Unexpected move

Unexpectedly, the state-run Nepal Oil Corporation’s (NOC) move to reduce the prices of petroleum products has given some relief to consumers. This means that the prices of petroleum products have come down marginally for the first time after NOC raised the prices four months ago. If the prices of petroleum products had not declined in the international oil market, and had the prices of petrol and diesel in India not been at par with the prices in Nepal, the move to revise the prices of petroleum products here would have been impossible. However, it is hoped that the move to roll back petroleum prices will not affect the country’s economic growth.

Last October, NOC had to increase the prices of petroleum products after they touched a 10-year high in the international oil market. For instance, kerosene for a litre cost over 26 rupees and gas for a cylinder was raised from 450 to 550 rupees in the commercial market. This had hit the lower and middle income groups of consumers harder than the country’s economy. It is unfortunate that NOC did not slash the price of gas also even though it revised the kerosene price. Now, the revised commercial price for kerosene has come down by five rupees while diesel and petrol have been reduced by one rupee only, keeping at par with the Indian rate. The decision to eliminate the "ration card system" should be deemed as a step in the right direction to prevent corruption and mismanagement.

The country meets the entire domestic demand for petroleum products through imports. But the problem is that the country has had to face 280 percent increase in price of petroleum products since February 1999 when the price of crude oil was at 10 dollars a barrel in the international oil market. This happened due to lack of effective measures to monitor the open border with India. This apart, had Nepal not pegged its currency to the Indian rupee, and if the country had not looked for economic ties with India, things would have definitely been better than what they are today. Unfortunately, this did not happen. What has happened is that whenever India raises the prices of petroleum products, Nepal has to do so also just to prevent illegal cross-border trade.

The government must realize that it has neither introduced any measures to lessen economic burden viz a viz India, nor has it been able to prevent cross border smuggling. The recent slashing of kerosene price, more than petrol and diesel, will increase the cross border smuggling. This may prompt NOC again to raise the commercial rate of kerosene in the market. It is, therefore, necessary that the government introduce measures to foster a situation which will minimize not only cross-border smuggling while regulating petroleum prices but also its economic ties with India.

LPG, politics of shortage

By Ratnakar Adhikari

Shortages of consumables have been a routine event in Nepal. A few months earlier there was a huge shortage of sugar, followed by petroleum products. One of the common features of these shortages was that they were more artificial than naturally occurring. When the prices of these products were increased, the shortages disappeared. However, due to what economists would call very low "elasticity" of demand for the products, a large majority of the consumers still consume them in more or less the same quantity, putting further strain on already overstretched household budgets.

At present, there is a new shortage in town, that of liquefied petroleum gas (LPG). The question that now arises is whether the shortage is naturally occurring or man made. The concerned government officials have tried to cover up by posturing that it is natural. As per them, the shortage is due to a sudden surge in LPG consumption resulting from, inter alia, the running of the public transport system on LPG, switching over of consumer preference to LPG due to a "historical" increase in the price of kerosene, and sudden drop in the temperature, requiring consumers to make use of more heat. Three questions emerge from these lame excuses "manufactured" by the concerned authorities.

First and foremost, when the Ministry of Population and Environment had announced that it would allow import of a certain number of vehicles to be operated on LPG, why could not Nepal Oil Corporation (NOC) forecast the increased demand for LPG? Safety concerns apart, which will be discussed a little later in this column, the subsidised LPG being used for commercial purposes is an open invitation to disaster. More so when the business establishments have an unholy nexus with the NOC and private sector LPG manufacturers and dealers have the capacity to build up stocks of LPG.

Secondly, when NOC took a so called "bold" initiative to scrap the subsidy provided on kerosene and fix its price to what it calls a "commercial level", why could it not foresee the increase in LPG consumption due to what is known as "cross elasticity of demand"?

Thirdly, cold weather during winter is not something new. Historical data shows that heating requirements increase during winter. This is something for which NOC should have planned earlier by increasing the winter supply of LPG. On the contrary, as revealed by private industry sources, the amount of LPG they used to receive from NOC has been reduced this winter. In a country where the "elasticity of hoarding" is much higher than in any country in the world and even a smell of potential shortage is sufficient to motivate business enterprises to initiate hoarding, the supply side should have been properly managed.

NOC has made its intention to establish a filling plant and storage facility clear. It has justified the establishment of such a set up on the ground that it is the panacea for the current woes of the consumers. Moreover, NOC has cited that this plant will be instrumental in breaking the "tacit collusion" between the private sector LPG manufacturers. There are prima facie reasons to be convinced of this justification, as all that the consumers want is the availability of LPG at a reasonable price as and when they require it.

But as we go deeper to analyse this proposal, some frightening realities come to the fore. The first and foremost is the question whether the NOC has the capacity to operate the new set up or not. Considering its track record, it does not appear to be a feasible proposition. When NOC promoted Nepal Lube Oil, it ran into deep trouble due to mounting losses. The company was later privatised, and it is doing much better now.

Secondly, there are arguments in consumer circles as to whether the present crisis was not "manufactured" by NOC in order to show that private sector operators are inefficient and hence a filling and storage plant of its own is a must. Considering the cost estimation of the proposed plant and the element of hidden benefits associated with it, anyone at the helm of a natural monopoly enterprise is likely to be tempted to float such a proposal.

Private sector players are opposing this idea tooth and nail, not because they are concerned about the commercial viability of such a proposal, but because they will find their market share shrinking after the coming into being of the proposed project. If they were interested in promoting genuine competition in the market place and providing relief to the consumers, they would not have opposed the idea. They would have openly said, "let the market decide."

It is, therefore, necessary for the consumers to understand that neither NOC not the private sector is concerned about protecting their interests. While NOC is interested in manufacturing a crisis and proving that private sector players are inefficient, such players are interested in protecting their market share.

In the process the most fundamental issues are being sidelined. The first issue is that of creating a clear and distinct demarcation between subsidised and commercially priced LPG. While the former must be sold to consumers for household purposes, the later should be sold to the commercial enterprises.

The second issue is that of the safety of users of public transportation. As per experts, LPG manufactured for household purposes being used in vehicles is technically wrong.

The LPG cylinders are neither meant to be kept in a horizontal position nor made to withstand the bumps in the road while being used in moving objects. They further warn that an explosion, which has every possibility of happening, could take a massive toll.

Finally, the supply side should be managed optimally. If there is requirement for more LPG, why does not NOC import more LPG from the Indian Oil Corporation? When the crisis could have been anticipated much earlier, why did not NOC make adequate provisions for the supply of adequate quantities of LPG in the first place? Maybe time has come to ponder these issues which have serious ramifications for the interests of consumers as well as for the overall growth of the economy.

Is solitude so blissful ?

By Smriti Jaiswal

There was a man who lived next door. He had everything, big house, big garden and, from what I could gather, a luxurious, tension free life. But there was something about him I didn’t like, honestly speaking, I thought he was a sophisticated conceit. I tried befriending him, smiling at him, but he always smiled back as if he was coerced into it. But it didn’t really bother me because I was happy being where I was, how I was and who I was.

Yet I envied his quite existence, I envied his small family, his liberal mind. Most of all I envied his complacency. He lived like an island.

Then I went away from Kathmandu for about two months. I had a swell time, stayed with cousins, forgot about studies and career and life, there was no time except to have a swell time. There were times when I felt crowded, when the presence of people around me all the time kind of suffocated me.

During those times I thought of the man, his unbroken solitude, and a rush of envy came upon me. If only I could be in his place....

How the two months zoomed away I didn’t have the time to realize, and already I was coming back home. You don’t know how difficult it is to come back to a city after having spent time in a small, concerned, crowded village. Kathmandu began to appear like a big factory. The man wasn’t in my mind for some hours, I was too busy unpacking, distributing things to family members who hadn’t gone with me, and of course, chatting endlessly. Then suddenly someone exclaimed that the man was in hospital.

"Hospital? Why the hospital?" So many things crossed my mind with the word hospital -- accidents, diseases, even death. But what came was the most unexpected.

"I don’t know", my mother said," but I hear he’s had a mental breakdown."

"Oh please mom", I said, " how can such a serene, calm man have a breakdown. It’s people like us who get such breakdowns."

"How do you know he was serene and calm?"

How did I know indeed? What did I know of him? What did he allow me to know. I saw him every day, but I don’t think he would have recognized me if he saw me on the streets. Maybe, he was lonely on an island. Maybe solitude wasn’t bliss. Maybe all the luxury he so apparently enjoyed didn’t give him any luxury at all. And what did I know about him? Suddenly I was so sad far him, suddenly I was so thankful for all the people I had around me, and for all those who cared for me, made me laugh, made my days so easy that I didn’t even feel them slip away. Maybe all the tensions, all the worries I have are good for me. After all, what did I know of him though I knew him since I was a baby?

Advertisement of cigarettes and alcohol

By Dr Rupesh Kumar Agrawal

The government’s recent decision to ban the advertisement of tobacco and alcohol in the electronic and print media has been taken as a good step. It has been learnt that the advertising revenue thus lost by the media will be made good by the government. However, AAN (the Advertising Association of Nepal) has protested the move.

Various individuals associated with different professions and the general public have welcomed the government’s decision to ban the advertising of cigarettes and tobacco products through electronic and print media. But the major problem is not only the advertising. Measures should be devised to regulate the supply and distribution of alcoholic drinks and tobacco products.

The tobacco industry needs to recruit new smokers every year to replace those who die from tobacco related diseases. The industry’s very survival depends on new, teenage customers. Few people start smoking in adulthood. Thus, children are the industry’s main target. The tobacco industry’s own documents demonstrate this. It is therefore not surprising that tobacco companies spend billions of dollars in their efforts to entice children into smoking.

In 1984, a tobacco company market researcher wrote in a secret internal report: "Younger adult smokers have been the critical factor in the growth and decline of every major brand and company over the last 50 years. They will continue to be just as important to brands/companies in the future for two simple reasons. The renewal of the market stems almost entirely from 18-year-old smokers. No more than 5 percent of smokers start after the age 24. The brand loyalty of 18-year-old smokers far outweighs any tendency to switch with age... Brands or companies which fail to attract their fair share of younger adult smokers face an uphill battle. They must achieve net switching gains every year to merely hold share.. Younger adult smokers are the only source of replacement smokers. If younger adults turn away from smoking the industry must decline, just as the population which does not give birth will eventually dwindle."

Children around the world are surrounded by advertisements portraying tobacco use as fun, sophisticated, modern and a Western phenomenon. In many countries, cigarette advertisements dominate most radio stations, popular with teenagers. Tobacco advertising exploits the vulnerabilities of youth by offering tobacco as a means of building up a positive self image and as a key to peer acceptance. Advertising also sends the message that smoking is "adult" behaviour, and offers cigarettes as a badge of independence and maturity.

Tobacco advertising conveys the message that smoking is the key to social success and upward mobility, a powerful draw for young people. But the fact in many developed countries is that smoking rates are significantly higher among the poor and less educated.

Some tobacco companies have used cartoon images in their advertising, with very successful results. The "Joe Camel" campaign catapulted Joe’s brand of cigarettes from one smoked by less than 1 percent of US smokers under 18 years, to a one-third share of the youth market
within three years. That same cartoon camel was found to have a high level of recognition among three year-olds, who were as familiar with it as with Mickey Mouse.

In the US, the tobacco industry began aggressively targeting women, with the introduction of a "women’s cigarette" in 1968. Within six years, the number of teenage girls smoking more than doubled. The same patterns are being repeated in a host of other countries.

Tobacco companies say that tobacco advertising is only used to promote brand switching among smokers. However, studies suggest that the more cigarette companies advertise, the more people, especially youngsters, start or continue to smoke. Studies show that adolescents smoke the most heavily advertised brand, in a proportion far greater than among adults.

Tobacco advertising and promotion aims at expanding the market for their products especially through targeting those populations in which there is the greatest potential for growth.

Cigarette advertisements undermine and deflect smokers’ concerns about safety, and serve to reassure smokers or potential smokers that cigarettes are not harmful. May people do not take the risks of smoking seriously partly because advertising portrays smoking as innocent and benign. Tobacco companies claim that they should have the freedom to advertise their products.

However, most smokers begin smoking when they are too young to understand the risks, and by the time they are old enough to make an informed choice, their addiction undermines their freedom of choice. When unfair and untruthful commercial speech is not restricted, other important freedoms are placed in jeopardy, including children’s freedom from deception, misrepresentation, and psychological manipulation by advertising.

Product placement is another means of increasing social acceptability of smoking. Tobacco companies pay large sums of money to film companies so that their cigarettes will be used in feature films. For example, a prominent American actor was paid US $ 500,000 to ensure the placement of one company’s cigarettes in his films. Product placement payment can also influence script writing decisions. Lois Lane in the Superman movies was a smoke, but the comic books Lois Lane never smoked.

As more countries around the world move to ban tobacco advertising , tobacco companies are quick to divert their attention to sponsoring sports and cultural events. This gives them an ideal opportunity to reach large audiences of young people. In addition to cleverly circumventing tobacco advertising bans, companies attempt to use these events to improve their image.

In many developing countries, rock concerts, with their enormous following of young fans, have been a magnet for tobacco industry sponsorship. In countries where cigarette advertising is banned or restricted, sponsoring live or televised concerts enables the companies to get around local regulations. In Taiwan, one multinational tobacco company sponsored a concert with a popular teen idol in which the only accepted admission "ticket" was five empty packets of the company’s cigarettes.

Through the promotion of sports events, tobacco companies gain widespread exposure for their brands and are able to link tobacco with health and athletic prowess. Young people seeing cigarette logos linked with health, excitement, speed and triumph are likely to lose sight of the reality of death, disease and addition.