Fuel Consumption Falls as Rising Petroleum Prices Slow Nepal’s Construction Sector

The sharp rise in petroleum prices has begun to leave visible marks on Nepal’s construction sector, with declining infrastructure activity now directly affecting fuel consumption across the country. Although petroleum imports continue to rise in value, actual daily consumption of diesel and petrol has started to weaken, particularly in the Madhesh region, where large-scale construction activity has traditionally driven strong fuel demand.

According to the Madhesh Provincial Office of the Nepal Oil Corporation (NOC), daily sales of both diesel and petrol have declined noticeably in recent months. The office previously sold an average of around 5,000 kilolitres of diesel and nearly 2,000 kilolitres of petrol each day. However, current figures show diesel sales dropping to around 3,500 kilolitres per day, while petrol sales have fallen to nearly 1,000 to 1,500 kilolitres daily.

Officials say the decline is closely linked to rising fuel prices, which have increased operational costs across almost every sector of the economy. NOC Madhesh Provincial Chief Ashok Sah said higher prices have naturally reduced consumption, as businesses and consumers alike are trying to limit unnecessary fuel use. According to him, the current market trend shows people becoming more cautious about transportation and industrial fuel spending.

The impact appears to be most severe in the construction sector, which is one of the largest consumers of diesel in Nepal. Construction entrepreneurs say soaring petroleum prices have significantly increased project costs, making it difficult for contractors to continue work at the previous pace. As a result, many builders are reportedly operating machinery only when absolutely necessary.

Former President of the Federation of Contractors’ Associations of Nepal, Ravi Singh, said construction companies that once consumed nearly 20,000 litres of fuel every month are now using substantially less. He explained that rising fuel prices, combined with expensive raw materials, have placed heavy financial pressure on contractors already struggling with delayed government payments and slow project implementation.

The increase in bitumen prices has added another layer of burden to the sector. According to Singh, bitumen — one of the key materials used in road construction — previously cost around Rs 80 per kilogram, but has now crossed Rs 155 per kilogram. Such a sharp rise has significantly increased road construction expenses, forcing many companies to slow down projects or delay expansion plans.

Despite the decline in domestic consumption, Nepal’s petroleum imports continue to rise in monetary terms. Data from the Birgunj Customs Office show that petroleum products worth Rs 148.16 billion were imported during the first nine months of the current fiscal year. During the same period last year, imports stood at Rs 140.10 billion. The increase suggests that Nepal is spending more money on fuel imports mainly because of higher international prices, even though actual consumption growth appears weak.

Among the imported products, diesel accounted for the largest share, with imports worth Rs 78.79 billion during the review period. Petrol imports stood at Rs 31.08 billion. The figures indicate that diesel remains the backbone of Nepal’s transportation and construction economy, despite the recent slowdown in demand.

Meanwhile, Nepal Oil Corporation officials maintain that supply remains stable. The Amlekhgunj depot currently has storage capacity for 17,748 kilolitres of petrol and 25,843 kilolitres of diesel. Existing reserves are estimated to meet petrol demand for seven days and diesel demand for four days.

The office continues to import fuel smoothly from the Indian Oil Corporation through the cross-border petroleum pipeline. In each cycle, around 11,000 kilolitres of petrol and 24,000 kilolitres of diesel are brought into Nepal through the pipeline system. Deputy Manager Jawahar Kumar Yadav said there are currently no supply disruptions from India, and imports remain regular despite rising prices.

Economists say the current situation reflects a deeper slowdown in economic activity rather than simply a temporary decline in fuel usage. When diesel consumption falls sharply, it often signals reduced transportation movement, weaker industrial activity, and slowing infrastructure development. In Nepal’s case, the decline in construction-related fuel use may also indicate growing liquidity pressure and reduced confidence among contractors and private investors.

The trend has raised concerns about the broader pace of economic recovery. While higher import bills continue to pressure foreign currency reserves and the national trade deficit, weaker domestic fuel consumption suggests that economic momentum on the ground remains fragile. Analysts believe infrastructure spending, government capital expenditure, and stable fuel pricing policies will play a crucial role in determining whether fuel demand and construction activity recover in the coming months.