Laxman Kafle

With the steep price hike in petroleum products, people’s daily life is getting unbearable for it has multiple impacts on national economy. Inflation has soared up. Fare of public transportation and aviation services has increased unexpectedly. Price hike in LP gas has put extra financial strain on the ordinary folks.

Nepal Oil Corporation (NOC), the state-owned monopoly petroleum supplier, has attributed fuel price hike to the increasing price of dollar and crude oil in the international market.
Different organisations have hit the streets against the fuel price hike. In the past one year, petrol has become dearer by Rs. 29 per litre to Rs. 136 per litre. The price of diesel and kerosene stands at Rs. 119 per litre. Their price increased by Rs. 30 from Rs. 89 per litre. The price of a cylinder of cooking gas went up by Rs. 200 to Rs. 1,575.

The government has seemingly not taken steps to provide relief to the consumers by reducing taxes imposed on fuel considering this abnormal situation. Recently, the Indian government has reduced taxes on petrol and diesel to address the consumer’s concerns.
The excise duty on petrol has been reduced by IRs 5 per litre and on diesel by IRs 10 per litre.  The Indian states have also reduced local fuel taxes by as much as IRs 7 per litre.

According to the NOC, Rs. 57.73 per liter as tax has been imposed on petrol purchased at Rs. 83.79 from IOC. Similarly, Rs. 40.41 per litre is levied on diesel purchased at Rs. 82.21. About Rs 278.86 per cylinder is added to cooking gas. Besides, the expenses of corporation, transportation fare and profits of fuel selling companies are also included in their prices. The government is also charging Rs. 10 per litre on petrol, diesel and kerosene as infrastructure development tax.

NOC is still running into the loss of billions of rupees. "The corporation is in a state of disarray due to the price of crude oil and the dollar. If we fail to adjust the price, the corporation will collapse," NOC claimed. With the second wave of COVID-19, the price of crude oil has risen to about USD 84 a barrel. A barrel of crude oil was about US$ 38 a year ago. With rise in the fuel prices, the transportation fare has also gone up, which led to the price hike food and other commodities.

The government had imposed additional tax on fuel since May 2016 saying that it would build Budhigandaki hydropower project. Since then, about Rs. 78 billion has been collected. The government increased the charge on fuel to Rs. 10 per litre from existing Rs. 5 under the heading of infrastructure development tax from February 2020.

It hast adopted an auto pricing mechanism in petroleum products -- diesel, petrol and kerosene -- in a bid to check the ballooning losses since 2014. As per the system, the NOC should adjust fuel price every 15 days based on the new price list received from IOC. IOC sends price list to NOC fortnightly but the latter did not follow it strictly.