Petroleum Price Hike: Why do consumers have to pay Rs 142 for petrol bought by Nepal Oil Corporation at Rs 84?

The price of petroleum products in Nepal has risen for the second time in less than two weeks to an all-time high.

But Nepal Oil Corporation will be at a loss of Rs 2.23 billion in another 15 days, said Binit Mani Upadhyaya, spokesperson of the corporation.

"Even after the price adjustment on Tuesday night, we have a loss of Rs 13.23 on petrol and Rs 11.13 on diesel," said spokesperson Upadhyay.

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"The question is how long we will keep the price of such items imported from outside the country."

Officials of the corporation have been saying that they are in debt so it will be difficult to make the supply system easier in the future.

But consumer rights activists say that every time prices rise in the international market, they add to the burden of the people without looking at the management side.

The Reason

The corporation has been increasing the prices of diesel, petrol, and kerosene under the automatic price system.

However, as the corporation is already selling oil at a lower price than the cost, it has been said that the problem persists even after implementing the system by 'adjusting only a small part'.

On top of that, such a system does not apply to cooking gas and its losses are the highest.

While the corporation has a loss of around Rs 560 per cylinder, its total loss can reach around Rs 1 billion in 15 days, said spokesperson Upadhyaya.

At the current price of kerosene and aviation fuel, the corporation has been earning around Rs 210 million in 15 days.

The corporation has stated that it has received a new price list from the seller Indian Oil Corporation after the price of petroleum products continued to rise in the international market and now reaches Dollar 91 per barrel.

Spokesperson Upadhyay says, "As payments are made in US dollars, the effect of rising dollar prices has now reached consumers."

How Does The Price Go Up?

Looking at petrol as an example, the price situation of petroleum products in Nepal looks like this:

According to the international market, the purchase price of petrol in Raxaul / Barauni, India, which is Rs 84.32 on Tuesday, is Rs 142.

To which Rs. 58.48 total government revenue and value-added tax are added. These include customs duty, road maintenance fee, pollution fee, price stabilization fund fee, and physical infrastructure development fee.

The corporation deposits 1 percent of all its sales in the price stabilization fund, saying that the consumers will be hit hard by the automated system.

An additional Rs. 1.77 is added for the corporation's administrative and sales expenses including insurance and its technical losses. The transportation cost from Raxaul to Kathmandu is said to be Rs 5.11.

"There is no subsidy on petroleum products. But even so, we are selling petrol to the people at a discount of Rs 13.23," says Upadhyay.

According to the officials of the corporation, there is a challenge of the black market in the Terai as it is about 32 rupees cheaper than in India.

At present, the price of diesel and kerosene is Rs 125 per liter.

Ways To Reduce

Consumer rights activists say the government's flexibility in taxes on petroleum products could benefit consumers.

Consumer rights activist Jyoti Bania says, "Consumers are being harmed without thinking of other options. The policy of running the country from petroleum tax has been hurting consumers."

He also accused the corporation of failing to manage the savings of the price stabilization fund set up for the embarrassing situation.

The corporation had recently remitted Rs 1.80 billion to the fund, which has saved about Rs 12 billion.

However, experts say that the price of petroleum products is still rising and that customs and infrastructure taxes should be reduced in preparation for a worsening situation.

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