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Out of gas

Publication Date : 03-04-2014

 

Nepal repeatedly faced a petrol crisis over the past decade when the Indian Oil Corporation (IOC) cut off supply. The Nepal Oil Corporation (NOC) is perpetually in the red and in debt to the IOC.

The IOC has, on repeated occasions in recent years, cut off petrol supply to the NOC because the latter severely lagged behind in making payments.

Any disruption in the supply of petrol causes immense disruptions in the lives of people across Nepal, especially in urban areas. Yet, the government’s response to the situation has always been ad hoc.

During every crisis, the government tries to find a way to pay back the existing debt and then seems to forget about the entire issue until the next crisis. There have been very few attempts to find a permanent solution to the problem.

It appears that another major crisis of petrol scarcity is looming. And it seems that this will cause severe disruption, possibly for months on end, if the government does not take action.

However, there are no indications that the government is planning to tackle the matter. Last month, the NOC had sought a grant of 5 billion rupees (US$52 million) to pay its dues to the IOC.

The government refused, stating that petrol prices should be raised instead. But the raised prices were partially rolled back after protests. The NOC continues to lack the funds to pay off its debt.

Financial institutions are reluctant to lend money to the NOC as it already owes around Rs 35 billion to various such institutions. Government officials state that they are helpless and are waiting for a report from a parliamentary committee formed to study problems in petrol import and distribution. The report is not expected to be released until the end of April.

Meanwhile, according to an NOC official, distribution of petrol will come to a halt in 12 days if supply from India does not resume.

In fact, there is no difference between waiting for the report and doing nothing at all. The report, when it is produced, will have long-term recommendations for the overall restructuring of the NOC.

Their implementation will not be immediate but rather part of a drawn-out process. This will not help solve the immediate petrol crisis that the nation is facing.

Granted, such a report and its implementation is a necessity. But this does not mean that government officials should just sit around doing nothing as a major crisis in petrol supply threatens Nepal in the immediate future.

In the meantime, the government should find ways of paying back owed dues to the IOC and thus resuming petrol supply. Then, they should work on reforming the NOC so as to find a permanent solution to the problem.

 

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