Following the decline in the international price of oil by more than half from its all-time high, the Nepal Oil Corporation (NOC) decreased the prices of petrol, diesel and aviation fuel recently. As a result, the airlines have reduced airfares but the owners of commercial vehicles have been trying to avoid or at least delay doing their part. This reluctance is grossly unfair. After every significant increase in the price of fuel, they hardly waited for the obligatory

government approval to hike the fares. And they often did so in a way that suggested that they thought the cost of fuel was the only component of the total cost of operating commercial

vehicles. It is a universal commercial principle that with the rise in the cost of providing a service, the selling price goes up too. But this also demands that with a fall in cost, the selling price should go down too in a market economy.

In Nepal, this law of business competition has not worked very effectively, mainly because of the operation of open or not-so-open cartels. This has given the public the impression that, in Nepal generally, prices only tend to go up, regardless of the behaviour of cost. On Monday, government officials and transporters failed to reach an agreement on fare reduction, because the transport owners laid down the condition that the government first implement past agreements. One need not go against implementation of their accords to say that this condition is unjustifiable, because there is no point in making the linkage; the other issues need to be separately pursued. The entrepreneurs are also wrong in arguing that ‘a scientific fare fixation system’ needs to be developed to avoid changing the fares along with the changes in the price of oil. But this is not possible unless the government decides to subsidise oil, or in a period of falling price, to sell the commodity to the transporters at the existing prices, and to the others at reduced rates.

The fares must be revised without further delay. It is another matter that they may explore better ways of fixing the fares afterwards. The transport operators should also bear in mind that unlike the providers of other many kinds of services, they have often enjoyed a certain degree of captive market, and they have often cared little about protecting the interests of the travelling public. There is not much freedom in switching routes, and where one kind of vehicle plies, it is hard for another kind of vehicle to enter the market because of the protests of the existing operators. And despite efforts by businessmen, the government and the others, the efforts to break the syndicates that still exist along a number of routes have not been entirely successful. All this has restricted competition, often making consumers pay much more than the fair prices. Last time, even the fares of the battery-operated tempos were raised the same way as petroleum-operated vehicles. There has also been a tendency among the operators to make their fares uniform, in order to maximise their profits and deny the consumers the fruits of competition. The government would need to inject more competition into the transport routes. It may also be worthwhile establishing a better basis for fixing fares afresh.