The Energy Research Centre of the Institute of Engineering organised a discussion on the implications of the recent changes in fuel prices in which experts warned of severe consequences on the economy.
Director of Nepal Lube Oil Ltd, Amrit Nakarmi presented a 20-year data series on prices of petroleum products in Nepal, arguing that the Nepal Oil Corporation (NOC) stood to earn a profit of Rs 520 million a year even if it sold kerosene at Rs 19 per litre (instead of the present rate of Rs 26). Nakarmi, a former general manager of the NOC, argued that petroleum prices were raised due to NOC's inability to take precautionary measures because international prices were already headed upwards in late February 1999. "The present crisis could have been prevented if the NOC had carefully studied the market and prepared long-term plans for domestic consumers accordingly," he says.
Nepal's annual per capita consumption of petroleum products is 35 kg, compared to the US's 3,170 kg, Canada's 2,835 kg, Japan's 2185 kg and India's 82 kg. In Nepal the sale of petroleum product has been increasing by 12.41 percent each year. But most of Nepal's energy is obtained from traditional sources-88 percent from firewood, nine percent from petroleum products, two percent from coal, and one percent from hydroelectricity. Nakarmi added that only the mechanisms of a free market could correct the inefficiencies of the NOC, and lead to more realistic prices.
At the same meeting, Deputy Director of NOC Rudra Bahadur Khadka clarified that the corporation cannot always fix prices based on the market situation only, adding that the government decision to subsidise five litres of kerosene per family per month would lead to annual losses to the tune of Rs 2.4 billion.