Identifier
Created
Classification
Origin
08KATHMANDU679
2008-06-13 10:59:00
UNCLASSIFIED
Embassy Kathmandu
Cable title:
NEPAL: STEEP HIKES IN PRICES OF PETROLEUM PRODUCTS
how-toVZCZCXRO8633 PP RUEHBI RUEHCI DE RUEHKT #0679 1651059 ZNR UUUUU ZZH P 131059Z JUN 08 FM AMEMBASSY KATHMANDU TO RUEHC/SECSTATE WASHDC PRIORITY 8675 INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6525 RUEHLM/AMEMBASSY COLOMBO PRIORITY 6849 RUEHKA/AMEMBASSY DHAKA PRIORITY 2146 RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 4888 RUEHLO/AMEMBASSY LONDON PRIORITY 6094 RUEHNE/AMEMBASSY NEW DELHI PRIORITY 2468 RUEHSA/AMEMBASSY PRETORIA PRIORITY 0153 RUEHCI/AMCONSUL KOLKATA PRIORITY 4212 RUEHBI/AMCONSUL MUMBAI PRIORITY 3897 RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RHMCSUU/DEPT OF ENERGY WASHDC PRIORITY RHEHNSC/NSC WASHDC PRIORITY RUEAIIA/CIA WASHDC PRIORITY RHEFDIA/DIA WASHDC PRIORITY RUEKJCS/SECDEF WASHDC PRIORITY RHMFIUU/CDR USPACOM HONOLULU HI PRIORITY
UNCLAS KATHMANDU 000679
SIPDIS
E.O. 12958: N/A
TAGS: ENRG ECON ETRD PGOV KDEM IN NP
SUBJECT: NEPAL: STEEP HIKES IN PRICES OF PETROLEUM PRODUCTS
Government Raises Fuel Prices
------------------------------
UNCLAS KATHMANDU 000679
SIPDIS
E.O. 12958: N/A
TAGS: ENRG ECON ETRD PGOV KDEM IN NP
SUBJECT: NEPAL: STEEP HIKES IN PRICES OF PETROLEUM PRODUCTS
Government Raises Fuel Prices
--------------
1. (U) On June 9, the Government of Nepal (GON) directed the
state-owned Nepal Oil Corporation (NOC) to raise the price of
petroleum products; including petrol, diesel, kerosene and
cooking gas. (NOTE: The price of aviation fuel was already
increased twice in the last two months, first on May 13 and
then again June 5.) The price increases range from 25
percent for petrol to 10 percent for cooking gas. The GON's
decision to hike the prices came less than a week after India
raised fuel prices in order to cope with the rising price of
oil in the global market. The new price will most likely
help improve supplies; however, according to local press
reports, even with the price increase the NOC is still
estimated to lose NRs 1.5 billion (roughly USD$23.5 million)
per month. In addition to the price increase the GON also
announced that it would reduce taxes on petroleum products
and would open up the sale of petroleum products to the
private sector. One day later, on June 10, the Federation of
Nepal National Transport Entrepreneurs (FNNTE) announced
increases in transportation fares ranging from 30 to 40
percent.
Comment
--------------
2. (U) This is the largest price increase that the GON has
yet attempted. As the effects of the increase trickle down
into the price of commodities and transportation, it will
have a significant impact on many. Yet in the four days
following the price increase, protests and strikes have been
sporadic and confined largely to student groups and youth
political wings. It seems clear that people are tired of
spending 5 or 6 hours in fuel queues and watching the prices
soar in the booming black market, and it is also clear that
they understand the long-term impact of businesses having to
close down. Yet, the NOC's troubles are still not over.
Even with this price increase and the GON's promise to lower
taxes, the NOC is still facing unmanageable losses,
corruption, mismanagement and pilferage. The GON's
announcement that the petroleum market will be opened to the
private sector is in reality more rhetoric than a real
indication of reform. The Indian Oil Corporation (IOC) and
the NOC have government-level contracts granting IOC a
monopoly on the supply of petroleum products from India, so
it is unclear what role the private sector will be able to
play. Attempts to import petroleum products from China and
other third countries are likely to resurface, but Nepal's
geography and lack of infrastructure (including a refinery,
pipeline, roads, etc.) will make these imports unrealistic
for years to come. In the meantime, there are still profits
to be made in the black market, at the pumps (with weak
regulation over the quality of the fuel sold or the
calibration of the fuel pumps) and for the transport
operators, who unilaterally instituted fare increases that do
not necessarily correlate with the rise in fuel prices.
POWELL
SIPDIS
E.O. 12958: N/A
TAGS: ENRG ECON ETRD PGOV KDEM IN NP
SUBJECT: NEPAL: STEEP HIKES IN PRICES OF PETROLEUM PRODUCTS
Government Raises Fuel Prices
--------------
1. (U) On June 9, the Government of Nepal (GON) directed the
state-owned Nepal Oil Corporation (NOC) to raise the price of
petroleum products; including petrol, diesel, kerosene and
cooking gas. (NOTE: The price of aviation fuel was already
increased twice in the last two months, first on May 13 and
then again June 5.) The price increases range from 25
percent for petrol to 10 percent for cooking gas. The GON's
decision to hike the prices came less than a week after India
raised fuel prices in order to cope with the rising price of
oil in the global market. The new price will most likely
help improve supplies; however, according to local press
reports, even with the price increase the NOC is still
estimated to lose NRs 1.5 billion (roughly USD$23.5 million)
per month. In addition to the price increase the GON also
announced that it would reduce taxes on petroleum products
and would open up the sale of petroleum products to the
private sector. One day later, on June 10, the Federation of
Nepal National Transport Entrepreneurs (FNNTE) announced
increases in transportation fares ranging from 30 to 40
percent.
Comment
--------------
2. (U) This is the largest price increase that the GON has
yet attempted. As the effects of the increase trickle down
into the price of commodities and transportation, it will
have a significant impact on many. Yet in the four days
following the price increase, protests and strikes have been
sporadic and confined largely to student groups and youth
political wings. It seems clear that people are tired of
spending 5 or 6 hours in fuel queues and watching the prices
soar in the booming black market, and it is also clear that
they understand the long-term impact of businesses having to
close down. Yet, the NOC's troubles are still not over.
Even with this price increase and the GON's promise to lower
taxes, the NOC is still facing unmanageable losses,
corruption, mismanagement and pilferage. The GON's
announcement that the petroleum market will be opened to the
private sector is in reality more rhetoric than a real
indication of reform. The Indian Oil Corporation (IOC) and
the NOC have government-level contracts granting IOC a
monopoly on the supply of petroleum products from India, so
it is unclear what role the private sector will be able to
play. Attempts to import petroleum products from China and
other third countries are likely to resurface, but Nepal's
geography and lack of infrastructure (including a refinery,
pipeline, roads, etc.) will make these imports unrealistic
for years to come. In the meantime, there are still profits
to be made in the black market, at the pumps (with weak
regulation over the quality of the fuel sold or the
calibration of the fuel pumps) and for the transport
operators, who unilaterally instituted fare increases that do
not necessarily correlate with the rise in fuel prices.
POWELL