Slippery like oil

There has been a public debate — particularly since the government jacked up the prices of petroleum products citing a steady rise in the international price of crude oil, which indeed hit US$93 per barrel the other day — about alleged corruption and inefficiency in oil procurement, distribution and their management. The government and NOC have come under fire on the grounds that they have not taken concrete steps to check corruption, leakages and inefficiencies and that they are taking much more than the cost price from the consumers. Therefore, it becomes the duty of NOC to make public full cost details of each petroleum product it distributes so that it may contribute to transparency and make the debate more informed. It would also help explain more fully the position of NOC and the government, making it easier for the public to know whether they are charging fair prices. Such a step is necessary to facilitate good governance.

A newspaper in a front-page banner story yesterday challenged the government’s claim by reporting with figures that NOC is charging the consumers much more than the cost price for petroleum products. One of the chief charges is the high rate of tax on oil. The other costs include transportation and overheads. For instance, these three kinds of cost are reported to work out to Rs.33.37 for petrol, which has now been priced at Rs.73.50 per litre in the Kathmandu Valley. As Nepal depends solely on imports for its petroleum needs, its annual oil bills are quite heavy, nearing one-third of the value of its total imports. On the other hand, foreign loans and grants finance the capital expenditure of the government about fully, and the government is finding it not so easy even to meet its recurrent expenditure. In the light of this financial crunch, nobody in his sober mind would advocate a significant amount of subsidy in petroleum products. But very well placed is the public concern that all possible measures should be taken to reduce the avoidable costs of oil.

Lok Krishna Bhattarai, a CPN-UML functionary appointed as NOC chairman during his party’s

nine-month-long minority government in the mid-1990s, had been relieved of his post by his own

party’s government for speaking in public that NOC had to give a hefty commission to the then queen.

He has stuck to his guns since. The interim

government is expected to convince the people of its bona fides to win their support for unpleasant price hikes in essential commodities like oil. Public suspicion needs to be addressed as to whether the contracted prices for the purchase of petroleum products are fair, whether transport costs are within reasonable limits, whether the taxes on oil are just, and whether the overhead costs are a necessary minimum. The government and NOC have been on the defensive, and their best defence would be to come up with true and justifiable figures. Besides, the present ownership and organisational structures for oil distribution need to be reviewed. And the tendency of the cooking gas dealers to form a cartel to extract as wide a margin as possible at consumers’ cost should be seriously discouraged.