Nepal raises retail fuel price, stoking inflation fears

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A petrol pump attendant (L) fills petrol on a car at Saja Petrol pump in Kathmandu, Nepal, January 27, 2016. REUTERS/Navesh Chitrakar

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KATHMANDU, May 23 (Reuters) - Nepal's state-owned oil company has hiked the retail prices for fuels, including petrol and cooking gas, by up to 12.5% because of rising global oil prices, an official said on Monday, stoking concerns consumer inflation will be further pushed up.

State monopoly Nepal Oil Corporation (NOC) said in a statement that the price for one litre of petrol was raised 5.8% to 180 Nepali rupees ($1.45) from 170 rupees a week earlier.

The price for a 15.4 kg cylinder of cooking gas was increased 12.5% to 1,800 Nepali rupees from 1,600 rupees earlier, it said.

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Nepali people are facing a surge in food and energy prices as annual retail inflation accelerated to a five-year high of 7.28% in the month through mid-April and could further rise this month after fuel prices were revised twice within two weeks.

Spiralling inflation in the poor Himalayan nation of 29 million raises the risk of social unrest as imports of goods like fuel, coal and edible oil become costlier.

"This comes very hard on us," said Geeta Pokharel,38, a Kathmandu housewife. “Those who have can pay but what about those who can’t,” she asked.

Unlike Sri Lanka, Nepal has sufficient foreign exchange reserves to cover about six months of imports, but it could slide into difficulties if global oil and food prices remain high for a prolonged period due to the war in Ukraine.

Retail petrol prices have surged nearly 30%, and diesel and kerosene by 33% this year, while cooking gas prices have risen 14%, according to data on NOC website.

The government has banned luxury goods imports and raised fuel prices several times this year to curb the capital flows amid dwindling forex reserves - down 18.2% to $9.61 billion as of mid-April from mid-July.

Deependra Bahadur Kshetry, a former central bank governor, said if prices continued to rise, inflation could rise into double-digits by mid-July this year.

"If the government wants to give some respite to the poor people it should open mobile fair price shops and supply essential goods to consumers at reasonable prices." ($1 = 124.2100 Nepalese rupees)

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Writing by Manoj Kumar; Editing by Simon Cameron-Moore and Bernadette Baum

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