GoN takes a small step towards addressing Nepal’s petroleum woes

Petroleum line Photo courtesy: Anil Parajuli

Part of Nepal Economic Growth Agenda (NEGA) 2014, Samriddhi looked into three issues – acute energy crisis, strenuous industrial relations and inefficient spending of taxpayers’ money on public enterprises – to provide policy prescriptions for reform. Continuing with its study on Public Enterprises, it also recently released a paper on reforming Nepal’s petroleum sector which involved discussions on the state monopoly organization – Nepal Oil Corporation – and the current system that sustains the monopoly. The paper laid down a set of recommendations that if implemented, can take the burden off the taxpayers, smoothen petroleum product supply in the country and allow market forces to act freely in a market-and-private-sector friendly business environment. One of the recommendations in the paper was adopting automatic pricing mechanism in petroleum retailing.

In line with the recommendation, GoN recently implemented an auto pricing mechanism on diesel, petrol and kerosene in a move to end costly fuel subsidies. However, this is a small step in reforming the sector with multitude of problems and issues – the monopoly Nepal Oil Corporation (NOC) going on perennial losses, government having to intervene to keep NOC in business, and taxpayers having to avail loans to NOC while paying the principal and interest themselves. The Foundation’s research paper recommends all necessary home-works to be done in order to implement automatic pricing mechanism (which includes opening up the industry for private sector, designing target group benefit plan, etc.), which is still to be implemented by the government.