Deregulation of petroleum sector sought

Himalayan News Service

Kathmandu, January 25:

Deregulation of petroleum sector is the need of the hour in Nepal’s context as increased involvement of the private sector in this area is expected to make it more efficient and user-friendly. Amrit Nakarmi, coordinator for petroleum studies at the Centre for Energy Studies (CES), Institute of Engineering (IOE), and Tribhuvan University today said prior to deregulating the petroleum sector in the country, an independent regulatory body should be formed to look after the petroleum sector.

The private sector can ensure a vibrant and competitive oil market, catering to the needs of general public for quality service and quality products at competitive prices. It will benefit the public, commented Nakarmi.

Nakarmi was presenting a paper on downstream petroleum sector in Nepal and its need for deregulation at a stakeholders’ meeting held today by CES-IOE.

The global petroleum industry is undergoing structural changes, most being privatised. In such a context, Nakarmi suggested, the government of Nepal has to take serious policy decisions as soon as possible regarding the petroleum sector.

Before liberalising the petrol sector, the government has to bring domestic prices at par with border import parity costs of petroleum products, he said. “Except the price of kerosene sold on quota, current price increases reflect import parity costs.”

“The government too has to allow domestic prices to be based on the automatic pricing mechanism so that the prices are adjusted automatically as per the changes in the international market,” says experts. Petroleum products are the cheapest sources of energy for Nepal. According to a study, energy consumption in coal, electricity, renewable and other traditional petroleum energy sources are 9.02 per cent, 2.01 per cent, 1.63 per cent, 0.53 per cent and 86.81 per cent, respectively. It shows that over 86 per cent energy is consumed through traditional sources. According to Nakarmi, weak management of Nepal Oil Corporation (NOC), has cost it more than two billion rupees in losses, which is attributed to sluggish ‘stock and distribution system’. Nepal’s per capita petroleum consumption is just 35 kg per, which is twice below India’s, and more than four times below that of China. However, consumption growth rate of petroleum products in Nepal has been growing at the rate of 10 per cent per annum, thanks to rapid population increment. If properly managed, NOC can distribute petroleum products at lesser prices than what it does now, as per Nakarmi who has already worked in NOC as chief.

It has been found that kerosene has become the principal source of cooking energy for the urban poor. Use of LPG has been increasing tremendously by the middle and top group consumers in urban areas.