Not Just Cooking Fuel: Impact Extends to Medicine and Drinking Water Due to Rising Fuel Prices
Summary of Key Points
- Tensions between Iran and the United States have disrupted global petroleum supplies, leading to four rounds of diesel and petrol price hikes in Nepal.
- The increased fuel prices have affected medicine production, food prices, and infrastructure projects; industries have cut production by up to 40%.
- Although the government has offered some fuel tax relief, seven different taxes and fees continue to keep prices high, causing financial losses for the Nepal Oil Corporation.
April 7, Kathmandu – The ongoing tension between Iran, located about 4,000 kilometers from Kathmandu, and the United States, nearly three times farther away, has disrupted global petroleum supplies. While typically fuel shortages mainly impact cooking and transportation sectors, the prolonged conflict has directly affected drinking water, medicine, industry, employment, and road and infrastructure construction in Nepal.
Fuel Prices Hiked Four Times; Petrol in Nepal Costs 59 Rupees More than in India
Due to nearly two months of blockade in the strategic Strait of Hormuz by the US and Iran, crude oil prices in the international market have surged approximately 60%. This increase has inevitably impacted Nepal.
In the last one and a half months, Nepal has witnessed four price hikes for diesel and petrol. Diesel prices rose from NPR 142 per liter on March 15 to NPR 152 and then to NPR 167 by March 25. Subsequently, prices climbed further to NPR 182 and then NPR 207. On April 15, diesel prices increased by NPR 30 to reach NPR 237 per liter but have slightly decreased to NPR 225 currently.
Similarly, petrol prices increased from NPR 172 before the conflict to NPR 219. Recently, on April 30, the price was reduced by NPR 2 per liter.
At the India-Nepal border market in Singhwali, petrol is priced at 97 Indian rupees (about NPR 155), while in Nepalgunj, it costs NPR 214 per liter, making Nepal’s petrol 59 rupees more expensive than India’s. This price disparity is primarily due to multiple government taxes and levies.
Although the government granted a 50% relief on customs and infrastructure development fees in the third week of March, the presence of seven different taxes, fees, and customs service charges continue to keep prices elevated. This situation has led the Nepal Oil Corporation (NOC) to operate at a loss.
According to NOC’s Managing Director Chandika Prasad Bhatt, despite the rising prices in the international market, efforts to control prices domestically have weakened the corporation’s financial health.
Prices of domestic aviation fuel and cooking gas have also increased. Aviation fuel costs have nearly doubled to NPR 269 per liter. The price of a full LPG cylinder has increased by NPR 150 to NPR 2,160, while a half-cylinder costs NPR 1,080.
Meanwhile, public transportation businesses have raised fares twice, citing rising fuel prices as the reason, with the second increment occurring on April 29. This challenging economic environment has heightened tensions between business operators and consumers.
The tension in Iran has also caused a gas shortage. Although the government supplies half cylinders, businesses are demanding full cylinders for sale. Consequently, many consumers have faced difficulties refilling half cylinders, leading to disruptions in supply.
Medicine production has been adversely affected by the fuel shortage. Importing raw materials necessary for pharmaceutical manufacturing has faced challenges. Rising costs of plastic and paper packaging materials have created production crises. Although some pharmaceutical companies stocked supplies sufficient for three to four months, shortages have already begun.
Food prices have also sharply increased. Prices of maize, wheat, lentils, oil, and sugar have seen significant rises. Increased packaging and transportation costs have made everyday consumer goods more expensive for the public.
Water treatment industry representatives have also pressured the government for price adjustments. The General Secretary of the Bottled Water Industry Association confirmed that a committee has been formed to study the possibility of increasing water prices.
In the industrial sector, shortages of plastic raw materials have reduced production by up to 40%. Production challenges in consumer goods have heightened the risk of losing approximately 50,000 jobs. Export industries, including footwear, are also facing difficulties.
Road and infrastructure construction work has slowed due to rising prices of bitumen, cement, and steel rods. Paving on main highways has come to a halt. Industrialists are demanding immediate price adjustments or construction holidays as relief measures.
The agricultural sector is also facing potential shortages of chemical fertilizers. Nepal requires around 800,000 metric tons of fertilizer daily, but import disruptions following purchasing agreements have arisen due to tensions in West Asia.
The World Food Programme has warned that global supply disruptions and rising food prices will exacerbate food insecurity. Worldwide, approximately 320 million people are at risk of hunger, with vulnerable and poor populations among the most affected.
Although a ceasefire has been declared in Iran, tensions remain elevated. Disruptions in petroleum transport through the Strait of Hormuz continue to affect global supply chains. Therefore, fuel shortages and price increases in Nepal are expected. However, arbitrary hikes in drinking water and food prices, coupled with governmental silence, are deeply concerning issues.