Nepali Times
Economic Sense
The oil yo-yo


The price of petroleum products in the United States yo-yos with every day of the Iraq war, affected by things as diverse as news stories, consumer confidence and commodity markets that shuffles things around on the bourses and the commodity markets. In contrast, here in Nepal the Beed has observed prices only go one way-up. And interestingly, because the government is the sole arbiter of that decision, it alone faces the consequences.

Other than the war, we now have two important things to protest: electricity tariffs and fuel. For one of the poorest countries in the world, we pay among the highest prices for our electricity, thanks to the NEA. The massive bungling between the NEA and Nepal Oil Corporation results in Nepali consumers paying the price-an unfair trade of less for more.

Of course the public bears the brunt of it, after all the government barely conceals attempts to transfer responsibility for its inefficiency onto the masses. Rather than allowing privately managed or owned businesses to set the price based on demand and supply, the government stubbornly holds onto prehistoric policies. In cases of such negligence, the Beed declares the government should be thrown to the lions, or worse still, left to an enraged Nepali mob.

The politicisation of oil has been hardwired into our South Asian minds. Over the years we have born witness to post price-hike activity south of the border. Buses were burnt in Calcutta after a five paisa increase but we Nepalis took a Rs 9 jump in the price of kerosene with a large dose of tired acceptance, broken by only a few spurts of street protests and slogan chanting.

The Beed has noted that political activists are at their most combustible when the price of petroleum products are raised. Governments have fallen on this issue alone so it is no surprise that political parties feel it is a legitimate ticket into the corridors of power.

Oil is a good populist tool to woo voters. Every single party promises stable prices in its manifesto. Politicians are ignorant enough to assume they can control something tied to our exchange rate with India that in turn sways with the Indian currency's dollar parity. Politicians also do not understand that they cannot control the prices of global crude oil that has more geo-political and socio-economic ramifications than any other commodity. Keeping that in mind, here's a radical perspective-we act myopically when we raise a hue and cry without trying to understand the rationale behind price hikes.

The only way for Nepalis to move away from lambasting the people at the top is to first understand that prices of commodities can rise (and fall) and this has as much to do with previous governments trying to shy away from raising prices as it does with the state of global affairs. Secondly, the government should allow the market to determine the prices of oil or electricity by ruling in favour of privately managed or owned companies. Last but not the least, leave the ramifications of price hikes to the nation's economists and planners instead of embroiling it in politics and speaking about a subject one does not know in open-air theatrics at Tundhikhel.

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(11 JAN 2013 - 17 JAN 2013)