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Nepal’s new government on Tuesday decided to give some tax exemption on petroleum products, so as to reduce the additional financial burden on consumers. This announcement matches the decision of the Government of India.

The cabinet meeting held on Tuesday approved 50 per cent exemption in custom duty and infrastructure tax on petrol, diesel and kerosene, Federal Affairs and General Administration Minister Pratibha Rawal told reporters. “The decision will be published in the Nepal Gazette,” he said.

Currently, petrol attracts custom duty of 25.23 NPR (Nepali Rupee) per litre, while diesel attracts 12.02 NPR per litre. Additionally, both fuels attract an infrastructure tax of NPR 10 per litre. Apart from these two taxes, the government also levies additional duties such as Value-Added Tax (VAT), Road Maintenance Tax, Price Stabilization Fund Charge, Pollution Tax and Green Tax.

Due to the ongoing tension between America, Israel and Iran, oil supply from the Strait of Hormuz is banned. Because of this, oil prices have increased in the international market. Due to this, the cost of transportation and insurance has also increased, due to which the prices of goods dependent on transportation have increased. Asian countries have been particularly affected by the blockage, as they are heavily dependent on oil imports from the Gulf region.

Nepal does not directly import petroleum products from the Gulf or other regions, but is completely dependent on India for refined fuel. However, India itself is facing challenges in fuel imports. In late March, the Indian government reduced excise duty on petrol and diesel by Rs 10 per litre, making it Rs 3 per liter for petrol and zero for diesel.

In the last fiscal year, Nepal imported petroleum products worth NPR 288 billion.