Aug 21st
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Bright side of fuel black market during recent economic blockade

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Black market, specially related to fossil fuels, during the recent unofficial economic blockade by India over Nepal really "saved" our nation from disaster.

Although many people cursed black marketers for charging super high prices, it really had saved government and Oli’s butt. During the time when the government was not legitimately getting fuel from India and was having diplomatic trouble in getting fuel from China, black marketers were the only Messiahs who kept our vehicles, and thus economy, moving at least, if not, in normal speed.

Oli government should especially be thankful to them because it were them who helped to keep Oli government stable. Had there not been those marketers, people, being unable to continue their daily life, would have lost their patience that could have created riots and instability. This would definitely have rocked the government and economy, forcing the government to comply with our southern neighbors very quickly. Thus, not being too confident, it could be well understood that the black market have saved our national pride in a sneaky way.

Technically speaking, it actually is Gray Market rather than black market as it is not illegal to buy products like fuel, so to speak; but the trade was done via illegitimate channel. This is also one of the reasons the government was reluctant to take actions against these suppliers as they already knew that it was important during those rough days, at least to save the government.

Gray market of fuel was fairer than the fact that it was criticized. It was following more rules of free economy than the regular Nepali market. Theories of demand and supply were clearly observed and was being practiced more than in our regular economy. Anybody who had courage and will to bring fuels from India could do business as long as they were able to dodge local authorities. Thus, there was nothing like monopoly as such. Due to the absence of monopoly, prices were not fixed and was not controlled by one single person/company. Instead, prices were determined by market forces of demand and supply. As the demand got high along with shortage of supply, that too at higher risk, the expectation of profit definitely got higher, increasing the prices by almost 3-4 times the original price. There was supply because people were willing to buy. That’s it.

Also, the prices were determined by the quality of fuel. Individual suppliers who gained reputation of selling unadulterated fuels were charging more and selling more than other competitors.

Furthermore, there were nothing like syndicates and cartels. Due to this, the suppliers were not openly visible; the opportunity to form a syndicate was out of question. As a result, prices were not fixed but were very fluid and varied from place to place and from person to person. The price of a liter of petrol, in the beginning of the blockade, was around Rs. 500; however, by the end of the blockade, price had dropped to Rs 200 or Rs. 250 as more and more suppliers participated in the gray economy. Many suppliers helped the price fall up to the equilibrium level where suppliers were happy enough with 100-150% of profit. This could be a perfect example of free market.

Having said all these, this article definitely does not advocate any grey or black market. The only aim of the article is to imply that the government should definitely stop all the causes for the black markets to grow rather than the black market itself because black & grey market will ever exist as long as there is a shortage of something essential or is in high demand.

The only way to stop black market is to make the environment conducive to import or produce without a lot of government interferences, such as back breaking taxes, licenses etc. Apart from these, the government should make sure that there are no syndicates and the minimum accepted level of quality should be defined to compete in the market. Create an environment where supply could be made more abundant so that the demand is matched. Let then the consumers choose themselves and price be determined by the market forces of supply and demand.


Bibek Dangol

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Last Updated ( Tuesday, 20 December 2016 23:06 )