Price hike in fuel due to monopoly of NOC

KATHMANDU, March 15
Petrol-PumpConsumers have to suffer from price hike done without maintaining transparency in lack of clear policy provisions about determining price of petroleum products by the government. The problem is repeating every year due to the inability to end the monopoly of Nepal Oil Corporation (NOC) in supply of petroleum products.
Economists opine that price should not be raised without long-term policy provisions when the government has been providing loans/grants to the government-owned NOC. They state that the government must be clear about who to provide grant to even though one cannot sell fuel at a lower rate by buying it at a higher rate. “The consumers will have to face unimaginable price hike unless a long-term policy for transaction of petroleum is formulated, managerial capacity of NOC is improved, and a sustainable strategy about infrastructure is brought,” economist Madan Dahal states. “The current price hike must immediately be reviewed as there seems to be dual benefit,” he reasons. He feels that price hike by the government in its initial days is also unfair as the people had great expectations from the new government. He reasons that the government should immediately review the decision as rise in petroleum price affects education, health, communication, transportation and other sectors. He claims that there is little chance of availability of quality fuel and fall of price until the private sector is allowed to import petroleum products.
Another economist Bishwambher Pyakurel states that price hike has never been stopped though it always affects the lower income group in lack of proper policies by the government. “The current hike is very high. There is tendency to unnecessarily raise price in the market in the pretext of the rise in fuel price. The government must prepare to stop that,” he adds. He feels that the trend of always raising price citing monthly loss of billions while not paying attention to improve management of NOC, and control leakages and commission will be fatal. “We should allow the private sector to import and distribute fuel by making policy reforms,” he opines. “Foreign assistance has increased and capital expenditure has not been able to increase. There will not be development by spending 20-50 percent at the end of fiscal year. The price hike is unfair on consumers even though there has not been adequate capital expenditure,” he argues.
Speaking at a program organized by the Department of Commerce and Supply a day after announcement of rise in fuel price Chief Secretary Lila Mani Poudel stated that the decision was a compulsion. “The government did not have alternative to price hike. There is no meaning of protests and opposition,” he said.

The 13 student organizations and eight consumer organizations have announced protest programs including shut down of the Kathmandu Valley protesting the hike of fuel price. Spokesperson of the Nepal Students Union (NSU), affiliated to Nepali Congress (NC), UP Lamichhane revealed that the student leaders will submit memorandum letter to Prime Minster Sushil Koirlaa on Sunday.
Burden of Rs 4 per liter on consumers due to interest on loans
NOC has been charging the consumers Rs 4 per liter on petrol, diesel and kerosene, and Rs 56.80 on every cylinder of liquefied petroleum gas (LPG) to pay the interest on loans taken until now. NOC has been paying Rs 220 million a month in interest for the loans taken from the government, commercial banks, Employees Provident Fund (EPF), Citizen Investment Trust (CIT) and other institutions that have crossed Rs 32 billion.
NOC will still suffer a monthly loss of over Rs 1 billion even after this massive hike. It is projected to suffer a loss of Rs 1.05 billion in the month of March even after the latest hike. NOC procures petrol from the Indian Oil Corporation (IOC) at Rs 80.53 per liter, diesel at Rs 86.62, kerosene at Rs 84.73, and gas at Rs 1,794.70 per cylinder. It will now sell petrol at Rs 140, diesel and kerosene at Rs 109 each, and gas at Rs 1,470 after provisioning for customs duty and value-added tax (VAT), transportation cost, administration cost, leakages, interest on loans and dealer commission.
NOC still suffers a loss of Rs 5.24 in every liter of diesel and Rs 864 in per cylinder of gas even after the latest hike that will raise NOC’s income by Rs 640 million a month. NOC will make profit of Rs 223.80 million on petrol, Rs 28.50 million in kerosene, Rs 100 million in aviation fuel for domestic airline companies and Rs 283.90 million in aviation fuel for foreign airline companies every month after the price hike while it will make a loss of Rs 1.29 billion in gas and Rs 393.40 million in diesel.

Source : Karobar Daily