Petrol, Diesel, Biofuel & the “New” Nepal

A month ago, I was in line at around 6:30 in the morning to fill up my small Korean car’s petrol tank in Nepal. As I waited amongst dozens of vehicles, an interesting broadcast about biofuel and its impact on global warming, rain forests and the world’s fuel supply was being aired on BBC, via 103 FM in Kathmandu.

It is unclear when Nepal plans to seriously adopt any form of alternative fuel, but the insufficient supply from Indian Oil Corporation (IOC) this year because of Nepal Oil Corporation’s (NOC) outstanding debt, has been tough on every motor vehicle owner in the city, especially those whose livelihood depend on it.

The problem heightened in late June when IOC decided to supply NOC with only 1,200 kiloliters of fuel per day as opposed to the normal supply of 2,000. The shortage has also forced many private pumps to remain closed, while institutional pumps operated by security forces and Sajha Corporation have themselves been running out of supply on a regular basis.

“We have been selling at least 12,000 liters or petrol and around 7,000 liters of diesel everyday for over a week now,” an employee of the station said at the height of the crisis in early July. “Most times, we close the pump when we run out of fuel, which was around midnight yesterday, and we have been running out of fuel everyday. But it’s been like this because of the shortage.”

An unprecedented growth rate in the number of privately owned small and large motor vehicles as well as an unmonitored influx of mini-vans and buses used for mass transit during the last five years in Nepal have helped steadily increased the country’s demand for petrol and diesel. However, NOC has been consistently unable to clear their dues with the IOC, largely because of their monthly losses which run up to millions.

“International price should be a dictator and we should increase or decrease price here accordingly but that hasn’t happened in Nepal,” Umesh Prasadh Dahal, deputy managing director of marketing at NOC, said with frustration during a recent interview. “We don’t follow automatic price mechanism. Yet, NOC is expected to bear all the losses on its own.”

Still, the prices of petrol has increased more than 30% in the last four years alone, and prices of diesel and kerosene too have steadily risen during that time.

Such increments have traditionally been a popular cause for political parties and their student wings to hit the streets in protest, such as when the Royal government of 2004-2006 tried to increase NOC’s revenue by increasing the prices by certain percentage. Today’s rate stands at approximately $3.95/gallon (Rs. 67/liter) for petrol, and approximately $3.15/gallon (Rs. 53/liter) for diesel.

The national budget for the coming fiscal year was announced last week, but it came with no plans to help NOC. “The government is supposed to provide Rs.1 billion to NOC through a cabinet decision though,” explained finance journalist Kiran Nepal, who has been writing about NOC for over six years now.

NOC is staying afloat due to the millions of dollars it has taken out in loans; its key supplier is no longer willing to supply petroleum products to Nepal on credit. According to Kantipur publications, a national daily, the Nepali government extended a loan of approximately $26.5 million (Rs.1.7 billion) to NOC on July 3, while the total amount payable to ICO was approximately $70.3 million (Rs.4.5 billion).

“The supply has gone up to 2,500 kiloliters this week because of improved payments from our part,” Dahal explained.

But many private pumps are still closed and there is still a general shortage of petrol.

“The fuel scarcity is going on still naturally. NOC is not able to maintain its reserve even to last year’s levels,” adds Nepal.

So what is the situation like now?

“Well, if I’m lucky I don’t have to wait, but other times I do,” said Jit Lama, a taxi driver in Nepal. “At least even the lines are a bit shorter for now.”

However, the government has been very passive to its otherwise progressive decision in January 2004 to use ethanol-based biofuel in Nepal, which could decrease the amount of petroleum import by 10%, if not more. It also has the possibility of being a much cleaner source of energy for Nepal, and could be a boost to the farming/agriculture sector in the country. However, neither has a serious supplier of ethanol emerged nor does the government seem to be actively seeking one.

“There has been absolutely no development in the biofuel sector,” explained Dahal. “The problem is petrol is a political tool and the government has not provided any subsidies for biofuel here.”

In fact, of the Rs.168.99 billion budget for the coming fiscal year Rs.5.82 billions has been assigned for general agriculture development, a 47.3% increase from last year’s allocation, and Rs.7.65 billion for hydropower development for which Nepal has always worked closely with India. Of the Rs.75.25 billion set aside for development none has been earmarked for developments of biofuel or solar power.

The government has also made buying an electric vehicle a particularly expensive experience. Instead of giving tax breaks to electric vehicles, the government currently imposes a variety of taxes making it an unfeasible medium of transportation.

In addition, the Nepali solar power industry considers solar energy as something limited to heating water, or to lighting a few bulbs or running water pumps in rural parts of the country where there is no electricity.

But the initiation of these two new industries—alternative fuel and urban solar farms—could create new jobs and help boost an economy devastated by years of political conflict. It would also ease the burden on both the Nepal Electric Authority, which was forced to cut power to households in Kathmandu for as much as 40 hours per week this spring, as well as the NOC.

To many, this is common sense. To the political leadership in Nepal, this is possibly something that will need a lot more than just common sense—perhaps a certain international bank, or a donor agency. Of course, there won’t be immediate justice, peace and other idealistic changes in Nepal after the planned Constituent Assembly elections in November. But it hasn’t stopped political parties from promising Nepali’s the world and more in a “New Nepal.” Unfortunately, a ‘green Nepal’ isn’t even a part of a false promise yet.

So for now, it seems, Kathmandu’s air quality will continue to go from bad to worse, NOC will continue to run huge loses and acquire even larger debts, and lines of motor vehicles, 4- and 2- wheelers alike, snaking around areas near fuel stations will be a fairly common sight. At this rate, the “New Nepal” will have many of the same old problems.

Kashish Das Shrestha has worked on the radio as a producer and host for four years in Nepal and in the print media as a writer and photo journalist since 2000. He was most recently the co-publisher and Editor-in-Chief of Nepali Aawaz, a bilingual newspaper in New York for the North American Nepali diaspora, but is currently on a sabbatical in Nepal. Previously, he served as an Editor for WAVE magazine, Nepal’s largest youth publication, and written for several publications in the country and freelanced as a photographer and writer for several webzines in New York.

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