SANGAM PRASAIN
KATHMANDU, APR 18 -
With the government reluctant to adjust oil prices in line with the international market and cash-strapped Nepal Oil Corporation (NOC) struggling to ensure regular supplies, the high-level Petroleum Sector Reform Taskforce is currently discussing setting up an independent body to fix prices.
It will play an advisory role rather than a regulatory one, according to a member of the taskforce. This body will be independent in nature and will recommend the appropriate price adjustment to NOC in line with world market prices. According to task force member Hari Roka, the idea of an independent body is being mulled to insulate fuel pricing from political interference. “Despite being an autonomous body, the NOC board has not been able to carry out fuel price adjustment effectively due to political interference,” said Roka.
The body will consist of independent experts who will sit down twice a month to review fuel prices. “We are currently discussing this mechanism that would make the pricing policy scientific,” said Roka. “We’ve also asked for suggestions from NOC.”
Past studies on NOC had also strongly suggested automatic adjustment of fuel prices in line with international trends. However, successive governments have refused to adopt such a mechanism.
Till now, it is the NOC board that takes the decision on fuel price adjustment. However, it hasn’t been effective as fuel price adjustment has become a political decision of late with the highest political actors calling the shots. Fearing a backlash, the government hasn’t allowed NOC to hike fuel prices when Indian Oil Corporation increases the price.
The taskforce, which was formed on Jan. 23, is likely to finalise its preliminary report by next week and urge the government to adopt an administered price mechanism. “The government still fixes fuel prices, and the board appears are either powerless or disinterested in doing anything about it,” said Hari Roka.
Instead, the government has been bailing out perennially hard-up NOC by providing loans. In the first nine months of the current fiscal year, the government has already provided about Rs 4 billion to NOC as petroleum import finance.
Although the government has allowed NOC to hike the price of petrol and aviation fuel recently, NOC officials said it doesn’t help to reduce its losses. “Diesel accounts for around 60 percent of the total consumption of petroleum products in the country,” said a senior NOC official. “And the government hasn’t allowed us to hike the price of diesel.”
NOC said it was incurring a loss of Rs 23.26 per litre of diesel. Out of the total estimated loss of Rs 1.96 billion in April, the loss on diesel amounted to Rs 1.58 billion, according to NOC.
