The long queues, rationing and the non-availability of petroleum products for the past several months have become a part of life. The oil problem became obvious to the general public when Indian Oil Corporation (IOC) refused to provide oil to the Nepal Oil Corporation (NOC) on credit after a certain limit — a perfect approach to be taken by a commercial enterprise. The public, and the media as well, have requested the government repeatedly to change the oil price in accordance with the change in import price. The government of eight political parties — now actually six as both factions of the Nepali Congress have been united and the Communist Party of Nepal ( Maoist) has quit the government — has refused to raise the price until the completion of the election to the Constituent Assembly. Nor is it ready to provide adequate monetary resources to NOC to maintain domestic price at lower than import price.

On the contrary, the Prime Minister is requesting the ambassadors of both India and China to help solve this artificial problem created by the administration under his own leadership. It is a futile exercise. As expected the price has remained unchanged, and so is the long queue at the petrol station. “This will drag the country indirectly”,

warns a leading English daily, “into another cycle of violence”. (The Kathmandu Post, Sept. 27, 2007).

The problem was created by the previous governments and, at present, has been maintained at the initiative of a minister, notwithstanding his verbal commitment in favor of liberal policy. Obviously, he is no other than the Minister of Finance whose breathtaking arrogance is exceeded only by his incompetence to manage the economy of the country.

The Ministry of Finance has imposed a heavy tax on the import of petroleum products. Let me give an example. The net loss to the NOC in the import of petrol per litre is just Rs. 3.50, but the tax imposed by the government, including value added tax is about Rs. 25. The amount of tax to be paid, and, subsequently, government revenue will go up parri passu with the

increase in import price. This means in effect the problem of long queues at petrol pumps would have vanished if the tax on petrol per litre had been reduced to Rs. 21.50.

The Minister of Finance, however, has refused to reduce the import duty on oil or to provide adequate resources to the NOC to maintain domestic price lower than import price in the transition period on the ground that it will lead to a decline in capital expenditure of the government, and, subsequently, the overall growth rate of the economy! This is a big lie. In fact, the government revenue in the current fiscal year, according to Budget Speech itself, will not be sufficient to meet regular expenditure plus the repayment of principal of the loan that is due in the current year.

As a result, the budget documents show that fifty per cent of the domestic loan that the government has proposed to take in the current fiscal year will be used to meet the regular expenditure. True, the Ministry of Finance will not have sufficient monetary resources to provide salary of the civil servants and to meet other administrative expenditures if they reduce the tax on oil. Against this background, it is safe to ask, is there any real difference between the current Minister of Finance and the Finance Ministers of the Royal regime? If not, what are the commonalities all of them possess. It is now clear that, in Nepal, you have to be a good liar to be a Minister of Finance.

The current oil problem, however, has provided a nice opportunity to the Minister of Finance to mobilise external resources. On May 30, 2007, for example, he forwarded a letter to the Managing Director of the International Monetary Fund stating that “ to address NOC losses, the GON (Government of Nepal) will gradually adjust upwards prices of oil with the objective of introducing an automatic pricing mechanism for all petroleum products at that time.

In the meantime, suitable measures to finance losses have been devised (for implementationl)”. It enabled the Minister of Finance to use Rs. 2.25 billion from the Poverty Reduction Growth Facility of IMF within November 18, 2007. I guess he has used or will use the facility in the form of loan by IMF to finance the regular expenditure.

But we do realise what the Minister of Finance has promised to deliver, and what he will actually deliver are two different issues. He has not taken or help to initiate a single measure to help solve the current crisis. He has tried to give the impression that the current problem has a genuine cause and he has not expressed a single word to indicate the benefit he has managed to derive from the current problem. If we are really serious about solving the oil crisis, the first thing we need to do is to expel the current Minister of Finance from the government. Rest will be easy.

Dr Pant is executive director, IfDS