Petro Price Hike: Half Cooked Decision
The government is lucky this year that the protests against the price hike in petroleum products have been so weak. Last year in August, when the government owned monopolist Nepal Oil Corporation (NOC) increased the wholesale prices of petroleum products, the street demonstrations in the capital were so violent that the government had to withdraw the decision after two days.
One reason for the weak protests this year may be the fact that the price hike was announced when most of the students (the violent protestors group) were outside the capital for the festival holidays. Still more plausible reason may be that the ordinary consumers were tired of the petroleum scarcity they faced over the last one year. The Corporation has promised that with the price increase the supply will now be regular.
But this promise is not likely to be fulfilled with the set of things stand today. Though the new prices are between 6 and 22 percent higher, the Corporation will still be incurring losses in all product categories except the petrol. However, the price rise in petrol this year is lower than what was proposed last year. Petrol per litre was proposed to be Rs. 80 last year, but this year the new price is only Rs. 73 per litre. The hike in LP gas price is higher this year than what was proposed last year. Still the corporation says it will be incurring loss also in LP gas.
It is obvious that the recent increase in price is not enough for the Corporation to recover its costs, forget the previous losses accumulated over the previous years due to failure to revise the selling prices according to the increase in the purchase price. Last year in August, the average cost price of the crude oil in the inventory of Indian Oil Corporation (IOC), the only supplier of petroleum to NOC, was US $ 75. Now it has zoomed up to US $ 80, according to a report published in Indian press only a week before the price hiking decision of NOC. By now, this must have gone up further as the crude oil price in the international market has been increasing steadily in the recent days crossing $ 98 per barrel as of November 07. This means the NOC will continue defaulting on payment to IOC. Therefore, another round of price increase is just round the corner. But the politics will prevent the government from doing so. Failure to revise the prices further up soon will repeat the same experience of shortage.
Of course, NOC as a government owned monopolist has various alternatives to across-the-board price hike. But these have been neither explored nor adopted by the government as they are complicated though they are much desirable to be adopted despite their own weaknesses. Failure to adopt such systems renders government’s arguments unacceptable for the people. For example, the government says the price hike was necessary also because the prices of petroleum and cooking gas in Nepal have to be brought at the same level as that prevailing across the border in India . But the consumers see that the LP gas is available in India at much cheaper prices than in Nepal . Hence, the consumer’s perception that the government here is not at all bothered to safeguard the consumer’s interests, is not unjustified.
