Nepal Oil Corporation and Rise of Petro Products

Sunday, 29 January 2012 17:58

2 Comments

While everybody is talking on petro price hikes, I too thought why not to pin-point some of my views in this scenario.

For how long we will be into the hands of others to run our own country internal affairs. The recent hike in prices of petroleum products by NOC was obvious, as there is no other option available to control the losses encounter by the monopolist giant in Nepal. With the hike, the price of petrol has reached NPR 115 per litre while that of diesel and kerosene have reached NPR 85 per litre. The price of cooking gas has reached NPR 1500 per cylinder and NPR 105 per litre of aviation fuel. With even the further increase in prices, the state owned monopolist is bearing a loss of 861 million per month with even further subsidization in fuel prices.  And the per cylinder prices is still less around NPR 276 what NOC is paying to its suppliers and suffering losses in diesel prices too.

Nepalese consumers are still suffering the blackouts of load shedding and yet another new hike in fuel has raised the heartbeats of Nepalese consumers. I am sure it will continue to be in the future days too, if the government and general public are not aware of the consequences.

The Dual pricing for the industries too have deteriorated the performance of day to day running of the corporate giants and if this continue to happen it will lead to the cost increase in every industry and many jobs and revenues will be in line of redundancy and decrease.

The main causes behind of this rise in price are obviously the international prices for oil; further added up with crude oil price rise in international market, road maintenance tax and non-competitiveness of NOC and failure to respond and have clear bargaining power with its suppliers Indian Oil Corporation under Memorandum of Understanding.

Nepal yet don’t hold any refineries and solely depend on India for import of petroleum products. If we look from the broad point of view NOC buys at high cost from IOC and sale at cheaper rates and which has ultimately resulted in its operation with 861 million of loss per month. If we look at the market the rise in prices in fuel market is a function of international scenario, but to subsidized everything is a dangerous option as it may lead to long term debts to the suppliers of oil and ultimately a tax rise has to be borne by the general public. And today’s as we already know what are the Nepalese consumer spending on daily products for living too; and if this happens we will be at the last list of world poorest countries, and NOC will be into the state of liquidation and there will be disequilibrium of demand and supply of petro products.

The mere solution lies not in striking out every time by closing business houses when problems exist as we see today by student unions or other major political sister concerns, but to tackle the problem or provide a remedial solution to government agencies with peace protest. Though definitely such protest put pressures on authorities to revise its plan and look at the existing policies outlined at present.  As a remedy to the long term scenario government should try to revise its MOU with the fuel suppliers or seek alternate source of supply, besides IOC and liberalize its monopolistic nature by giving option to private entities to enter the petroleum market thus increasing a free competition and making the market to decide the prices of petroleum products. Sometimes it’s really disgusting to talk about Nepal scenarios, as its too much that why Nepal is not focusing on going along globalization or entering into public and just solely keeping the rights of big organisation to government itself and becoming the obstacle for free market development?

We need to be aware our self too and make sure that dealers don’t cheat the ultimate consumers in hands of high price and introduce artificial shortage and adulteration in oil products. Cartel induced collective pricing should be reduced and syndicates of dealers should be minimized.

Government should be out of pricing the petroleum products and either the market or an autonomous body should be there to fix the wholesale price and fix the retail price at certain limit and give options to free trade the private entities to reach that retail price with margin thus private owners can share their profit margin too. NOC needs a  total reform. Dealers doing adulteration should be strictly fined or closed down and a focus to quality control and inspection by the autonomous body should be in place.

And obviously a tax reduction on imports by the government will be a added point to lowering the price of the petro product. Anyway the road tax that government takes has not been seen fruitful by the general public and we see many holes like the piling of loans on NOC, in our highway roads which looks wonderful to ride along our bikes :))

On traditional view I wonder if we could return to our cycling age and reduce burden on NOC so that big bosses of NOC can have a share of big bonuses on their pockets. I hope the first may be the option but second should be taken to the right judgement. Let us build our own energy sources through hydro power which I dream at this moment and many analyst too dreamed about but never come to real but, even that can’t be happen when the fuel prices and ultimately  transport cost will be  in high peak and increased inflation in daily consumption products and input materials will lead the general public and corporate entities life at risk and ultimately such hydro projects which are in line stop its construction prior to their finishing dates and once again the bear will be in the hands of the government agencies and ultimately to consumers .

I will go green eventually and ride a bicycle and do a 'Chula Chauka' for living at least to avoid my part of share for NOC default.