EDITORIAL: Auto-pricing system

Being able to clear all debts does not mean that NOC has been running in an efficient manner. To this aspect, great attention should be paid on its efficiency

The adoption of automatic pricing of the petroleum products by the Nepal Oil Corporation (NOC) will be completed by bringing liquefied petroleum gas (LPG) under this mechanism too from January 1. Since September 29, 2014, petrol, diesel and kerosene have been priced under automatic mechanism, matching their domestic prices with their international prices.

But talk of introducing automatic pricing had been going on for years as the state monopoly for oil had been making losses for years.

For decades, the state monopoly and the government which controls it never bothered about raising the prices of the petroleum products even when their international prices justified it, all because of their lethargy, indifference, inefficiency, as well as a fear of provoking the public into street protests which they thought could land the government in trouble.

And when pressed to the wall, the NOC sharply raised the prices, making up for years of non-revision of prices.

However, since the introduction of the automatic pricing by the NOC more than two years ago, there have been a number of price revisions, most of them being on the downward curve as the international prices of fossil fuels have shown a long declining trend.

The beauty of this system is frequent small price adjustments depending on the fluctuations on the international oil market. What is important, this pricing has not caused any big political agitation, as a small increase also happened the other day.

The NOC’s decision to put the cooking gas under the automatic price mechanism has come under pressure from the government and the parliamentary Committee on Commerce, Industry and Consumer Welfare Relations. This decision is right, though somewhat belated.

Citing practical considerations, NOC has been reviewing the prices once every month though the Indian Oil Corporation, the sole supplier of oil to the NOC, sends its revised rates twice a month. This makes no great difference but contributes to convenience.

Once, i.e. in 2013, subsidy on the cooking gas had been costing the NOC Rs. 1,000 per cylinder, considerably increasing the state monopoly’s losses which amounted to billions of rupees, in 2014-15 surging to more than thirty billion rupees.

This caused a cash crunch and the NOC was unable to pay the Indian’s supplier’s bills at times, leading to a supply stoppage, which resulted in acute oil shortages in the country, sometimes for days, at other times for weeks, or even months.

Automatic pricing will take care of this dangerous prospect. Over the last one-and-a-half years, the NOC has even been able to clear all its debts, to the government as well as the financial institutions. This was possible because of the automatic pricing mechanism and the falling international oil prices on which it played also to cover the past losses.

But being able to clear all the debts does not mean that the NOC has been running in an efficient and effective manner. To this aspect, great attention should be paid on its efficiency.

Now that the market mechanism has been adopted, the consumer should have the right to choose – where to buy their cylinders from -- and they should not be bound to any single brand after they have paid for both the cylinder and the gas in it.

Maintain them

Solar streetlights had been installed in the Kathmandu Valley two years ago ahead of the 18th SAARC Summit held in November 2014.

However, 5000 solar streetlights in the capital are no longer working. This is because they were not properly maintained and had gathered dust. The streetlights are for the most part working for only four hours when it should have been providing light for 12 hours.

When the solar panels are covered with dust they receive less light as a result of which the batteries are prevented from being sufficiently recharged. When the batteries are not recharged they stop working.

Most of the streetlights had been installed by the Nepal Electricity Authority.

The Kathmandu Metropolitan City and the Kathmandu District Development Committee had also installed some of them. However, no authority has taken responsibility for the solar streetlights being dysfunctional.

Now officials of the KMC say that they would see to their regular maintenance if the NEA hands over all the solar streetlights to them.