News Summary
Prepared following editorial review.
- The ongoing military tensions between Israel, the US, and Iran are disrupting international petroleum supplies, raising concerns about a deepening fuel crisis in Nepal.
- Nepal’s LPG storage capacity only covers about one week’s supply, with petroleum products primarily imported via pipeline and tankers.
- The Nepal Oil Corporation demands tax relief and price adjustments from the government to reduce losses, while discussions continue regarding the potential implementation of an odd-even vehicle system.
March 23, Kathmandu – There is no immediate sign that the military conflict between Israel, the United States, and Iran will end soon. As the nature of the war evolves, both sides have started targeting non-military areas beyond military centers, notably impacting petroleum extraction sites and refineries.
This prolonged conflict has caused disruptions in the global supply chain of petroleum products and gas, projecting a potentially severe fuel crisis for Nepal in the coming days.
Nepal consumes around 45,000 to 46,000 tons of LPG monthly. However, due to inadequate storage, the existing stock in the Nepal Oil Corporation lasts only about one week.
Similarly, the corporation has storage capacity for only 10 days of petrol, 12 to 13 days of diesel, and 15 days of aviation fuel.
Currently, LPG is transported via bullet trucks, while most petroleum products are imported through the Motihari-Amlekhgunj pipeline.
The Ministry of Industry, Commerce and Supplies is closely monitoring the supply issues caused by rising tensions in West Asia and has stated there is no immediate cause for panic in the market.
Netra Prasad Suvedi, the ministry’s spokesperson and joint secretary, explained that while fuel supply is not fully regular, it continues via pipeline, and there is no widespread crisis. The government is currently adopting a “wait and watch” strategy.
He further noted that Indian authorities have imposed some controls on fuel transport via tankers, which has mildly affected supply outside the pipeline.
“Fuel supply cannot be claimed as fully regular. Adequate fuel is not provided for transport through alternative modes beyond the pipeline. India has urged to avoid haste. The situation will depend on whether the Middle East conflict continues or ends,” Suvedi said.
In a previous meeting, the Oil Corporation informed that Indian Oil Corporation (IOC) has a three-month stock of crude oil. The issue appears to be with tanker supplies rather than the pipeline, according to Suvedi.
“Sufficient fuel has not been allotted for other transport means. Additionally, controlled supply in India’s distribution system has caused some impact,” he added.
The Nepal Oil Corporation is incurring significant losses due to rising international market prices. The prices in Nepal are set twice a month based on the IOC’s price list.
The latest price list from India showed a rise of 54 rupees per liter for diesel and 31 rupees for petrol. However, the corporation passed on only a 15-rupee increase for petrol and 10-rupee for diesel to consumers.
Following this, petrol prices rose from 157 to 172 rupees per liter, and diesel from 142 to 152 rupees. Despite a deficit of 216 rupees per LPG cylinder used for cooking, the corporation has not increased its price.
Manoj Thakur, corporation spokesperson, stated that despite comparatively small price hikes, the corporation faced a loss of about 393 crore rupees over the past 15 days.
“Historically, fuel prices were not raised during festivals like Dashain, Tihar, Chhath, and even recently during elections to lessen the burden on the public,” he explained.
Thakur added, “Before festivals and elections, losses were about 10 crore rupees, then 48 crore in two weeks, but now after a single price hike, losses have reached roughly 400 crore rupees within 15 days.”
The ongoing conflict in the Middle East and impacts on refineries have caused prices of refined petroleum products to more than double compared to crude oil prices. Thakur anticipates the losses to increase with upcoming price lists.
Although the Oil Corporation continues regular payments to IOC, the corporation’s cash reserves of around 19.5 billion rupees could be depleted within one and a half to two months if the situation persists.
“If payments to IOC are delayed, India may restrict oil supplies, potentially impacting the market,” the spokesperson warned.
To avert the crisis, the corporation is pursuing a three-pronged strategy. For immediate relief, funds are withdrawn from the Price Stabilization Fund to pay the IOC. However, these funds will last only about one and a half months.
Recognizing the upcoming depletion of the fund, the corporation has requested a backup plan from the ministry regarding when and how to source funds for future oil purchases.
Thakur clarified that the corporation cannot absorb losses alone without profit-sharing.
He stated, “The government should provide tax relief on fuel, the corporation must reduce expenses to bear part of the losses, and consumers should accept some price adjustment.”
“Only through collaboration among these three stakeholders can the burden be fairly balanced, enabling the corporation to manage the crisis.”
The greater the fuel consumption in the market, the larger the corporation’s losses. Due to instability and rising prices in the international energy market, countries like Sri Lanka have taken initiatives to reduce fuel consumption.
Options such as implementing an odd-even system for vehicles to cut fuel use are under discussion in Nepal, but no decision has yet been made, according to the ministry.
Spokesperson Suvedi confirmed ongoing discussions between the Nepal government and the Oil Corporation on measures to reduce the fuel crisis.
Suvedi said, “Discussions have included focusing on domestic energy sources, introducing odd-even vehicle restrictions, and promoting induction stoves, but no decisions have been finalized.”
Currently, there are no long queues for fuel in the market, so the government prefers to monitor international developments before making necessary decisions.
“Though discussions continue, the situation does not yet warrant a final decision. People are a bit anxious, hence rumors have spread,” Suvedi clarified.
While there have been some minor disruptions in transporting food grains and other goods, business representatives state no serious problems have occurred.
In response to energy conservation, the Sri Lankan government has switched to a four-day workweek and replaced weekly public holidays, while implementing strict rationing of vehicles under a national fuel pass system.
Similarly, Asian countries including Pakistan, the Philippines, Thailand, South Korea, and China have adopted various measures to cope with the energy crisis.
Senior stakeholders in Nepal emphasize the need to adopt similar strategies.
Former Commerce Secretary Purushottam Ojha suggested both short- and long-term solutions based on prior experience.
Ojha recalled the crisis during 2008 when oil prices reached $147 per barrel, noting that using the Price Stabilization Fund was appropriate for immediate loss management but did not provide a sustainable solution.
He suggested leveraging high-level political initiatives with India to secure credit oil supplies, as done previously, as a possible current option.
He also mentioned the practice of borrowing from the employees’ provident fund and citizen investment fund for fuel purchases, with repayments made when prices normalize.
Ojha advised the government to take firm steps to reduce fuel imports and consumption, institute odd-even vehicle usage regulations, promote electric vehicles, and expand public transportation usage.
Finally, while hoping for a swift resolution to the international conflict, he noted that damage to oil infrastructure would require time to stabilize supply and urged immediate discussions on alternatives to mitigate the crisis.
