Nepal Oil Corporation’s (NOC) announcement about mounting monthly losses is a broad hint about an impending price hike, analysts said.

“We have been incurring a monthly projected loss of Rs640 million,” said Birendra Kumar Goit, spokesperson for NOC. “We are doing homework to see what can be done to address our worsening financial status,” he said.

The last time NOC revised fuel prices was on August 19. The state-owned oil monopoly said it was under pressure due to higher oil prices in the international market and a rising US dollar. The Nepali rupee sank to an all-time low of 113.89 per dollar on Sunday. The price of crude oil has jumped to $77.42 per barrel in the global market.

NOC has revised fuel prices five times in the past four months, with the price of petrol going up from Rs106 per litre to Rs111 during the period. Diesel and kerosene became dearer by Rs8 per litre.

NOC is expected to incur an additional financial burden of around Rs1 billion in the next month due to the appreciation of the greenback and soaring crude oil prices, said Acting Managing Director Sushil Bhattarai.

Every increase in price of $1 per barrel in the global market means a loss of Rs150 million for the corporation; and every increase of Rs1 in the exchange rate of the US dollar means a loss of Rs150 million, Bhattarai said.

“Combined with the existing losses in the fuel business, NOC is likely to suffer losses of up to Rs1 billion per month due to the new scenario.”

NOC maintains a price stabilisation fund of around Rs4 billion from its profits in past years. It uses the fund to adjust the oil price in case of sharp price hikes in the international market. 

In September 2014, NOC introduced the automatic 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, but it has not been able to implement it consistently for various reasons. Since then, debt-ridden NOC has cleared its debts totaling more than Rs36 billion with the profits and a loan from the development fund.

Nepal has been facing pressure due to the appreciation of the dollar resulting from a sharp fall in the value of India’s currency with which the Nepali rupee is pegged.

As per Indian media, the depreciation of the Indian rupee is due to a hike in demand for dollars from Indian importers.

Global oil prices have shot up due to a drop in supply following US sanctions against Iran, one of the main oil producing nations, according to Indian media.