Supreme Court issues show-cause on tax rise on electric vehicles

The Supreme Court today issued a show-cause order against the government decision to raise the taxes on electric vehicles (EVs).
The government – through the budget for the current fiscal year 2020-21 – has increased the customs duty from 10 per cent to 80 per cent and excise duty from five per cent to 80 per cent despite its tall claims of promoting the clean energy and substitute the import of petroleum products that is the largest import of the country.
Due to the hike in the customs and excise duty, traders have stopped import of electric vehicles lately. A single bench of the Supreme Court Justice Ananda Mohan Bhattarai has issued a show-cause order showing concern on the tax hike in electric vehicles as a serious matter. Claiming that the rise in tax has made electric vehicles unaffordable to the general people, Jury Nepal – a non-government organisation – has filed a writ petition against the government move.
The provision – to raise tax on electric vehicles by discouraging the use of environment-friendly automobiles – has been not only against the government’s own policy to substitute the fossil-fuel vehicle by 2030, and also Prime Minister’s pledge to promote the clean energy through the use of electric vehicles.
The government move has also been criticised on the ground that it will hit the aspiration of making the country self-reliant in energy supply and reduce the ballooning trade deficit by substituting the import of fossil fuel.
However, finance minister Dr Yuba Raj Khatiwada has been defending his move – to increase taxes on electric vehicle against the government policy – claiming that the government is compelled to revoke the scheme to check misuse of the government package due to surge in imports of luxury electric cars.

Fossil fuel still accounts for one fifth of total import bill

Despite smooth electricity supply, country’s dependency on fossil fuel has not decreased. “The share of import bills of petroleum products still accounts for 20 per cent of the total import bill worth Rs 207.41 billion,” according to the central bank.
According to Current Macroeconomic Situation of three months, Nepal paid Rs 41.36 billion – during mid July-mid October of the current fiscal year – for petroleum import, Rs 8.22 billion less, from Rs 49.58 billion in the same period of the last fiscal year 2018-19.
But the import bill of petroleum products drop is not due to less consumption rather due to falling price in the international market that determines the price in the domestic market. Nepal spent 16.6 per cent less in import of petroleum products – in the first three months of the current fiscal year 2019-20 compared to the same period last fiscal year – though the import value has increased by 7 per cent.
Though, the import bill – in monetary value – has dropped, the consumption volume has gone up, according to the data of Nepal Oil Corporation (NOC) that revealed that the import volume of fuel including petrol, diesel, kerosene, air turbine fuel and cooking gas increased to 789,144 kiloliters (kl) from 736,105 kl in the same period of the last fiscal year.
The import value is down also due to the variation of the exchange rate of the Nepali currency against the US dollar. The price of the petroleum products depends on the price in the international market.
According to the NOC, price of crude oil in the international market had swelled to $86 per barrel in October from $65 per barrel last July. However, the petroleum prices in the same period this year dropped to around $67 per barrel.
Though, the monetary value of import is less, the volume – especially of diesel – has not gone down. Demand for diesel is rising in the recent days due to construction-related works in hydropower projects unlike the demand from industrial sectors earlier, according to state oil monopoly. “In the first quarter, import of petrol increased to 183,026 kl from 160,846 kl, diesel increased to 412,563 kl from 393,601 kl while import of cooking gas also surged to 127,628 tonnes from 116,546 tonnes in the same period of the last fiscal year,” the NOC data revealed.

Load shedding hours to increase to daily 12 hours from Sunday

Nepal Electricity Authority (NEA) has increased the power cut hours effective from Sunday.

A consumer will have to face 12 hr power cut a day Sunday onwards.
The extra hour of mandatory power cut imposed by the authority is going to be increased four hours weekly to 84 hours from the current 80 hours further worsening the industrial climate.

Increased demand versus supply also due to reduction of water level in the rivers with the onset of winter has been key reasons behind the new schedule.

Rise in power cut hours will not only increase import of diesel and petrol but also fuel inflation due to increased operational cost of the industries.

Petroleum product is the largest import of the country that imports around 25 per cent fuel out of its total imports.

The increased cost will also make domestic products uncompetitive.

According to the central bank recent data, the industries have been operating at only 57 of their capacity due to lack of electricity and increasing dependency of he imported fossil fuel

Despite having huge economically viable hydropower potential, the current production stands at 1200MW only making some 700MW power deficit.