Nepal to raise fuel prices to counter shortages

By Gopal Sharma

KATHMANDU, June 9 (Reuters) - Nepal's government sanctioned a rise in fuel prices on Monday to stem losses by the state-run oil firm and overcome a domestic oil shortage caused by record-breaking fuel prices.

The government said the Nepal Oil Corporation, which has a monopoly on oil imports, would decide how much to raise prices.

The tiny Himalayan kingdom of Bhutan also announced a hike in petrol and diesel prices by around 10 percent on Sunday.

The announcements followed a similar decision by huge neighbour India last week, which pushed up petrol and diesel prices by around 10 percent, prompting strikes and protests in various parts of the country.

Protests are also possible in Nepal. In January the government backed down on a decision to raise fuel prices after fierce anti-government protests across the country crippled life for two days.

Losses and rising debts to India, through which all oil imports come, have forced Nepal Oil Corporation to limit imports, making queues of hundreds of cars and motorcycles at petrol pumps a common sight in Kathmandu.

The oil importer warned the government last month it was running out of stock and would face further shortages if the subsidised retail price of fuel was not raised.

It imposed rationing of petrol last week, saying it could only recover around 70 percent of the cost of oil from the consumer.