Fuel price hike in India to hit Nepal hard

June 4th, 2008 - 4:21 pm ICT by IANS  

By Sudeshna Sarkar
Kathmandu, June 4 (IANS) India’s decision Wednesday to hike fuel prices will hit its northern neighbour hard, causing Nepal’s state-run sole oil importing agency a loss of billions of rupees per month and escalating an already grave fuel crisis in the country. Nepal Oil Corporation, which imports fuel from India’s Indian Oil Corporation, is currently smarting under a Nepali Rs.2.70 billion ($42 million) loss per month following a hike in global fuel prices in May.

In April-end, NOC’s losses stood at Rs.1.78 billion. To add to its woes, last month crude prices went up and the US dollar appreciated, pushing up its losses.

As of June 1, NOC was losing almost Rs.20 per litre of petrol, Rs.43 on diesel and Rs.379 per cylinder of cooking gas due to the government’s suicidal policy of continuing to subsidise fuel.

Now, with India having announced a hike in petrol, diesel and cooking gas by Rs.5, 3 and 50, respectively, the bankrupt NOC faces a collapse of its distribution system.

Last month, IOC cut supplies to Nepal by almost 50 percent, causing an acute crisis. It has hurt transport, the hotel industry and caused common people untold misery.

“I have been waiting in queue for five hours at a gas station,” said Dayanidhi Jha, a taxi driver in Kathmandu. “Due to the scarcity, now I can drive my cab only three days a week.”

The NOC’s dues to the IOC, local banks and other institutions runs into over Rs.20 billion.

Digambar Jha, managing director of NOC, says the government has to either pay for the subsidy or allow him to raise fuel prices.

The cash-strapped finance ministry a few years ago stopped doling out the subsidy, causing the NOC to run into severe trouble.

Last week, after fuel supplies from India began drying up due to non-payment of dues, the ministry was forced to allocate Rs.800 million so that NOC could pay some of its bills to IOC.

A price hike is virtually impossible right now, given Nepal’s fragile political situation. Earlier this year, the coalition government of Prime Minister Girija Prasad Koirala had tried to raise prices once with disastrous results.

The Maoists, a member of the alliance, distanced themselves from the hike and joined widespread public protests that forced the government to rollback prices.

Coming on the eve of a critical election, the move cost the prime minister dear, with his Nepali Congress party winning only 110 seats out of 575.

A fresh political crisis hovers over Nepal currently, with the Maoists having delivered an ultimatum to Koirala. The octogenarian leader has been asked to resign by Wednesday and pave the way for a government headed by them.

If he fails to meet the deadline, the former rebels have threatened to quit the government and start a new street struggle.

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