Ongoing tensions in West Asia have started to affect Nepali households, with rising fuel prices making essentials and services costlier.

The Nepal Oil Corporation (NOC) increased the prices of petroleum products effective from Monday evening, citing rising global prices due to the war.

The increase in fuel prices has directly affected consumers, with the rise in the prices of vegetables, food grains and other essentials due to higher transport and production costs.

Amid a global fuel crisis, the Corporation increased petrol prices by Rs 15 per litre and diesel and kerosene by Rs 10 per litre each. NOC’s Executive Director Chandika Prasad Bhatta said the price adjustment was necessary because the Indian Oil Corporation (IOC) had hiked the prices, in line with international market trends.

As per the latest price revision, petrol is sold for Rs 172 per litre and diesel for Rs 152 per litre.

NOC holds a monopoly over the import and supply of petroleum products, with prices determined by its board of directors, chaired by the secretary of the Ministry of Industry, Commerce and Supplies. The board sets fuel prices in Nepal based on rates sent by IOC.

IOC revises the price of petrol, diesel, and kerosene every 15 days, and liquefied petroleum gas and aviation fuel every 30 days.

Despite an automatic pricing system, prices are sometimes kept unchanged despite fluctuations from India. For instance, 15 days ago, when IOC increased prices by Rs 5 per litre, the Corporation did not adjust domestic rates due to an election period, Bhatta said. “This time, petrol has increased by Rs 31 per litre and diesel by Rs 54 per litre from IOC,” he said. “So we had to raise the prices.”

The corporation said prices in Nepal have risen due to sudden increases in the international market and would be reduced immediately once prices fall abroad. Even after the latest price hike, the Corporation expects a loss of Rs 3.93 billion over the next 15 days.

The fuel price surge is expected to raise transport fares, increasing the prices of lentils, oil, rice, and edible oil. Vegetables and domestically produced food items are also likely to become more costly in the coming days.

Economists estimate consumer prices to increase by eight to nine percent if the war in West Asia does not end soon. Economist Keshab Acharya noted that consumer prices could go up by at least 9 percent.

“If the corporation incurs losses, the government has to cover them, diverting funds meant for development projects to support the corporation,” he said. “Globally, one-third of total fertiliser is produced in the Gulf region. Therefore, fertiliser prices will also surge.” He added that inflation would affect both households and production sectors.

According to a study by the International Monetary Fund, a $10 increase per barrel in oil prices reduces global economic growth by 0.15 percent and raises inflation by 0.4 percentage points. Similarly, if oil prices rise above $100 per barrel, global inflation goes up by 1.2 percentage points, and economic growth declines by 0.4 percent. Economists say the price increase in petroleum products could lead to slower growth and higher prices in Nepal.

Ram Prasad Gyawali, head of the Central Department of Economics at the Tribhuvan University, said higher fuel prices make basic goods more expensive, making it difficult to control inflation, and putting pressure on the government to raise workers’ wages.

Meanwhile, the Federation of Nepalese Transport Entrepreneurs (FNNTE) has demanded fare adjustments, citing the fuel price hike. FNNTE General Secretary Deknath Gautam said in a statement that the federation was seriously concerned about the price increase announced by the Corporation on Monday night, saying it would directly affect the transport sector.

The Federation has demanded that the government control internal leakage and fuel consumption within the Corporation, adopt a scientific system, and ensure smooth fuel supply. It noted that public transport operates using diesel and petrol, meaning any price change directly affects its operations.

The Federation has also urged the Department of Transport Management to adjust fares for federal routes and all seven provincial ministries to revise fares for provincial routes promptly.