Airlines hit hardest by Nepal’s fuel hike

That possibility is sending Nepal’s tourism sector into panic mode because of what it may mean for their bookings for the autumn season for tourism and trekking, which showed signs of a rebound this spring.

“We understand that the increase in petroleum fuel prices is a worldwide phenomenon after Russia’s invasion of Ukraine, but such a high increase for aviation fuel will be counterproductive for Nepal’s economy because of the impact on tourism,” one worried airline executive who did not want to be identified told Nepali Times.

An official at NOC justified the increase, saying that it needed to make up for its subsidies on diesel and petrol and LPG with higher profit margins for ATF. Prices for fuel in Nepal are higher because of government tax as well as the cost of transporting it in tankers from Indian refineries, he added.

In addition, petrol prices must also be higher in Nepal than India to stop smuggling of fuel across the open border. Indian vehicles refueling on cheaper fuel in Nepal and driving back had increased Nepal’s import of fuel, but with Sunday’s increase the price of petrol in Bihar is now slightly lower than in Nepal at Rs172/l (INR 107/l).

However, there is criticism of NOC for disproportionately punishing airlines with such sky high prices, and earning a hefty profit on refueling planes at Kathmandu and other domestic airports. NOC’s fortnightly profit/loss figures show that it still Rs13.58 for every litre of petrol or diesel at the pumps, but it still has a profit margin of $56.67 per kL of ATF – up from only $22 in January 2022.  

“The mindset that flying is a luxury must change, aviation is a public service especially during the monsoon when highways are blocked by landslides,” says the manager of a private carrier.

Indeed, the $1,645/kL of aviation turbine fuel at Kathmandu airport is nearly double of the price in Delhi ($875) and Bangkok ($855). Even at Colombo airport, despite Sri Lanka’s economic crisis, the cost of refueling planes is only $965/kL. Dhaka whad the highest fuel cost in the region, but it still much lower than Kathmandu at $1,100/kL.

Read also: Ukraine crisis hits Nepal economy hard, Ramesh Kumar

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