Consumer at crossroads over pricing war

In the Valley-Petrol - Diesel - Kerosene
NOC price - Rs 85.50 - Rs 60.50 - Rs 60.50
NPDA price - Rs 85.70 - Rs 60.75 - Rs 60.75
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The state oil monopoly Nepal Oil Corporation (NOC) has lived up to its promise, slashing the retail prices of petrol, diesel and kerosene, which will be applicable from this midnight.
Contrary to the global freefall of oil prices, the cuts are a paltry Rs 5 for each item. Currently, international price of crude is hovering around $50 per barrel (159 litres). It had risen to an unprecedented high of $147 per barrel about three months ago.
Ideally, the prices should have been readjusted on the same day NOC received the new price list from its sole supplier of petroleum products, Indian Oil Corporation (IOC). The delay has had a cascading effect in the Valley, which had stopped lifting petrol over the last couple of days, causing an artificial scarcity of sorts.
However, the reduction is couched in a shrewd pricing mechanism. Though in the face of it, the prices have been reduced by Rs 5, the Valley denizens will end up paying more due to Nepal Petroleum Dealers' Association (NPDA) and pollution controlling charge. The negligible alteration - Re 0.50 per litre more for petrol and diesel - in mark-up prices is attributed to 'pollution controlling charge'.
Consequently, petrol and diesel will be available for Rs 85.50 and Rs 60.50 per litre, respectively in the Valley, according to the NOC that has fixed revised price of kerosene at Rs 60.50 per litre, which is on a par with diesel. The cost of ever-scarce cooking gas (LPG) remains unchanged.
But, despite NOC's caveat, the Nepal Petroleum Dealers' Association (NPDA) is busy chalking out its own pricing mechanism.
"A consumer has to pay Rs 85.70 for per litre petrol, Rs 60.75 per litre diesel and Rs 60.75 for per litre kerosene in the Valley," according to NPDA.
Digamber Jha, managing director, NOC, strictly said that NOC fixes retail prices of petroleum products. "NOC will stop supply," he said adding that "if necessary NOC will also suspend the licence of those not following NOC's price list. But entreaties are likely to fall on deaf ears.
The price of Air Turbine Fuel (ATF) has also been reduced by $100 to $1,200 per kilolitre for international flights. Local aviation companies have to cough up Rs 95 per litre, a reduction of Rs 5. Incidentally, bowing to global cues, NOC was compelled to slash prices for the third time in as many months.
Notwithstanding the downward revision, NOC is raking in a tidy monthly profit of Rs 500 million. "But the present profit cannot make up for the cumulative loss that stands around Rs 15 billion. At this rate, NOC will be able to pay its outstanding loan to various financial institutions within next three years," said Purushottam Ojha, secretary at the ministry of commerce and supplies.
On the otherhand, NPDA authorities insisted that NOC price would adversely affect their business prospects within the Valley. They argued that the distance ensured a price difference of Rs 2 in each litre of fuel between the Valley and Hetauda. "Cumulatively, it adds up to an astounding difference of Rs 24,000 for a single tanker," they said.
A logic that may not cut ice with NOC. They, it seems, at loggerheads again and the consumers will again be at crossroads.