Pushed by India, Nepal orders fuel price review

June 9th, 2008 - 7:46 pm ICT by IANS  

By Sudeshna Sarkar
Kathmandu, June 9 (IANS) The unrest triggered in India by the recent hike in fuel prices, following a spurt in global prices, is now likely to spill over into neighbouring Nepal with the Himalayan nation’s government Monday ordering a fuel price review. Nepal’s council of ministers approved the long-standing demand of the state-run Nepal Oil Corporation (NOC) to allow it to increase fuel prices in a bid to resolve the spiralling oil crisis and the funds crunch gripping it.

The steering committee of the NOC began discussing means to avert the crisis, which is certain to result in a hike in fuel prices in Nepal as well.

Last week, immediately after India decided to increase oil prices, the NOC boosted aviation fuel prices by 12 percent, causing domestic air fares to go up and public protests in its remote Karnali region, where most trade is conducted by air due to bad roads.

Maoist minister for Information and Communications Krishna Bahadur Mahara tried to downplay the tension, saying that the government was assessing means other than a flat price rise to address the crisis.

Mahara said the state would try to reduce some of the oil taxes and plug loopholes in transportation costs so that the consumer doesn’t have to bear the brunt of the hike.

Shyam Sundar Gupta, minister for commerce, industry and supplies, said that the government would end the monopoly enjoyed by the NOC and allow private operators to import oil.

NOC has been incurring a loss of millions of rupees every month due to the long-standing policy of the government to buy oil from India at world market rates and sell it in Nepal at a subsidy.

As the government struggled with political instability and a wavering economy due to the Maoist insurgency, the finance ministry slashed its subsidy to the NOC, causing it to be neck-deep in debt to financial institution and banks.

With the recent hike in India’s fuel prices, Nepal has no other option but either to increase oil prices to keep parity or allow the NOC to go bankrupt.

The Indian Oil Corporation has reduced supplies to Nepal by almost 80 percent following the latter’s inability to pay its bills, causing a severe oil crisis.

Petroleum dealers have warned they would go on strike from June 15 unless the government ensures adequate supplies as well as security for tankers.

Earlier this year, the government had tried to increase oil prices but met with disastrous results. The hike, coming on the eve of the April election, caused strong public protests that forced the government to rollback prices.

Prime Minister Girija Prasad Koirala paid dearly for the unpopular move with his ruling Nepali Congress party securing only 110 out of the 575 contested seats.

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