The Nepal Oil Corporation Ltd (NOC), the sole importer and distributor of petroleum products, determines the maximum retail prices of fuels depending on a number of variables, including the price of crude oil in the world market, the cost of transportation, taxes, customs fees, exchange rates, and operational costs. The NOC has now started the Auto Fuel Pricing System and the cost of petroleum products have dropped as a result. Evana Manandhar of ApEx talked to Puskar Karki, deputy director and co-spokesperson of the NOC, to find out how this change will affect us in the long run. Excerpts:
What is the Auto Fuel Pricing System?
The Auto Fuel Pricing System refers to the process by which the prices of vehicle fuels such as petrol and diesel are decided and regulated based on the tariff it receives from its sole supplier, the Indian Oil Corporation (IOC). It encompasses a variety of issues and stakeholders, including government agencies, oil firms, and market dynamics.
Every 15 days, we receive a new price from IOC, and we base our price on that, including taxes and other fees. The 2.5 percent profit margin has been lowered to two percent and we have kept no profit on LPG. If the IOC fluctuates the price, we will proceed accordingly.
How is it different from the previous system?
According to the previous system, the government, or the NOC had the authority to adjust the price of petroleum products any time. The adjustment of the price need not be in any pattern or ratio. But with the auto pricing system, the price will be adjusted as per the international market price.
Why did NOC introduce this system?
The NOC introduced the auto fuel pricing system to improve the transparency and consistency of petroleum product pricing in Nepal. Prior to the launch of this system, petroleum products’ prices in Nepal were governed directly by the government. It was up to the government if it wanted to charge a higher price or a lower price. But now, the government or the NOC can’t do so. We have to stick to the international market.
The approach improves transparency in fuel pricing by taking into account the numerous cost components and market factors that influence the final price. It explains how fuel prices are computed and offers customers and stakeholders a clear reason for any price change.
The price of petroleum products has now decreased with the launch of the auto pricing system. Will this trend continue? Will this help the public?
Around five months ago, the price of petrol was Rs 199 and it has dropped to Rs 165. The price of diesel has come down to Rs 145. As international prices have fallen, the price of petroleum products in Nepal has also fallen, which is good for us and the public.
I can’t guarantee that the price will fall down every time as it will be decided by the international market. But this system will definitely help the public. Inflation is largely determined by the price of petroleum products and once it is reduced, other financial pressures will ease too.
Will the IOC allow us to continue this system for a long time?
The IOC has nothing to do in the matter. Though we buy petroleum products from IOC only, it’s up to us on which platform will build our pricing system in Nepal. So this system will continue as long as the public extends its support. They should now understand that if there is a price hike, it’s not because of the NOC but the global market.
