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Sangam Prasain

The Kathmandu Post

Publication Date : 14-02-2013

Following an outcry from various quarters, the Nepali government on Wednesday rolled back the hike in prices of liquefied petroleum gas (LPG) it had effected on Tuesday. With the blessings of the government, the Nepal Oil Corporation (NOC) had raised the price of a full LPG cylinder to 2,100 Nepalese rupees (US$ 24), up by 630 Nepalese rupees.

However, an emergency meeting of the NOC board on Wednesday decided to roll back the hike until another decision is taken, Spokesperson of the Ministry of Commerce and Supplies Deepak Subedi said. The price will now remain unchanged at 1,470 Nepalese rupees for a cylinder.

With a view to ending subsidy given to commercial users and enabling the NOC to offset its ballooning losses, the government had enforced a dual pricing system by differentiating two classes of LPG consumers - subsidised and non-subsidised. The rate for household users or subsidised cylinder had been fixed at 1,550 Nepalese rupees per cylinder.

According to NOC officials, the government had been attempting to sell LPG cylinders at the cost price some two years ago. As per the plan, in the first phase, the government introduced the LPG consumer card system, under which subsidy was planned for the targeted group. The plan also aimed to end subsidy and VAT refund for commercial users.

In the second phase, the government had planned to enforce colourcoded LPG cylinders in the market to make LPG distribution transparent and end hoarding and black-marketing.

In the third phase, the government had planned to open petroleum trade to the private sector by adopting an auto pricing mechanism or selling petroleum products at cost price.

“A number of private traders are waiting to begin oil trade and for the government to deregulate the petroleum business,” NOC officials said.

The High-Level Petroleum Sector Reform Taskforce has recommended ending the NOC’s monopoly in the country’s petroleum business. At present, the government provides a subsidy of 587 Nepalese rupees on an LPG cylinder to all users by incurring losses to the tune of 700 million Nepalese rupees in the LPG business alone.

“The LPG price hike for commercial users was expected to bring the NOC back to profit ways,” said a top NOC official.

The import of LPG is about 1.2 million tonnes per annum, while its demand has been soaring at the rate of 20 percent annually due to the countrywide loadshedding. As a result, NOC’s total outstanding loans to the government and financial institutions stand at around 28 billion Nepalese rupees.

On Wednesday morning, student unions affiliated to various opposition parties demonstrated against the government’s decision to hike the LPG price. Irate students burnt tyres and shouted slogans against Prime Minister Baburam Bhattarai in different colleges. Social networking sites like Twitter and Facebook were abuzz with comments against the price hike.

Responding to the tweets, PM Bhattarai claimed that the price hike would not affect domestic users. He said the dual pricing system would help stabilise the price and LPG supply. At noon, however, he tweeted that the system had been withheld for the time being. He cited lack of “necessary preparations.”

Bhattarai himself has been looking after the Ministry of Commerce and Supplies. Meanwhile, the protesting student unions have decided to continue with their protests until they get a ‘written commitment’ from the government.

The 11 student wings of the major and fringe opposition parties jointly organised demonstrations and chanted slogans against the government. The unions have decided to continue with the closing of roads to vehicles for two hours on February 14 and 15, and a torch rally on February 17.

*US$1=87.36 Nepalese rupees