KATHMANDU, OCTOBER 19

The Nepal Oil Corporation (NOC) has decided not to lower the prices in the domestic market citing huge losses and outstanding dues to the Indian Oil Corporation (IOC).

The state-owned company owes Rs 33.60 billion to IOC for fuel purchases.

As a result, oil prices in the domestic market continue to remain high despite its fall in the international market. Consumers have complained against NOC for hiking prices immediately when it increases in the international market but showing no efforts in lowering it when prices fall globally.

As per the revised list of fuel prices sent by the IOC on October 16, the NOC is heading to make a profit of Rs 390 million in the second half of the month. As per the list, the IOC has increased the price of petrol by Rs 1.75 per litre, Rs 15.30 for diesel per litre, and Rs 10.25 for aviation fuel per litre. NOC is incurring huge losses in diesel and LPG sales while making some profit through petrol and aviation fuel sales.

The consumption of diesel is around twice that of petrol in the country. A total of 56,000 kilolitres of petrol and 91,000 kilolitres of diesel were sold within the country from mid-July to mid-September, while 59,000 kilolitres of petrol and 82,638 kilolitres of diesel were sold from mid-September to mid-October, according to NOC.

According to Binitmani Upadhyay, spokesperson for the NOC, the estimated total loss in diesel sales amounts to Rs 180.51 million and Rs 370.60 million in LPG sales in the second half of October.

'The NOC is facing losses in diesel and LPG sales and has taken loans for its operations. We are also witnessing a trend of a slight increase in fuel prices in the international market. Such reasons are the cause for NOC's decision to not make changes to fuel prices in the domestic market,' Upadhyay told The Himalayan Times.

Meanwhile, expensive fuel prices have adversely affected transport entrepreneurs, forcing many to leave the sector.

Deknath Gautam, spokesperson for the Federation of Nepalese National Transport Entrepreneurs, said, 'The transport industry is one of the most affected sectors due to rising fuel costs. We are not in a state to sustain our business anymore. Despite many requests to the government and concerned bodies, the prices have not been lowered. We have no option but to shut our business.'

As per Resham Thapa, economist and associate professor at the Central Department of Economics of the Tribhuvan University, the refusal to decrease prices despite a drop in the global market by NOC is due to the 'rent-seeker' nature of the state itself.

'They just want to generate the revenue. Prices of gold, fuel, and imported cars are one of the major components in our consumption market. Prices of 300 commodities are checked to calculate inflation.

The weighted average of the prices is our inflation rate. If fuel prices are decreased when prices fall in the international market, it significantly lowers inflation,' he explained.

According to the latest macroeconomic report released by Nepal Rastra Bank, consumer price inflation in Nepal stood at an average of 8.26 per cent in mid-August, compared to 4.35 per cent in the corresponding period of last year.

'However, I don't think our bureaucrats or the finance ministry will work according to the macroeconomic indicators. There is a lack of honest people in our economic administration. When such enterprises continue to bear losses, many are in favour of privatising them.

But, privatisation also comes with its own sets of exploitation,' Thapa opined.

A version of this article appears in the print on October 20, 2022 of The Himalayan Times.