Bhutan to propose fuel agreement between two governments to bring down prices

Officials from the Ministry of Foreign Affairs (MFA) and the Ministry of Economic Affairs (MoEA) have been doing research and having meetings on what can be done to change the current fuel pricing modality that will help bring down prices.

Now, the main proposal from Bhutan’s side is to have a government to government agreement between the Indian Petroleum Ministry and the MoEA on fuel, instead of the current system of MoUs between Indian Public Sector Undertaking fuel companies and private fuel distributors in Bhutan overseen by the Department of Trade.

“The agreement (MoU) that expired in 2020 needs to be updated. They have just been renewing it without any negotiation, but now we need to negotiate the terms of conditions and have an official agreement,” said Foreign Minister Lyonpo Dr Tandi Dorji.

“In the past I don’t know how they did it since 2016, but now we have a clear understanding that the price mechanism for us has been different so we need to negotiate,” said Lyonpo.

He said the MFA has asked the technical people from the Indian Petroleum Ministry to set a date for them so that they can talk with them.

He said the agreement in the past was with the PSUs like Indian Oil Corporation Limited, Hindustan Petroleum and Bharat Petroleum but now the aim is to do a government to government agreement between the Petroleum Ministry and the MoEA.

He said once those things are clear from their side then they will talk out the other details.

“Just now we are waiting to hear back from them on if they are amenable to have a government to government understanding,” said Lyonpo.

The MoEA Minister Loknath Sharma said that the MFA and MoEA decided that instead of writing directly to the GoI they have requested for a technical meeting with the Petroleum Ministry which the MFA is following up on.

The Technical meeting will also aim to get the PSUs for the discussion.

This is felt to be a better strategy than just writing to GoI and taking up the issue directly.

Lyonpo Loknath said, “From our side the experts are quite confident that it is (fuel pricing to Bhutan) under bulk pricing and it was not there earlier. We don’t know why it is under bulk pricing but the bulk pricing looks higher by Nu 10 or Nu 15 per liter than the normal pump price and so at least our effort has to be the ex-factory or ex-pump price rather than the bulk price.”

Lyonpo said they have bulk pricing mechanism with the Railways and big industries in India, but for Bhutan given the country to country relationship the request would be to do away with bulk pricing.

The MFA has suggested to the MoEA to do away with the current modality and come up with a new one. The MFA has studied various price modalities and options to see what is best for Bhutan including what would also be acceptable to the other side.

The MoEA is supposed to draft the draft agreement that would need to be discussed and hopefully signed.

This paper in a series of stories showed how Bhutan is being overcharged for fuel not only compared to pumps in India but also Nepal.

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