By Our Reporter
A recent Cabinet decision cut customs duty and infrastructure tax on petrol and diesel by 50 percent. The move came at a time of rising global fuel prices and growing public demand for relief. It was initially welcomed as a step toward easing pressure on consumers.
The relief, however, did not last. Public transport fares rose by 16.71 percent the following day. Freight charges also increased, by 21.68 percent in the hills and 15.75 percent in the plains. Soon after, fuel prices went up again—Rs 17 per litre for petrol and Rs 25 for diesel and kerosene. Since the current government took office, petrol and diesel prices have already climbed by around Rs 47 and Rs 55 per litre.
This sequence highlights a policy tension. Tax cuts aimed at easing costs did not translate into stable prices for consumers. Nepal Oil Corporation explained that while the tax reduction lowered its losses, it did not remove them. That gap forced further price adjustments. The revised structure brought petrol tax down from Rs 66.98 to Rs 49.28 per litre, diesel from Rs 49.28 to Rs 28.28, and kerosene from Rs 34.78 to Rs 28.78.
On paper, the tax cut delivers nearly Rs 2.99 billion in relief over a 15-day period. Even so, the corporation still projects a loss of about Rs 7.81 billion after price adjustments. Petrol now shows a marginal profit, but diesel, LPG, and aviation fuel remain heavily loss-making.
These numbers point to a deeper issue. Nepal’s fuel pricing problem is not only about taxes or retail rates. It is also about structure and supply dependence. The country continues to rely heavily on imports from India, where refinery constraints and supply pressures have kept prices elevated. Reports suggest Indian state-owned oil companies are also operating under losses, which adds pressure across the supply chain.
This dependence brings back an earlier policy decision that never moved beyond paper. After the 2015 blockade, Nepal agreed to import 30 percent of its petroleum from China. The idea was to diversify supply and reduce reliance on a single route. But the plan never materialised. Officials at the time cited logistical challenges, transport costs, and infrastructure limits. Over time, the agreement faded from active policy discussion.
Former officials argue that this missed opportunity now carries real costs. China currently supplies petroleum to several countries at competitive rates. Its refining capacity and export scale allow it to offer relatively stable pricing. Nepal, however, has not developed the infrastructure or arrangements needed to access that supply chain.
At the same time, India itself faces refinery and supply constraints. These limitations affect pricing in the region, and Nepal absorbs that impact directly due to its dependence. Short-term policy tools like tax cuts or subsidies cannot fully offset these structural pressures.
Experts point out that the issue is not limited to pricing decisions made today. It lies in long-term supply strategy. Diversification of import sources, infrastructure development, and implementation of past agreements could have reduced vulnerability. Instead, Nepal remains tied to a narrow supply route, with limited flexibility during global price shocks.
The case of the unused China agreement illustrates how delayed implementation can shape present realities. What was once presented as a diversification strategy has now become a reminder of missed options. Ten years later, Nepal faces a fuel market where policy tools work within tight constraints rather than changing the underlying structure.
The broader takeaway is straightforward. Fuel prices fluctuate, but supply dependence compounds the impact. When long-term agreements remain unimplemented, short-term decisions carry heavier weight. In Nepal’s case, the cost of that delay is now visible in both household expenses and national economic exposure.
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