Stop subsidizing oil

It is shameful that the government has once again decided to dole out precious state resource to subsidize oil supply. This is a grave mistake, for the diversion of resources to Nepal Oil Corporation (NOC) comes with serious developmental costs. Think tanks across the globe have pointed out that subsidizing oil bills is simply not viable for countries that rely totally on imports to meet domestic consumption. For countries like Nepal whose export volume is small, balance of payments is in deficit and foreign currency reserves weak, adoption of such a policy is damaging. It will eventually invite  disaster that the government cannot manage.



With the oil import bill threatening to cross Rs 75 billion, far above total export earnings, the focus of the government should have been  on plugging losses and taking steps to cut irrational consumption, something encouraged by subsidized supply. However, instead of dealing with the faulty pricing policy, the government has decided to fork out another Rs 1.5 billion to finance imports. This will obviously please consumers and NOC. Consumers will continue to get their supply at a rate cheaper than the import price and NOC top brass can avert the headache of reforming the corporation’s operations and plugging leakage.



But leaders occupying the country’s top executive posts, we ask you:  who do you want to serve with such a faulty policy? Petroleum products as a whole account for only 9 percent of the total energy that Nepal consumes. Worse, about half of all petroleum products is consumed in Kathmandu Valley. Political parties and pet sister organizations that resist fuel price hike, who do you prioritize: people who own motorcycles and cars, eat in restaurants and urban consumers in general, or the rural poor who remain deprived of basic health and educational services, reel under hunger and poverty and remain underserved in other ways?



Sadly, as political leaders and civil society have not called for explanations on who gains from the oil subsidy, the government has readily shelled out Rs 15.50 billion to subsidize oil that ends up ultimately as exhaust fume. With that kind of money, the government could have completed the Sikta Irrigation Project (project cost: Rs 15 billion; irrigation capacity: an additional 42,000 hectares) or two irrigation projects of the scale of Rani Jamara (project cost: Rs 7.5 billion; irrigation capacity: 45,000 hectares) and about one-third the length of a 4-lane Mid-hill Highway (project cost: Rs 52 billion; capacity: change the socio-economic face of all districts located along the highway from east to far-west Nepal). We condemn the policy of  financing consumption at the cost of development. Fuel subsidies have neither served the needy nor done anything for economic stability. Hence, we urge the government to stop the subsidy immediately, and also adopt measures such as plugging leakage at NOC, improving roads and harnessing hydropower and alternative energy sources.

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