Nepal Oil Corporation (NOC) has backtracked on its decision to hike fuel prices less than 12 hours after it was announced as per Prime Minister Sher Bahadur Deuba’s instruction which some suspect is an election ploy. 

On Wednesday, the state-owned oil monopoly had increased prices of petrol by Rs2 per litre, diesel and kerosene by Rs1.5 per litre each and cooking gas by Rs25 per cylinder.

Supplies Ministry officials said Deuba had directed the ministry on Thursday to cancel the decision citing approaching federal and provincial elections. “The ministry has asked the enterprise to adjust the increase in prices by using the price stabilisation fund for now,” said Birendra Kumar Goit, spokesperson for NOC. 

The corporation has around Rs3.31 billion in its price stabilisation fund. It set up the fund in order to cushion shocks of abnormal price hikes in the international market. 

As per the Automated Pricing System Guideline 2014, NOC can dip into the fund only if oil prices change by at least 2 percent.

The guideline allows NOC to absorb 50 percent of the price hike using the money and pass the rest of the burden to consumers by raising the price. 

After NOC adopted the auto pricing mechanism in 2014, it has been fixing fuel prices in accordance with the price list sent by its sole supplier Indian Oil Corporation. 

According to NOC, it decided to increase fuel prices on Wednesday as per IOC’s new tariff. Crude oil prices have hit a two-year high of $61.50 per barrel, international media reports said.  

The corporation had been making profits of more than Rs300 million per month till the recent price hike by IOC. “If prices are not adjusted, NOC can expect to lose Rs220 million monthly,” Goit said. 

Prime Minister Deuba pointed to the upcoming polls for withdrawing the decision, but Election Commission officials said the election code of conduct did not prohibit raising fuel prices.

“The prime minister’s decision seems to have been guided by political interest to avoid any unpopular move with elections around the corner,” a source at the Election Commission said.