South Asia's priciest tank: how the Gulf war reached Nepal's pumps
Nepal imports every litre of fuel through India. When Hormuz closed, Kathmandu paid more than anyone in the region.
Nepal is completely dependent on imported petroleum, and Nepal Oil Corporation (NOC), the state company that is its sole importer and distributor, buys largely from India, Global Voices reported. The Nepal Economic Forum, a Kathmandu think-tank, puts Nepal's reliance on India for refined fuel and cooking gas at 100%. India in turn imports around 90% of its crude oil, roughly 40% of it through the Strait of Hormuz, the forum said in April. So when the war involving the United States, Israel and Iran disrupted shipping through Hormuz this year, Nepali motorists felt it within weeks.
The spring shock
Brent crude, below $60 a barrel in mid-December, was above $100 by 6 April, according to the Nepal Economic Forum. NOC passed the cost on quickly. By 12 April it had raised prices four times in a month, taking petrol to Rs 219 a litre ($1.48) and diesel to Rs 207 ($1.40) in Kathmandu, the Kathmandu Post reported. That made Nepal's petrol the most expensive in South Asia, ahead of Pakistan ($1.36), Sri Lanka ($1.30) and India ($1.02). Estimates of the starting point differ: Global Voices put petrol at Rs 137 a litre in January, while the Nepal Economic Forum gave Rs 156.
Even after those increases, the corporation said it was losing about Rs 7.81bn (about $50m) a fortnight, despite a 50% cut in customs duty, and owed Rs 18bn to Indian Oil Corporation, the Post reported. Nepal spent Rs 139.1bn on petroleum imports in the first seven months of the 2025/26 fiscal year, according to Global Voices.
The increases fed straight into the cost of moving people and goods. The Department of Transport Management allowed passenger fares on inter-provincial routes to rise by 16.71%, and cargo rates by 15.75% on Tarai routes and 21.68% on hill routes, the Post reported. Analysts cited by the paper estimated that a rise of about 21% in cargo charges could add roughly two percentage points to inflation. Year-on-year consumer inflation reached 5.96% in mid-August, against 1.68% a year earlier, according to central bank data reported by ShareSansar.
Relief, then a freeze
Prices eased in the summer. On 1 July NOC cut petrol by Rs 20 to Rs 197 a litre and diesel by Rs 30 to Rs 195, and took Rs 100 off a cylinder of cooking gas, leaving it at Rs 2,060, ShareSansar reported. On 3 August, after Indian Oil raised its rates, petrol and diesel went back up to Rs 200 in Kathmandu.
At the end of September Indian Oil raised its prices again, by Rs 20.44 a litre for petrol and Rs 20.21 for diesel. This time NOC's board held retail prices from 1 October, citing the Bhotekoshi floods, the festival season and the interests of consumers, ShareSansar reported. It expects to lose about Rs 3.20bn (about $21m) a fortnight as a result. Petrol and diesel remain at Rs 200 a litre in Kathmandu and a 14.2 kg gas cylinder at Rs 2,060.
What to watch
Holding prices means the state company absorbs the difference; in April it already owed Indian Oil Rs 18bn. If Indian Oil's rates stay high after Dashain and Tihar, NOC will face a choice between larger losses and another round of increases, which would pass quickly into fares and food prices. Electric vehicles offer a partial hedge; see our report on the electric car boom. For how prices are weighing on festival spending, see our Dashain report.
How this story was made: researched and written by The Standard’s desk with AI assistance, from the published reporting and official data credited below, and checked against those sources. Our standards.
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