Bhutan to gain more by selling electricity cheaper within the country than exporting it at higher rates say business houses

One of the main arguments for a domestic tariff hike by Bhutan Power Corporation (BPC) and Druk Green Power Corporation (DGPC) is that it is more profitable to export electricity at higher rates than have it used at lower rates by the domestic industry.

The export figures also back them up as their revenue earning from exporting electricity is higher than those earned from the domestic industry.

However, some businessmen who presented their findings to the Bhutan Electricity Authority (BEA) say otherwise.

They say that though revenue earning from exporting electricity will be slightly higher, the reality is that the resultant taxes gained from the industry not only make up for any loss in not exporting the power, but also turn a handsome profit.

They say this is not even considering other benefits like employment generation and wealth creation in the country.

The businessmen said that if BPC and DGPC’s current domestic tariff rates were accepted then it would be equivalent to killing the golden goose that laid the golden eggs as all industries would have to shut down.

The businessmen have taken a 2009 joint report of the Ministry of Economic Affairs and the Royal Audit Authority and updated some figures.

The 2009 report was commissioned by the National Assembly to the see the net gain or loss of power subsidy given to the domestic industry.

The report had concluded saying, “The quantifiable benefits to the Government in terms of dividends and taxes (CIT and PIT) outweigh the revenue foregone on account of sale of electricity to these industries.”

The report further says, “It may be noted that there are other benefits to the society/ national economy at large such as employment generated, infrastructure created, duties and other taxes levied on import, salaries and welfare expenses paid to employees, retained earnings which are ploughed back into the company, etc., which were not considered.”

The study looked at 15 high voltage industries in 2007 which consumed 95 percent of the industrial power then.

The study showed that the revenue lost in not exporting power was Nu 271 mn, but then again the 15 industries through corporate income tax, dividends and personal income tax contributed Nu 336 mn to the government exchequer. This meant a net gain of Nu 64 mn.

The businessmen have taken the figures from this report and updated it and also added some of their own findings.

The figure for nine heavy weight industries shows that in 2010, power companies lost around Nu 220.5 mn by not exporting the power at Nu 1.86 per unit and instead giving it to the industries at a cheaper tariff of Nu 1.67. However, these industries

contributed Nu 407 mn just in corporate income taxes, which meant a net gain of Nu 186 mn for the national exchequer.

Similarly in 2011, power companies lost Nu 140 mn by not exporting it at Nu 1.86 per unit and giving it to industries at 1.74 per unit. However, with the 9 industries contributing Nu 434 mn in CIT the net gain for the government was Nu 294 mn.

The study also says that 11,800 both direct and indirect jobs are created by the 9 high voltage and 12 medium voltage industries.

It also shows that in 2009, 2010, and 2011- the 24 industries earned INR 29.3 bn and spent INR 17.5 bn meaning INR 11.8 bn being retained within Bhutan. This meant an annual average INR retention of 3.9 bn.

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