Nepal | April 06, 2020

Threat of petrol shortage looms large

Saurav Bashyal

The call for strike by BPDA ruffles City dwellers and has them queuing up outside petrol pumps yet again

Petrol station

Photo: Sujit Sangat/ THT


The 2015 economic blockade that forced an army of motorcyclists and motorists to stand in long queues at gas stations across the Valley is still fresh in everybody’s minds. Fast forward two years later and the Valley is again threatened by the same fate although in a much lower scale. The Bagmati Petroleum Dealers’ Association (BPDA) — an association of around 250 petroleum dealers from Kathmandu Valley and other five neighbouring districts (Nuwakot, Rasuwa, Dolakha, Kavre and Sindupalchowk) — on June 24, announced its decision to halt purchase of petrol from NOC and has called for a strike for two days (apprx) starting July 4. This decision threatens to destabilise the transportation system in the Valley, in effect, disrupting the daily lives of the common man.

Petroleum dealers’ strike

The possibility of fuel scarcity looms large for Kathmandu Valley dwellers and people from neighbouring districts due to the ongoing clash between BPDA and Nepal Oil Corporation (NOC). The issue finds its roots in loss compensation — NOC pays compensation for the 35-lt for every 4,000-lt of petrol due to technical loss (vaporisation). However, BPDA claims that the loss incurred is average 84-lt on every 4,000-lt of petrol. Achyut Bahadur Khadka, President, BPDA, says, “We came across this figure after inspecting seven petrol stations in Kathmandu Valley under the joint study team of Ministry of Supply (MoS), NOC, Nepal Bureau of Standards and Metrology and BPDA. The study revealed that in every chamber of 4000-lt of petrol, there is a loss of average 84-lt of petrol.” Stressing on the fact that this incurs a huge loss to BPDA, he shares, “We want NOC to compensate 66-lt of petrol instead of the current 35-lt. That way we can mitigate our losses to a large extent.” He further informs that the technical loss evaluated by the joint study team is yet to be addressed by NOC as on June 30.

BPDA claims that since the supply of Euro IV standard petrol (higher quality) from April the loss has gone up to 99-lt per 4,000-lt imported.

According to BPDA, private petrol pumps are to be closed for business, and consumers will have to buy petrol from stations operated by Nepal Police, Nepal Army and Sajha Petrol Pumps.

Khadka says, “During the strike that will probably last a couple of days starting July 4 we won’t be selling petrol. However, other petroleum products such as diesel and kerosene will be available. We will see how our negotiations go with NOC.” If this strike takes off as planned and lasts for more than two days then there are high chances of black marketers stepping in to fill the gap as seen in earlier instances.

Jyoti Baniya, President of Forum for Protection of Consumer Rights Nepal, informs THT Perspectives, “The announcement of strike from petroleum dealers is illegal. The law does not allow any private or public entity to call for such strikes. This goes against Consumers’ Rights Act. This is one form of organised crime against consumers that is prevalent in the country.” He further says, “Forum for Protection of Consumer Rights Nepal will file a police complaint against petroleum dealers if they refuse to sell petrol to public on the said days.”

NOC’s plan of action

The NOC has formed a panel to address the issues raised by BPDA. Sitaram Pokharel, Spokesperson of NOC, says, “NOC will discuss the demands of BPDA and come up with appropriate solution to tackle the problem, if possible, before July 4. The claim that the volume of petrol that reaches the dealers from NOC’s depots is less in quantity is completely false. Every dealer sends his representative to inspect the quantity and quality at the time
of transfer.”

NOC also faces serious problems of calibrating oil tankers from India. At present, tankers carrying petroleum products from Indian Oil Corporations (IOC) refineries are calibrated in India. Nepali standard calibrations are not approved by IOC since it is the seller and has the authority to decide the terms and conditions for import. Once the petroleum tankers enter Nepal, any form of deviation in quantity has to be accepted by NOC. There is no proper mechanism to negotiate with IOC in case of alteration in quantity. Pokharel says, “Currently, NOC has no other option but to depend on Indian calibration of tankers; however, Nepal will try to negotiate and seek approval for Nepali standard calibration in the near future.”

For the time being, the panel led by Bishwo Babu Pudasaini, Director General of Nepal Bureau of Standards and Metrology is studying the loss in order to solve the conflict with dealers. “The panel is currently preparing a report. We are reviewing the seasonal studies that we have conducted and we are also recording the facts. We will submit our report before July 6 which will be made public on the same day,” says Pudasaini.

Lack of competition

Nepali petroleum market is governed by anti-competitive practices that doesn’t help the economy grow and doesn’t provide many choices to consumers. Nepal imports all its petroleum products from India with IOC being the sole supplier. Nepal’s dependency on India for the procurement of petroleum product dates back to 1974 when the Government of Nepal and Government of India signed a Memorandum of Understanding (MoU) that dictates Nepal to import petroleum products exclusively from the IOC. The MoU gives authority to state-owned NOC to be the sole importer. Additionally, the MoU also instructs NOC to procure crude oil from the international market and supply the same to IOC. IOC would then supply NOC with the equivalent petroleum products. These terms of the agreement has restricted the import of fuel into Nepal from any other country.

Sales of petroleum products besides Automatic Transmission Fluids (ATF) are done through petrol pumps, packed dealers and kerosene dealers. There are 2,500 such outlets spread across the country. NOC imports and distributes petroleum products in around 1,500 tank trucks and 1,500 retail outlets owned by the private sector around all parts of the country.

Insufficient storage

However, if NOC were to increase its supply through various sources, NOC’s lack of storage capacity still remains to be tackled. Currently, NOC has ten storage facilities in the country with the present storage capacity of 71,622 kilolitres which is just enough for two weeks national sale. There is also a lack of proper distribution channel and during crisis, private petrol stations are found to be guilty of encouraging black market sales and exploiting consumers. Due to corruption and poor implementation of law, many petroleum dealers have been found guilty of supplying petroleum products to the black market during shortages. Khadka says, “There have been many cases of malpractices from petroleum dealers. The BPDA urges NOC and the MoS to stop the cases of infiltrations or pilferages and punish the culprits.”

Under- Secretary, MoS, Baburam Bhusal says, “The private petroleum sector does not possess sufficient storage facilities and other infrastructure to conduct quality tests of petroleum products. Therefore, even if private players were to enter the petroleum market, they will have to depend upon NOC for storage until they develop the required infrastructure through large commercial investments.”

Other alternatives

The issue of Nepal importing petroleum from China garnered major attention during the economic blockade in 2015 but the debate lost its momentum once import from India became normal. On October 28 2016, Nepal signed its first-ever fuel agreement with China but the temporary fuel agreement didn’t lead to any long-term formulation of plans and policies to import fuel from China through commercial mechanism. NOC had also issued a call of interest for private sectors to provide fuels from alternative sources during the blockade but didn’t continue the scheme after the blockade was called off.

Bhusal says, “If we plan to import fuel from China then our procurement cost must be feasible. Then only can we sell petroleum products to Nepali consumers at a low cost. Adverse geographical condition is the major hindrance for the government to initiate a long-term deal with China.”

Government’s reluctance to ease supply and distribution of petroleum products through the involvement of private sector is a worrying factor. Nepal relies upon the direct deal between NOC and IOC for overall operation of the fuel market in Nepal. With only one source of import and inefficient domestic distribution channel, any disruption in the conveyance of petroleum products cause immediate panic among consumers. Concrete solutions to these problems must be sought or else the consumers will forever be on tenterhooks.

A version of this article appears in print on July 02, 2017 of The Himalayan Times.

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