Petroleum Products Crisis in Nepal

I. Introduction:

An adequate amount of energy is necessary for the daily consumption and overall development of any country. There are various forms of energy sources used in Nepal such as fuel wood, hydroelectricity, solar, bio-mass and the petroleum products. The fuel wood occupies the larger part of energy consumption in the rural part of Nepal. Kerosene and LP gas are used for the cooking purposes and the petrol and diesel are used for running vehicles and other engines. Nepal lacks petroleum resources of its own. So, it has to import all these petroleum products. The supply of these products is inadequate and there is always growing crisis in Nepal. The vehicles in the urban area have to stay in queue for a long time to get a few liters of fuel. Sometimes the lack of kerosene and LP gas disturbs the regular activities of kitchen. Thus, the case of petroleum product crisis has become a serious problem.

II. Consumption Pattern of the Petroleum Products:

Petroleum products are used for the cooking purposes, running vehicles and other engines, lightening fire, producing electric powers etc. Life would have been very difficult in the absence of these petroleum products. It occupies an important space in the energy consumption structure. The imports of the petroleum products have significantly increased in recent years. Whatever quantity of the products is imported, the whole quantity is consumed. The increasing number of the consumer has increased the imports of the petroleum products from India.

Consumption of Petroleum Products (POL) in fiscal year 2008/09 stood at 729,621 Kilolitres (KL) recording a growth of 16.2 percent. Consumption of LP gas also rose by 19.6 percent reaching 115,813 Metric Tons (MT) during this period. Consumption of these two products in first eight months of fiscal year 2008/09 had totaled 431,745 KL, and 73,618 MT respectively. Consumption of POL products during the same period of the current fiscal year 2009/10 recorded a surge of 29.3 percent totaling 558,114 KL, and that of LP gas also rose notably by 17.4 percent totaling 86,403 MT (MoF, 2010). Besides, we do not have any known resources of petroleum products, but the consumption of these products has been increasing at a tremendous rate. In 2010, total petroleum products sales (1.2 million) increased by 27 percent but some of the products increased at a much higher rate such as petrol by 31 percent, diesel by 37 percent and LPG by 22 percent respectively( Nakarmi, 2011). Thus, there is heavy increment in the consumption of the petroleum products.

Among the petroleum products, diesel, kerosene, petrol and the aviation fuel occupies the major shares. According to the Economic Survey 2010, the share of diesel is 59.8%, petrol is 17.6%, kerosene is 11.5% and that of aviation fuel is 11.1. Petrol and diesel are highly consumed to meet the needs of the increasing number of vehicles while the kerosene is used by the lower class people for the household purposes and the aviation fuel are used for flying of the high class people. Whatever may be the share of the different products, it is clear from the above discussion that the consumption of the petroleum products has dramatically increased in the recent years.

III. Petroleum Product Crisis and its Causes:

It is obvious that the petroleum products are necessary to run the daily life of the people. But most often there is shortage of the products and it severely disturbs our life. The vehicles do not get petrol and diesel to run, no kerosene and LP gas to coke food and no fuel to run the other power engines. Nepal has been facing such problems since a long time and it has been repeatedly occurring.

There are many causes for the crisis of the petroleum products. Nepal does not have any petroleum resources. It has to depend on the import from the India to distribute the petroleum products to its people. When the demand for the consumption is high than the supply, then the shortage occurs and when the shortage is severe, then the crisis of the petroleum products arises. Previously, Nepal used to depend mainly on the fuel wood as the energy resource and still the rural area depend on it. But the urban area consumes a lot of petroleum products. The increasing number of vehicles in the urban area is one of the main reasons of petroleum crisis. The total number of vehicles since FY 1990/91 to FY 2008/9 was 805614 and it increased by 117981 (14.6%) in the mid-march of 2009/10 reaching the total of 923595 (Department of Transport management, Tinkune, Kathmandu; cited in MoF, 2010). All these vehicles consume huge amount of the petroleum products.

The Nepal Oil Corporation holds monopoly in distributing the petroleum products through out the country. Its mismanagement is also responsible for the crisis. The NOC authority lacks vision and planning of supplying the petroleum products. A significant portion of the imported petroleum products is lost through leakage on the way from Amlekhgunj to Kathmandu. A recent report of NOC showed that NOC maintains very low stock of petroleum products, heightening risks of shortage once supply is disrupted. The current stock cannot last for more than three days of demand in the capital. The report said absence of necessary infrastructure like pipeline from Raxaul to Amlekhgunj, the petroleum depot situated at the Indo-Nepal border some 90 km south of Kathmandu, has greatly affected supply of petroleum products (Upadhaya, 2008).

The price of the petroleum products is always debatable in Nepal. The annual growth rate for kerosene (13%), the most significant among fuel products, increased from Rs 27 per liter in 2003 to Rs 65.50 per liter in 2010. Petrol prices increased by six percent and diesel rose by ten percent during this time frame (Pant et.al 2010).When there is any hike in the price then the public opposes it and there are frequent strikes regarding the issue. So, when the price increases at the international level, the NOC neither can adjust the price nor it gets any subsidy from the government. The NOC is totally dependent on Indian Oil Corporation for importing the petroleum products. When NOC is unable to pay money to IOC for importing petroleum products, then it stops the supply of the products. As a result, there is crisis of the petroleum products. The black marketing of the petroleum products at the time of the shortage also magnifies the problem of the crisis. Nepal lacks other alternative sources of energy. So, when there is crisis it is not backed by the other forms of energy. Hence, the problem of petroleum products crisis is becoming severe in Nepal.

IV. Conclusion:

Petroleum products are an important source of energy consumed in Nepal. It has become an important aspect of the life of the people especially, the urban people. The consumption pattern of the petroleum products is increasing day by day. Heavy consumption and inadequate supply of the products is the main reason behind the crisis of the petroleum products. The improper management of the authorized organization has also heightened the problem. Nepal can not bear this problem for a long time. The prevalent crisis of the products have already disturbed the daily life and made a heavy loss to the national economy. So, it’s a high time for Nepal to find the solution of petroleum crisis. The alternatives of the petroleum products need to be searched before it is too late.

References:

MoF, 2010. “Economic Survey: Fiscal Year 2009/10”. Kathmandu: Government of Nepal.

Nakarmi, Amrita. 2011. Energy Crisis and Its Economic Implications.

Available at: http://archives.myrepublica.com/portal/index.php?action=news_details&news_id=29934

Panta, Yoga Ram, Uttam Prasad Upadhya, Resham Bahadur Thapa and Jeevan Raj Lohani. 2010. “3 F Crisis: Impact on Education”. In Quarterly Monitoring Report, April-June, 2010. Kathmandu: UNICEF, DOE/GoN and RIDA.

Upadhaya, Suraj. 2008. “Energy Crisis and Nepal’s potentiality”. In The Intiation 2008. Kathmandu: Kathmandu Forestry College