 per kiloliter. [break]

“We have reduced the prices down by about 6 percent and the prices of diesel and kerosene have been maintained at the same level in accordance with our policy aimed at checking adulteration,” said commerce secretary, Purushottam Ojha.

Petroleum prices down by Rs 5; government imposes pollution control tax of 50 paisa in the Valley

New retail prices - Petrol: Rs 85.50, diesel and kerosene: Rs 60.50, aviation fuel: Rs 90, cooking gas: unchanged Rs 1,200 per cylinder

Talking to the press, he elaborated that prices in the country have been fixed to be the near equivalent of those on the other side of the porous Nepal-India border. This is expected to check illegal outflow of fossil fuel.

Despite the downward revision, officials said cash-strapped state-owned petroleum import monopolist Nepal Oil Corporation (NOC) will earn a monthly profit of Rs 500 million in December.

“The new rates generate us a profit margin of Rs 25 a liter in petrol, Rs 4 in diesel, Rs 5 in kerosene and Rs 36 in ATF,” said NOC chief Digambhar Jha. He stated that the corporation’s loss on each cylinder (14.2 kg) of liquefied petroleum gas (LPG) has also dropped Rs 60 per cylinder from Rs 361.47 in November. NOC said that it would use the upcoming profits to serve its outstanding dues and loans, which currently stand at a staggering Rs 16 billion.

Over the last three years, when political resistance prevented revision of domestic prices in line with international trend, the corporation relied heavily on credit of the supplier, banks, financial institutions, and the government to finance import. Records show the corporation’s outstanding dues stand at Rs 700 million to the Indian Oil Corporation (IOC), Rs 2 billion to commercial banks, Rs 3.53 billion to financial institutions, and Rs 10.12 billion to the government.

“We will clear our dues gradually from the profit we will make,” said Jha. He said the corporation will be able to serve its loans in 32 months at the present rate.

Ad-hocism in automatic pricing

The NOC’s Wednesday decision to lower fuel prices goes with the government’s latest policy to make monthly adjustments to domestic prices in line with international trends. Under this policy, the corporation is said to unveil new rates on the 3rd of every English calendar month.

Officials stated, however, that the price structure decided on the day was set on an ad-hoc basis rather than following a clear cut action plan. “The spirit of the automatic pricing system is policy clarity on pricing structure and consistency in pricing decision. This makes formulation of an action plan on up to what extent, and till when, it will allow NOC to reap profits to settle its dues very necessary. People too must be informed about it. But, sadly, that has not been done yet,” said a supplies ministry official.

In the absence of wider policy consultation and information dissemination, he cautioned that the practice will work only while international prices continue to slide. “It might not work once the prices start to rise; the real time when we need the system. Hence, a clear cut plan should come from the government on how it will enable NOC repay loans at the present international price and possible future fluctuation of international prices.”

Supply anomalies

Moreover, consumers faced a serious problem getting hold of fuel from November 31, as dealers failed to place supply orders to the NOC in anticipation of the price rise. “Who would accept fuel when one is certain prices will be reduced anytime soon?” said Sharad Bhandari of Nepal Petroleum Dealers Association.

Amid rumors of a sharp cut in prices, dealers anticipated a straight loss of Rs 60,000 to Rs 80,000 per tanker of stock, and hence took a lower quantity of fuel. As a result, most refilling stations were found to be operating with “no petrol” and “no diesel” signs. Consumers were forced to rush to army, police and cooperative-run refilling stations, where long queues built every day.

“This could prove a major stumbling block on the road to instituting a fair system in the oil market. The government must control it,” said consumer organizations.