Fuel still expensive despite falling international prices

The Nepal Oil Corporation continues to charge high prices even when the cost of oil in the international market has fallen, analysts say.

Inflation-hit consumers complain of being hit with higher prices every time rates on the international market rise, but the state oil monopoly doesn’t react with the same speed when it’s the other way around. .

Nepal Oil Corporation says it cannot cut prices due to massive losses, but insiders point out it is making a profit for the first time in 20 months.

Expensive fuel has added to the pain of Nepalese struggling with high inflation. The public is increasingly furious that even though world prices have fallen over the past two months, this has not been reflected in the domestic market.

The government company said prices may not fall due to its negative track record, adding that if there is pressure to reduce prices, the supply system could be disrupted.

Nepal Oil Corporation revealed that it is currently making a monthly profit of 790.87 million rupees, thanks to a drop in crude prices in August and September.

According to international media, the average price of Brent crude oil fell to $86.27 a barrel in September before climbing to $91.63 in mid-October.

Birendra Goit, director of the Nepal Oil Corporation, said the company was back in the black after 20 months. “Prices have been declining over the past two months, but the mid-October period looks uncertain as the price of rough has started to rise.”

The International Monetary Fund (IMF) said in its latest report that as the cost of living continues to rise, policymakers around the world will need to protect the most vulnerable members of society from the impact of the rise. prices.

The poorest households often spend relatively more than others on food, heating and fuel, categories that have experienced particularly steep price increases. Moreover, households cannot easily adjust their consumption to minimize spending on these products; everyone needs to eat and heat, and transportation (the price of which is often determined largely by fuel costs) is often essential to getting to work, the report says.

In countries with well-developed social safety nets, targeted cash transfers to those particularly exposed to rising energy and food prices (such as children and the elderly) and existing automatic stabilizers (e.g. example, unemployment insurance) are the best means of limiting the impact on those who bear it the least.

However, measures to limit the inflationary impact should offset any increase in new spending. In countries without well-developed safety nets, governments should seek to expand any programs already active, according to the IMF report.

With Nepal’s caretaker government unable to make crucial decisions ahead of the November 20 elections, the Nepal Oil Corporation is adamant about not cutting fuel prices because of its bloated debt. He says his unpaid dues currently stand at more than 43 billion rupees.

The government company owes Rs33.60 billion to its sole supplier Indian Oil Corporation. He borrowed 7 billion rupees from the government and 3 billion rupees from Rastriya Banijya Bank against his property as collateral to pay for fuel imports.

“The global oil market is always unpredictable. We cannot immediately reduce fuel prices,” Goit said.

“We are getting letters from Indian Oil Corporation to settle our arrears. If we don’t pay them, the fuel supply could be interrupted. So we don’t have a plan to reduce prices.

According to the Nepal Oil Corporation, its estimated fortnightly profit on gasoline sales is Rs 360.04 million. The company made a fortnightly profit of Rs 110.15 million and Rs 470.70 million on aviation fuel sold to domestic and international airlines respectively.

The company suffers a loss of Rs180.51 on the sale of diesel fortnightly. The fortnightly loss in the LPG sector is Rs 370.60 million.

Diesel accounts for a significant portion of its sales. Goit says diesel accounts for 60% of total fuel consumption. “So it doesn’t make much sense to profit from gasoline and aviation fuel. Even a Re1 profit on diesel makes a big difference.

With rising oil prices, as shown in the revised price list sent out by Indian Oil Corporation on Sunday, the company is taking a loss of Rs 6.34 on every liter of diesel sold.

“We are in a difficult situation to manage supply as the price of crude oil has risen again in the international market. On top of that, a stronger US dollar has added to the burden,” the company said in a statement. release published on Sunday.

“As the price of diesel is high, the company could suffer a loss again,” Goit said.

Nepal Oil subsidizes petroleum products. He makes a big profit from the sale of aviation fuel and uses it to subsidize diesel.

“If the company lowers the price of gasoline or aviation fuel, it will have to raise the price of diesel and LPG,” Goit said. “Rising diesel prices will obviously impact everything from the cost of food to clothing.”

The price of petrol has inflated by 28.17% to 181 rupees per liter over the past year, while diesel and kerosene prices have risen by 36.51% to 178 rupees per litre. The price of LPG or cooking gas increased by 19.44% to Rs 1,800 per cylinder over the same period.

Indian Oil Corporation reviews the export prices of gasoline, diesel and kerosene fortnightly, and other products such as aviation fuel and cooking gas monthly.

The last time Nepal Oil cut prices for petroleum products was on June 25.

Petrol price reduced from Rs20 per liter to Rs179; and diesel and kerosene prices were reduced from Rs29 per liter each to Rs163.

Again on July 4, Nepal Oil raised the price of petrol from Rs2 per liter to Rs181 and diesel and kerosene from Rs9 to Rs172 per litre.

Previously, at least two parliamentary committees had ordered the government to reduce various taxes imposed on petroleum products, but it is unclear which taxes were to be reduced.

On June 2, Nepal Oil lowered petrol prices by 10 rupees per litre. On both occasions, the government made no tax cuts.

Fuel imports soared 34 percent year-on-year in the first two months of the current fiscal year ending in mid-September, according to the Customs Department.

Nepal imported fuel worth 50.88 billion rupees in the first two months of the fiscal year, compared to imports worth 37.95 billion rupees in the same period of the year. ‘Previous exercice.