Editorial»
Fuel for thought
JUL 05 -
After a few days of severe shortage of petro products, the petrol pumps in the valley have resumed their regular supplies. But the reason behind yet another crippling shortage remains unclear. As Nepal Oil Corporation (NOC) has failed to come clean on the issue, various speculations are doing the rounds. Consumer groups believe that NOC deliberately created the shortage in order to ready people for another round of harsh price hikes. The only way of solving the perennial fuel crisis, in their view, is to stem the systemic rot in NOC rather than putting extra burden on consumers.
The official NOC version is that supplies have dwindled as it has failed to clear its dues worth around Rs. 40 billion to its Indian supplier. Apparently, the government had turned down NOC request for Rs. 1 billion earlier this month. At the heart of this problem is the issue of whether petroleum products should be treated as essential commodities and made available on subsidised rates.
Here, it is important to differentiate between affordable subsides and artificial suppression of prices. Successive governments have chosen to sink NOC deeper into debt rather than take the unpopular measure of increasing prices. Yet it is by no means certain that price adjustments alone will do the trick. Equally important is to control leakages. It is an open secret that many dealers obtain petroleum products through underhand deals or hoard them to create an artificial shortage. This is proven by the fact that even while the petrol pumps run out of fuel there is plenty available in the black market.
We believe that while it is hard to deny the importance of timely review to bring domestic prices in line with the international market prices, it would unfair to saddle consumers with extra costs without first plugging the gaps in the oil bureaucracy.
What is becoming increasingly clear though is that the current petroleum regime is deeply flawed, lack of clarity on its functioning perhaps being its biggest drawback. NOC reportedly receives a revised price list from its supplier on a fortnightly basis. This is the list on the basis of which prices are adjusted. But it is widely suspected that NOC adjusts prices in order to cover up for its losses owing to leakages, not according to market fluctuations. Thus far NOC has filed to remove this deep-rooted suspicion.
For a country whose export revenue in the first 10 months of the current fiscal year totaled a meager Rs. 45 billion, the fact that its oil bills now runs at Rs. 40 billion despite repeated adjustments is deeply troubling, and hints of something fishy. Unless NOC is more open and honest about its dealings, people will continue to cast doubt about its workings. The government, for its part, must stop with the dishonest policy of suppressing prices for political reasons but refusing to foot the resulting costs.
Posted on: 2010-07-06 08:11
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