Indian envoy meets Nepal PM as fuel crisis erupts

May 7th, 2008 - 6:15 pm ICT by admin  

By Sudeshna Sarkar
Kathmandu, May 7 (IANS) India’s newly appointed ambassador to Nepal Rakesh Sood Wednesday met Prime Minister Girija Prasad Koirala as in addition to the deadlock among the parties over the formation of the new government a severe fuel crisis erupted in the Himalayan nation. There were serpentine queues at gas stations as Nepal’s state oil supplies agency, India’s Indian Oil Corporation (IOC), the sole supplier of petro-products to landlocked Nepal, slashed supplies by nearly 40 percent for non-payment of dues by Nepal’s state-run Nepal Oil Corporation.

Against the daily requirement of 36,000 kilo litre of petroleum, NOC has been receiving about 22,000 kilo litre.

The cut came after NOC could pay only Rs.640 million to the Indian entity instead of the nearly Rs.3.5 billion it needs to pay.

Nepal’s oil economics has been in shambles, thanks to the earlier governments’ policy of subsidising fuel, thereby inflicting losses of billions of rupees on the state treasury for decades.

Though Nepal finally took the plunge last year and hiked prices, it still failed to bring domestic prices at par with international market prices, causing NOC to still bleed.

This year, the Koirala government’s attempt to increase oil prices again triggered nationwide protests and forced the government to roll back prices.

The hike, coming on the eve of the crucial election last month, caused the government’s stock to plummet with most of the ministers, including commerce, industry and supplies minister Shyam Sundar Gupta, losing in the polls.

The Indian government bailed out the Koirala government, agreeing to ensure the smooth flow of oil supplies till the election.

However, now, nearly a month after the April 10 constituent assembly election, IOC is asking for its pound of flesh.

NOC received a fresh blow May 1, when world oil prices went up again.

Now, while it buys oil at NRs.55.49p per litre, after paying taxes and transportation cost, NOC says oil costs about NRs.77 per litre when it reaches Kathmandu. However, since Nepal’s government, engaged in the formation of a new government and the first session of the newly elected constituent assembly, has not revised oil prices, it is still forced to sell fuel at the old price of about NRs.67 per litre, causing a loss of nearly NRs. 8 per litre.

After the price revision May 1, NOC is going to face a staggering loss of Rs.1.67 per litre.

With prices to be revised again in mid-May, the losses could go up higher still.

Besides the fuel crisis, Koirala also discussed the formation of the new government with the Indian envoy as well as the upcoming crucial first meeting of the constituent assembly, that is expected to give the death blow to Nepal’s 239-year-old Shah dynasty.

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