Nepal Oil Corporation has not slashed the price of gasoline proportionally with the sharp fall in global oil prices, saying it needs to make up for past losses. 

According to the state-owned oil monopoly, the price of crude oil reached $55.95 per barrel on Friday, down from $80 a few months ago. This steep drop in the international price has allowed it to make some profits for a change, as it had been losing more than Rs1 billion per month previously, it said.

Nepal Oil has been implementing the automatic pricing system for the last four years under which it adjusts the tariff in line with oil prices in the international market. But most of the time, it has not done so citing various reasons. On Wednesday, Nepal Oil reduced petrol, diesel and kerosene prices by only Rs2 per litre each despite a vast improvement in its financial health recently. As per the revised price list, petrol costs Rs108 per litre, diesel Rs95 per litre, and kerosene Rs95 per litre.

Acting Managing Director Sushil Bhattarai said Nepal Oil was considering a further cut in prices. He said they had reduced fuel prices only marginally because of the large losses incurred in the past few months.

According to Nepal Oil, international oil prices had risen sharply a few months ago, but the government forbade it from jacking up gasoline prices commensurately because it was the festival season. “For this reason, the company is yet to recover losses totalling Rs2.37 billion despite the fall in international prices,” Bhattarai said.

Calculated on the basis of the latest tariff sent by its sole supplier Indian Oil Corporation, it earns a profit on the sale of petrol, diesel, kerosene and aviation fuel; but it loses Rs80.69 on every cylinder of cooking gas sold. Nepal Oil will not disclose the amount of profit it makes on the sale of gasoline.

Bhattarai said existing rules prevented the company from changing fuel prices significantly. “As per the Petroleum Products Auto Pricing System Bylaw, it is allowed to adjust domestic prices by 2 percent only at a time regardless of the degree of global price fluctuations,” he said.

Nepal Oil has also pointed to the difference in fuel prices in Nepal and India for not lowering prices saying it would trigger widespread smuggling into the southern neighbour. According to Nepal Oil, petrol and diesel are cheaper by Rs10.41 and Rs12.38 per litre respectively in Nepal compared to prices in India. Recently, incidences of fuel smuggling have also come down, company officials said.