Amid nationwide protests after steep price hike of major petroleum products, Nepal Oil Corporation (NOC) today said that it would not withdraw its decision, citing a heavy loss due to price disparity.
The state-run petroleum supply monopoly — that is blamed to be fleecing the poor and serving the rich by hiking prices of diesel, kerosene and LPG that are used by the middle-and-lower classes — hiked the prices by Rs 5.05 a litre, Rs 10 a litre and Rs 130-150 per cylinder respectively in diesel, kerosene and liquefied petroleum gas (LPG) yesterday evening.
"Though the decision was an unpleasant, it was obligatory to bail out NOC and to ensure smooth supply of petroleum products," NOC managing director Digamber Jha said, adding that the price hike of major petroleum products is aimed at the ongoing efforts to aid repayment of Indian Oil Corporation (IOC) dues and end the festering fuel shortage in the country.
However, Dr Raghab Dhoj Pant, a prominent economist warned that such a price hike would have a severe negative impact on standard of living of common people. "It will cause a spiral impact on inflation resulting in market prices of goods and services shooting up," he said. "Poorest of the poor will be hit hard. Income has not improved but market inflation is going up every one or two months," Dr Pant said, adding that such trend will increase poverty in long-term.
CPN-UML lawmaker and economist Dr Dilli Raj Khanal termed the price hike as government's move to aggravate the ongoing peace process by creating space for regressive elements. He also criticized the government, particularly NOC, for disobeying a parliamentary committee's directives.
"NOC has deliberately defied the Finance Committee's directives of adequate consultation with the concerned stakeholders, public awareness before any price hike, transparency on stock and accounts, structural and administrative reforms," Dr Khanal said, adding that the government even dared to consult with other ruling parties for this price hike.
"Under the pricing of IOC on January 16, NOC has been incurring Rs 604.6 million loss a month on diesel, kerosene and LPG," Jha said, claiming that the NOC would still be incurring a loss of Rs 230.28 per cylinder in cooking gas and Rs 6.08 a litre in diesel despite the price hike, making a total monthly loss to the tune of Rs 230 million.
He maintained that NOC has been incurring a minimal loss of Rs 0.54 in petrol but makes a profit of Rs 2.55 per litre in kerosene, which is the cooking fuel for many of the lower-middle and lower classes.
NOC has but said that it would continue to provide subsidy for students in cooking gas and people from lower income bracket in kerosene on monthly basis. It said that it would issue subsidy card with help of local administration for families and college or universities for the students.
"Each family will get Rs 50 subsidy in kerosene monthly and Rs 100 per cylinder in cooking gas for the students," Jha said. But the procedure to get subsidy is too lengthy and lacks transparency.
According to him, NOC's total liability including outstanding dues to the IOC stands at Rs 10.22 billion, currently. Of the amount, NOC has yet to pay Rs 2.05 billion to its sole supplier IOC, Rs 4.83 billion to various financial institutions and borrowings worth Rs 3 billion from the government.