Consumer rights

Oil Traders Demand Bigger Cut After Price Rise, Threaten Supply Disruption

As Nepalese are hit hard by unprecedented petrol prices and soaring inflation, petrol stations see this as an opportune time to demand a bigger cut.

The Nepal Petroleum Dealers National Association has negotiated a higher commission, and multiple sources say fuel sellers have stopped taking deliveries in a bid to create a shortage in the market.

Lilendra Prasad Pradhan, president of the Nepal Petroleum Dealers National Association, told the Post that the Nepal Oil Corporation raised the price of petroleum products on Thursday, but did not raise the sellers’ commission accordingly.

The state oil monopoly has raised the price of petrol from Rs 5 per liter to Rs 150 per litre. Diesel and kerosene have become more expensive by Rs5 per liter and cost Rs133 per liter each. This is the eighth time gasoline prices have risen since July.

Pradhan said that the commission provided to the retailers also increases with an increase in the price of petroleum products in accordance with the agreement reached with the dealers. But the government company did not increase its commission this time.

Dealers were to get a 3.12% commission increase on petrol and a 3% increase on diesel with the new adjusted rate.

On Friday, oil traders stopped buying gasoline from oil depots as part of their protest.

Pradhan said they had made no decision to stop the supply. “We don’t have the right to close the gas pumps. But with the company’s refusal to raise our commission, some gas pumps have stopped sales,” he said.

The association held a press conference on Friday to announce a protest if the company did not raise its commission within 15 days.

Consumer rights campaigners say that, as in previous years, it is a ploy by oil traders and retailers to create a fuel shortage in the market to pressure their demand.

“Following the rise in the price of petroleum products, the commission granted to traders and retailers increased automatically. But a meeting of the company’s board on Thursday decided not to increase the commission,” said Sushil Bhattarai, deputy general manager of Nepal Oil Corporation.

“We provided the commission to the dealers based on the adjusted price before that.”

The state oil monopoly declared bankruptcy as global oil prices hit new highs and it still subsidizes fuel sold to Nepalese consumers.

“The oil merchants’ demand is not justifiable. The difference in commission is only 12 to 15 paisa per litre,” Bhattarai said.

The disagreement between oil traders and the company is an indication that the market could sooner or later face shortages, consumer rights campaigners say.

Crude oil rose above $114 a barrel on Friday in a volatile session, according to international media, as fears of a disruption in Russian oil exports amid Western sanctions offset the prospect of increased supplies from Iran. in the event of a nuclear agreement with Tehran.

“As we are going to receive a new price list in mid-March from Indian Oil Corporation, the price of petrol could increase by Rs 10 per litre. “In the worst-case scenario, we have to pass the extra cost on to consumers,” Bhattarai said.

“We have adjusted the price increase to control inflation, as it could have a negative effect on the economy,” Bhattarai said. “But if the price continues to rise, we have no other alternative.”

The company said it was using 4.30 billion rupees from the price stabilization fund to finance oil imports. The next installment is due to be sent to its sole supplier Indian Oil Corporation on March 8.

“The company is considering borrowing money from banks and financial institutions to purchase petroleum products,” Bhattarai said. “We have also written to some financial institutions to obtain a loan.”

The company said it was taking losses amounting to 2.50 billion rupees every fortnight even with the latest price hike on Thursday. It has lost 25 billion rupees since the start of the financial year.

“In addition to deciding not to increase the commission for fuel dealers, the company also reduced the allowances it gave its permanent staff to purchase clothing,” officials said.