Kathmandu, May 2 (IANS) Ahead of a looming constitutional and parliamentary crisis, Nepal’s cash-strapped coalition government has now sent an SOS to India, seeking a Rs.3 billion credit guarantee to tide over its worst-ever fuel shortage in decades and ensure a smooth supply of petro-products for three months.
The Indian Embassy in Kathmandu said Nepal sent the request last week, asking the Manmohan Singh government to stand guarantor to Indian Oil Corporation (IOC), India’s state-run fuel supplier that enjoys a monopoly in Nepal.
Nepal Oil Corporation, the corresponding fuel provider in the Himalayan republic, has been struggling to pay its mounting dues to IOC, which made the latter cut supplies, triggering an acute fuel scarcity in Nepal for almost three weeks.
Nepal has asked New Delhi to stand guarantor for a credit of NRS 3 billion – over $41 million – to IOC for three months while it seeks to raise money through domestic borrowings to pay off IOC’s accumulated dues.
The fuel crisis is the legacy of an old state policy in Nepal to subsidise fuel, buying it at a higher international market price and selling it cheaper at home as a populist measure.
With international market prices going up, the subsidiary began to bleed the state treasury white. However, despite a few attempts to gradually increase domestic prices, governments in Nepal have been wary about adjusting prices fully due to fear of public discontent.
As a result, NOC currently reels under a loss of nearly NRS 15 billion. Last month alone, its loss jumped to NRS 2.7 billion from the earlier NRS 1 billion.
Though NOC urged the finance ministry to increase prices last month, the government, struggling for survival, refused, fearing a public discontent would lead to its fall.
Now it is once again seeking to borrow money from the Employees’ Provident Fund, despite having already loaned over NRS 1 billion to NOC last month to tide over its difficulties.
Besides the fuel pricing policy, NOC is also burdened with allegations of escalating corruption, mismanagement and theft when the fuel is transported from India.
Nepal’s central bank, Nepal Rastra Bank, said while trade deficit with other countries in eight months of the current fiscal declined by 31 percent, Nepal still registered a NRS 210 billion trade deficit, thanks mainly to the imbalance in the trade with India.
Trade deficit with India in the review period rose by 28 percent with petroleum products accounting for the bulk of imports from India.
Besides the fuel and financial morass, the three-month-old government of Prime Minister Jhala Nath Khanal also faces an acute constitutional crisis 26 days later when the deadline for promulgating a new constitution lapses.
Thanks to bitter power tussle among the major parties, the statute is not ready and the prime minister faces a call for his ouster even if the opposition agrees to bail him out by extending the constitutional deadline.
(Sudeshna Sarkar can be contacted at sudeshna.s@ians.in)
