KATHMANDU, March 15: Nepali consumers continue to pay high prices for petroleum products as the authorities are reluctant to factor in the plunge in the international price. The country’s petroleum products monopoly is likely to cite various types of taxes or the possibility of smuggling to India for keeping the price structure largely unchanged.
Prices of petroleum products have been in free-fall in the global market. According to international media, crude prices are down 50% from their January peak, and at the lowest level since early 2016.
“Crude has been down to US$ 32 per barrel from US$ 64 over the period,” reports NDTV.
The steep decline has been attributed to heavy fall in demand after a number of countries went into lockdown against the new coronavirus outbreak. There is also a price war between producers Saudi Arabia and Russia.
Oil price plunge sends ripples through global economy
Despite the heavy decline in the price graph , Nepal Oil Corporation has revised the price downwards only nominally over the period. The state-owned oil supplier, which is supposed to adjust prices as per an automatic adjustment mechanism, clipped a mere Rs 2 per liter petrol off the price of a month ago. Based on the recent price list, NOC earns a profit of more than Rs 500 million per month.
NOC has been implementing the auto pricing mechanism since September 2014. Under this arrangement it revises fuel prices every fortnight based on the price list sent by the Indian Oil Corporation, its sole supplier of fossil fuel . NOC should be revising the price on Sunday. However, it is unlikely to reduce the price by a significant amount this time either.
According to NOC officials, they could this time adjust the price against an infrastructure tax that the government revised two weeks ago. While the government has been claiming that the increase in infrastructure tax would not push up oil prices, the NOC officials said that tax hike was also meant to address price differences across the border.
“Apart from collecting tax revenue for the specific purpose, the main objective of imposing the tax is also to reduce the difference in prices in the two markets,” said an NOC official on condition of anonymity. As per the source, fuel in India is Rs 16 per liter more expensive than in the Nepali market.
Under the Petroleum Products Auto Pricing System bylaw, NOC is allowed to adjust domestic prices by only 2% at a time regardless of the degree of fluctuation in global prices. Anything in excess of this limit should go into a price stabilizing fund.
An NOC source said that the impact of the recent fall in crude prices may not show in the price quotations to be sent by the Indian oil supplier.
“We might have to wait another 15 days for the price of petrol and cooking gas to fall,” the source said.
