Severe fuel crisis looms large

Severe fuel crisis looms large
ArthaExpress, 6-May-08

The country is likely to witness a severe crisis of petroleum products again after the cash-strapped Nepal Oil Corporation slashed distribution of petroleum products by nearly 50 per cent in the capital.

NOC supplies manager Mukunda Dhungel said the Corporation headquarters had directed its Thankot depot to distribute only 410 kl of petroleum products a day to the dealers from Sunday, while the demand stands at around 800 kl.

“We had to take the harsh decision as we don’t have the money to finance regular import with the price of fuel surging in the international market,” Dhungel said.

Shortly after the CA polls on April 10, the state-run oil monopoly had slashed the supply of diesel and kero-sene to dealers by nearly 25 per cent. “Supply would go down further in the days to come if no immediate intervention is made to regularise the import,” Dhungel said.

An NOC source said the Corporation plans to import only 75,000 kl of oil this month as compared to 83,000 kl it imported last month.

The supply will keep on decreasing unless the government immediately came to its rescue — inject more money to cover for the ever-growing losses due to subsidies or hike in international prices, the source said.

“Nepali consumers would face unprecedented crisis, something beyond their imagination, within the next few days if the government did not take a bold decision immediately,” cautioned Shiva Prasad Ghimire, chairman of the Nepal Petroleum Dealers’ Association.

Dealers added that the customers had yet panicked as black marketeers and customers had been hoarding fuel for the past few months in the face of crisis. “But they will inevitably feel the heat within the next few days when the stock even in the black market finishes,” Ghimire added.

The Corporation could release only INRs 640 million to the Indian Oil Corporation, the sole exporter, on May 2. Going by the prevailing prices in the international market, Nepal needs to pay around INRs 3.57 billion each month if it is to ensure smooth supply.

The flow of oil had considerably improved in the run-up to the April 10 election, as the IOC had agreed to maintain a steady supply for the crucial vote as requested by Nepal government.

“Now the import depends on our capacity to finance it,” Dhungel said. On the other hand, NOC complains, as per the revised price of oil forwarded by the IOC on May 2, it would now incur a whopping loss of Rs 1.67 billion per month.

NOC and dealers maintain that it is high time that the government indulged in groundwork to hike the price rather than bleeding the exchequer to make up for the losses due to heavy subsidi-es, poor management of the corporation and leakages.

But it is likely to take a few more weeks before serious steps were taken to review the prices since the incumbent government is not taking the initiative and the new government appears at least a month away, stakeholders said.