Soon after government hiked the petroleum pice, Clean Energy Nepal (CEN), cen@mos.com.np came up with following press release. I think basic economics is missing in this press release. Past records shows slightest price hike in petroleum products influences every market sector - literaterally everything that comes with price. I do confess that earlier when the petroleum price was low, it was most of the 'taskars' in the border area who made quite a money smuggling it to India, so either price had to hiked or taskars' way had to be closed. And the government found earlier solution easy. Lets talk about real subsidy here, not the fake ones that government promises. Time will tell whether farmers and the people in remote district would get subsidy or they get subsided. symlyn ======================================== Press Release 12 January 2005 Government Decision on Petroleum Prices Deserves Public Support On 10 January, 2005 the government finally had the guts to raise petroleum prices, which was long overdue considering the rise in international oil prices, huge losses of Rs. 300 million per month being borne by the Nepal Oil Corporation (NOC) and its accumulated debt of about Rs. 5 billion. Clean Energy Nepal supports the government?s decisions to raise petroleum prices; provide transportation subsidy to 22 remote districts so that poor people there can have access to kerosene at the same price as consumers in Kathmandu; allow NOC?s Board to adjust petroleum prices according to fluctuations in the international market, and reduce NOC?s overhead costs by Rs. 200 million. However, NOC should become more transparent and take concrete steps to reduce overhead cost and supply high quality fuel. We urge people to think about the following facts while forming an opinion on the decision: 1. Only 9 percent of the energy consumed in Nepal is supplied by petroleum products, and 77 percent of Nepalese households use biomass, fuel such as fuelwood and dung, for cooking. This means that the majority of the poor people in Nepal are not really benefiting from low petroleum prices. It will be wiser for the government to support the promotion of energy technologies, such as improved cooking stoves, biogas and ?Tukimara? lamps, which directly benefit the poor. 2. Because of the huge differences in petroleum prices in India and Nepal, a significant amount of petroleum was being smuggled to Nepal and the government was thus subsidizing the smugglers and Indian consumers. Although with the new prices, the prices are still lower in Nepal (the price of petrol is lower by Rs. 1.98, diesel by Rs. 4.05 and kerosene by Rs. 2 per litre), the gap is now less. Therefore the incentive for smuggling has been reduced. 3. Although the government has been providing kerosene at a subdized rate, poor people in remote districts, haven?t really been able to enjoy this subsidy because of high transportation cost. For example a litre in kerosene in Humla used to cost about Rs. 150, compared to Rs. 24 or Rs. 28 in Kathmandu. This was an unfair system as people and industries who did not deserve the subsidies were enjoying it while the people who need it most were being left out. Now, hopefully, the subsidy will be a bit more evenly distributed. 4. Allowing the NOC Board to set oil prices is a step forward in keeping politics out of petroleum. 5. Nepal does not produce petroleum and it is a dirty fuel. In fact, diesel exhaust is a known carcinogen. Yet we continue to spend our precious foreign reserves in importing increasing amounts of dirty fuel while our own energy resources, which are also clean and renewable, remain underutilized. The increase in petroleum prices will level the playing field to a certain extent and increase demand for clean domestic fuel. For example, people in Bhattedanda, Lalitpur have decided to use electricity to power their ropeway instead of diesel. Similarly, this will also help increase the demand for electric vehicles in Kathmandu, which will result in cleaner air and better health for us all. In fact, because of the high environmental and social cost of fossil fuel vehicles, there should be an additional environmental tax on fossil fuel in Kathmandu. CEN also urges all protestors to refrain from burning tires, which is very hazardous to health, while expressing their opinions. Bhushan Tuladhar, Executive Director =============================