<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2022111413114/63722ef39c7e80680e0c24edjpeg.jpg" alt="" width="1280" height="852"/><figcaption>Photo: NEPALI TIMES ARCHIVE</figcaption></figure>Prime Minister Sher Bahadur Deuba was forced to sack Janardan Sharma this week, but only after his finance minister became a political liability because of sinking neck-deep in scandals.Instead of trying to resolve Nepal’s growing economic crisis, Sharma inducted yes-men with no finance background into the ministry, and ousted the Rastra Bank governor for blocking a money-laundering scam. He then involved an unauthorised ‘expert’ at a late-night budget drafting meeting to change tax rates, and later alleged deleted CCTV footage implicating him.Much of the credit for exposing Janardan Sharma goes to Nepal’s mainstream media which investigated his wrongdoings, as well as exposing corporate houses including the Chaudhary Group, Shanker Group, Saurabh Group and Jagadamba that stood to benefit directly from Sharma’s tax rebates.Deuba coddled his finance minister till the end despite growing criticism from within his Nepali Congress, as well as pressure from Sharma’s Maoist Centre party. All this meant that the prime minister and his finance minister took their eyes off the ball as Nepal’s economy started going into free-fall.This week Sri Lanka declared it did not have cash to import any more fuel, and officially declared bankruptcy. Nepal’s officials have said the country is not in the same debt trap, but there are many indications that the crisis is deepening.The clearest yet was Nepal Oil Corporation (NOC) asking the government this week to implement 10 austerity measures to reduce petroleum consumption, including by reimposing the two-day weekend, odd-even traffic rule, quota at filling stations, discouraging vehicle use, car pooling, and a ban on import of petrol and diesel vehicles.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2022111413114/63722ef69c7e80680e0c24eejpeg.jpg" alt="" width="800" height="565"></figure>Illustration: RABINDRALast week, the government reduced the tax on petroleum imports to reduce petroleum prices, but the NOC warned of “dire consequences” because it was running out of money.“Reducing gas prices by reducing taxes was absolutely of no use in the long run. They could have instead used tax money to promote and invest in sustainable measures,” says climate negotiator Manjeet Dhakal.He adds: “By reducing the tax the government is essentially abusing democracy by claiming to reduce the burden to the people in the guise of improving its chances in elections.”It is because of such short-sightedness that Nepal’s economy was in trouble long before Covid and Ukraine. The banking sector had a liquidity crisis because it had over-extended loans to real estate speculators. Stagnant overseas remittance, falling exports and a jump in imports had led to a growing trade deficit, and depleted foreign exchange reserves.However, some experts still believe that Nepal’s macroeconomic picture is sound, a healthy monsoon so far could mean a good rice harvest, and the INR-NPR peg cushions Nepal from the worst impact of the global crisis.They also say the fuel crisis provides Nepal with the perfect opportunity to accelerate the shift away from fossil fuels in transport, industry and households. Nepal needs to wean itself off petroleum not just to reduce its per capita carbon footprint, but to cut consumption of fossil fuels which now make up 20% of the total import bill.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2022111413114/63722ef89c7e80680e0c24efjpeg.jpg" alt="" width="1150" height="1488"></figure>In the last nine months, Nepal spent Rs218 billion importing petroleum products, which is 82% higher compared to the same period last year. This is nearly 20% of the country’s total imports, and is worth nearly double the income from all exports.Switching to electric public transport and battery vehicles to reduce the petroleum import bill by just 10% would save the county at least Rs21 billion a year.However, from July-December 2021, Bagmati Province alone saw the registration of 81,227 new vehicles, 75,573 of which were motorcycles and scooters. If they had been electric two-wheelers, fuel costs would have been reduced.“At this rate, we maybe fast approaching the fate of Sri Lanka and the only way ahead is maximising the use of domestically generated electricity primarily in the transport sector,” says Bhushan Tuladhar, board member of Sajha Yatayat which is starting electric buses in Kathmandu starting this week.“We have policies in place, but crucial details are missing such as how to incentivise electric buses, dedicated charging stations and coordinated management of public transport,” Tuladhar adds.Electric mass transit has long been identified as a cost-effective solution, and the government needs to facilitate loans for electric buses which are about five times more expensive than diesel ones, or subsidise them so that the private sector can invest in them.Industry experts are reworking Nepal’s Nationally Determined Contribution target submitted to the UNFCCC (Framework Convention on Climate Change) in 2021 with a particular focus on electric public transport.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2022111413114/63722efb9c7e80680e0c24f0jpeg.jpg" alt="" width="3214" height="2143"></figure>Photo: AMIT MACHAMASI/NEPALI TIMESThey have proposed an increase in sales of electric public transport to 60% by 2030, reduction in custom and excise duties for electric buses, grants and soft loans to procure them, and ensuring at least three provinces operate electric public transport by 2025.The other low-hanging fruit is a shift from LPG to electricity in households and restaurants, but transmission lines and distribution need to be upgraded so the grid can handle the load.In the Tarai, electric rickshaws are becoming popular, and municipal biodegradable garbage and crop residue can all be turned into compost to reduce imports of chemical fertiliser.All of this will also help Nepal meet its global climate targets set at Glasgow during the COP26 last year to achieve net-zero by 2040, and 45% forest cover by 2030.Nepal therefore needs to do its bit to reduce its petroleum imports to save both the economy and ecology. But that needs political will, which is sorely lacking during this election year.Says Bhushan Tuladhar: “If we don’t act even now, it will be too late. We need to work on energy, economy and environment simultaneously by involving both the government and the private sector.”Read more: <a href="https://www.nepalitimes.com/latest/sky-high-fuel-price-hits-nepals-tourism-airlines/">Sky high fuel price hits Nepal’s tourism</a>, airlines, Nepali Times

Sonia Awale

original

674x448

610x380

500x500

400x266

400x240

400x203

301x200

1250x600

1084x550

Fueling Nepal’s economic crisis

<img width="800" height="533" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114121112/637222949c7e80680e0c0304jpeg.jpg" alt=""/>Nepal Oil Corporation’s announcement on Sunday of an across the board increase in fuel prices is expected to have a knock-on effect on inflation, aviation and tourism and on prospects of an economic rebound post-pandemic.NOC brought the price of petrol to just below the Rs200 per litre threshold, and increased the already high price of aviation turbine fuel (ATF) by $100, taking the cost per kilo litre in Kathmandu to $1,645 -- the most expensive by far in the region.Bus companies immediately announced hikes in fares for urban and inter-city transport by between 6-7% and domestic airlines also increased their fuel surcharge, which on some routes is now greater than the actual fare.NOC increased the price of ATF by Rs19 per litre to Rs185. The one-way fare for the shortest destination line Kathmandu-Simara has increased by Rs170 to Rs4,195 which includes the fuel surcharge. Kathmandu-Dhangadi will now cost Rs840 more to Rs16,805 (see table below). <img width="1756" height="996" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114121112/637222969c7e80680e0c0305jpeg.jpg" alt="">The increases were announced just when the price of <a style="letter-spacing: 0.01em;" href="https://markets.businessinsider.com/commodities/oil-price">Brent crude dropped to $113</a> a barrel on Monday morning, down from $120 last week. NOC had reduced the price of petrol by Rs10 per litre two weeks ago, but has now jacked it up by Rs40 just when world prices were going down.Nepal’s domestic airlines and international carriers serving Nepal, which had started seeing high load factors for the first time after the pandemic, say they have no option but to pass the added cost of ATF to passengers. There is a fear that some international airlines operating long-haul routes that need to refuel at Kathmandu airport may have to make fuel stops, or close down operations altogether. Read also: <a href="https://www.nepalitimes.com/latest/sky-high-fuel-price-hits-nepals-tourism-airlines/">Sky high fuel price hits Nepal’s tourism, airlines</a>, Nepali Times <img width="1500" height="1000" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114121112/637222999c7e80680e0c0306jpeg.jpg" alt="">That possibility is sending Nepal’s tourism sector into panic mode because of what it may mean for their bookings for the autumn season for tourism and trekking, which showed signs of a rebound this spring.“We understand that the increase in petroleum fuel prices is a worldwide phenomenon after Russia’s invasion of Ukraine, but such a high increase for aviation fuel will be counterproductive for Nepal’s economy because of the impact on tourism,” one worried airline executive who did not want to be identified told Nepali Times.An official at NOC justified the increase, saying that it needed to make up for its subsidies on diesel and petrol and LPG with higher profit margins for ATF. Prices for fuel in Nepal are higher because of government tax as well as the cost of transporting it in tankers from Indian refineries, he added.In addition, petrol prices must also be higher in Nepal than India to stop smuggling of fuel across the open border. Indian vehicles refueling on cheaper fuel in Nepal and driving back had increased Nepal’s import of fuel, but with Sunday’s increase the price of petrol in Bihar is now slightly lower than in Nepal at Rs172/l (INR 107/l).However, there is criticism of NOC for <a href="https://www.nepalitimes.com/latest/sky-high-fuel-price-hits-nepals-tourism-airlines/">disproportionately punishing airlines</a> with such sky high prices, and earning a hefty profit on refueling planes at Kathmandu and other domestic airports. <a href="http://noc.org.np/fortnightly">NOC’s fortnightly profit/loss figures</a> show that it still Rs13.58 for every litre of petrol or diesel at the pumps, but it still has a profit margin of Rs56.67 per litre of ATF – up from only Rs22 profit per litre in January 2022.  “The mindset that flying is a luxury must change, aviation is a public service especially during the monsoon when highways are blocked by landslides,” says the manager of a private carrier.Indeed, the $1,645/kL of aviation turbine fuel at Kathmandu airport is nearly double of the price in Delhi ($875) and Bangkok ($855). Even at Colombo airport, despite Sri Lanka’s economic crisis, the cost of refueling planes is only $965/kL. Dhaka whad the highest fuel cost in the region, but it still much lower than Kathmandu at $1,100/kL.Read also: <a href="https://www.nepalitimes.com/here-now/ukraine-crisis-hits-nepal-economy-hard/">Ukraine crisis hits Nepal economy hard</a>, Ramesh Kumar <img width="960" height="640" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114121112/6372229d9c7e80680e0c0307jpeg.jpg" alt="">Airports in Europe like London, Amsterdam and Frankfurt have been in chaos all week because of crew and staff shortages. More than 10,000 flights were cancelled all over the United States this weekend because airlines could not cope with post-Covid surge in holiday traffic.When the airline industry is in such a crisis, carriers will scrap sectors running at a loss, and some international airlines may be forced to stop operations to Kathmandu because of high fuel and handling costs. Lufthansa, which used to have Kathmandu-Frankfurt flights till the late 1990s, stopped operating because of high local costs.Tourism operators and hoteliers say flight cancellations could affect their booking for the autumn season, which are looking healthy. Overseas Nepalis returning home for Dasain holidays could also be hit by flight shortages and high prices.A fully-loaded Airbus 330 on a 7-hour flight from Kathmandu to Incheon burns 40 tonnes of fuel which now costs $80,000, whereas a similar flight from Delhi would cost nearly half that amount.International carriers serving Kathmandu have put on hold plans to add flights for the autumn season, and some have even reduced frequency to Kathmandu blaming high refueling costs here. <a href="https://www.nepalitimes.com/latest/nepal-reopening-for-tourists/">Nepal’s tourism industry</a> directly employs at least 1 million people and it is the third largest source of income for the country have remittances and exports. This is revenue that Nepal needs to import petroleum which now makes up 20% of the total import bill.Read also: <a href="https://www.nepalitimes.com/opinion/how-nepal-can-avert-an-economic-crunch/">How Nepal can avert an economic crunch</a>, Kalpana Khanal

Airlines hit hardest by Nepal’s fuel hike

mainNavigation

footerNavigation

opinionSubnav

fuel-price-hike

Fueling Nepal’s economic crisis

Airlines hit hardest by Nepal’s fuel hike