Nepalis paying more for fuel despite fall in global prices

- Post Report, Kathmandu

Jun 24, 2017-

Nepali consumers are being forced to pay more for gasoline despite a sharp fall in global prices because Nepal Oil Corporation (NOC) has not been implementing the automated pricing system it launched two and a half years ago. 

As a result, the state-owned oil monopoly has been raking in massive profits.

On Wednesday, the price of crude in the international market plunged to a 10-month low of $42.13 per barrel after a single day fall of 2.3 percent due to a supply glut.

The international media reported that an agreement between the Organization of Petroleum Exporting Countries (OPEC) and other producers to cut output had kept oil prices stable in the last few months. 

“However, production is rising in Nigeria and Libya, countries exempt from the deal, offsetting cuts by other OPEC members,” states Reuters quoting Julia Simon. 

Last week, NOC reduced petrol, diesel and kerosene prices by Rs1.50 per litre despite a sharp fall in oil prices. The corporation’s projected profit stands at Rs800 million per month following the price revision.

NOC currently makes a profit of Rs5.69 per litre on petrol, Rs1.47 per litre on diesel and Rs17.47 per litre on kerosene. 

Its profits on duty paid and bonded aviation fuels amount to Rs11.22 per litre and Rs18.84 per litre respectively. Likewise, NOC earns a profit of Rs44.38 per cylinder on cooking gas. 

In 2014, NOC introduced the auto pricing mechanism under which fuel prices in the domestic market are revised in line with the price list sent by its sole supplier Indian Oil Corporation. 

The corporation has also set up a price stabilisation fund, that has now grown to Rs4 billion, to implement the mechanism. 

However, it has not been implementing the system fully on various pretexts. 

One reason NOC habitually gives for not slashing gasoline prices in line with global trends is the price difference in Nepal and in Indian towns across the border, which encourages cross-border smuggling from Nepal to India.

As per the company, the price of petrol in India is higher by Rs18 per litre compared to the price in Nepal. Similarly, the price of diesel in India is higher by Rs11 per litre. 

Madhav Timilsina, president of the Consumers’ Right Investigation Forum, said NOC had been revising the price only as a formality. 

“The enterprise has failed to implement the law made by itself and has been cheating consumers,” he said. 

The parliamentary Industry, Commerce and Consumer Welfare Committee too has been constantly directing NOC to fully implement the auto pricing system. 

But the state-owned enterprise has been defying the House panel’s orders. 

Prem Kumar Rai, secretary of the Ministry of Supplies who also heads the NOC board, said they were working to amend the Petroleum Products Auto Pricing System Bylaw with the aim of strictly imposing the provision. However, it is yet to be seen when the government’s efforts will be translated into benefits for Nepali consumers.

Published: 24-06-2017 08:11

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