The Bhutanese Leading the way.
There has been a major fuel price drop due to the move
Slash in Kerosene prices too
You may have noticed these days that when you go to fuel up your car, you are getting a lot more fuel for the same amount of money.
This is mainly because Indian Oil companies have drastically reduced oil prices to Bhutan coming to as much as Nu 30.67 per liter for petrol and Nu 25.38 per liter for diesel.
This not only due to the international dip in oil prices, but it has more to do with charging us the same price as Nepal and also removing other charges.
Effective from 1 April 2023 the oil companies finally started selling fuel to Bhutan at the same rate as Nepal which is cheaper by around Nu 12 for petrol and Nu 13 for diesel. In addition to that is the combination of lower oil prices and removal of other charges which is another combined discount of around Nu 18 for petrol and Nu 12 for diesel.
The other charges are likely to be the commercial bulk pricing for Bhutan that had jacked up oil prices.
When one compares the oil prices, last year on 1 April 2022 the international price of Oil was USD 104 a barrel (159 liters in one barrel) but today it is USD 77 a barrel. This drop, however, only explains around Nu 10 drop per liter out of the Nu 30.67 per liter drop for petrol and Nu 25.38 per liter for diesel price drop compared to Delhi.
This still leaves Nu 20.67 per liter drop for petrol and Nu 15.38 per liter drop for diesel which is likely due to the combination of the same price as Nepal and removal of bulk pricing.
Before 1 April 2023 the price of petrol in Thimphu was Nu 82.04 and diesel was Nu 84.10 but as of 1 April 2023 it dropped to Nu 70.97 for diesel and Nu 69.38 for petrol.
Currently the price of petrol in Thimphu effective from 16 June midnight is Nu 66.05 per liter and for diesel it is Nu 64.24 per liter which are a combination of the lower Nepal prices given to Bhutan, along with removal of bulk charges and a slight dip in oil prices.
Currently, the price of petrol in Delhi is INR 96.72 per liter and for diesel it is INR 89.62 per liter.
This means petrol in Thimphu is cheaper by Nu 30.67 per liter than Delhi and diesel is cheaper by Nu 25.39 per liter than Delhi.
Before the recent cuts the price of fuel in India and Bhutan had become almost the same with India even becoming cheaper in Diesel.
Last year in March 2022 the cost of petrol in Delhi was INR 95.41 and in Bhutan it was Nu 95.21 per liter.
Diesel in Delhi in March 2022 was INR 86.67 but in Thimphu it was more expensive at around Nu 100.50 per liter.
The dramatic drop in prices explains the long lines of Indian trucks at Phuentsholing and other border regions to fuel up in Bhutan.
Senior Indian official confirms price drop
A senior Indian official on the condition of anonymity in response to questions by the reporter on the matter said, “As of 1 April 2023, IOCL is supplying POL products to Bhutan at the same price point as Nepal. This is being done since this is better priced for the consumer.”
The official further added that the recent drop in retail prices in Bhutan can be attributed to the lower invoice price from India.
The invoice price is the price at which Indian oil companies sell the oil to Bhutan and it is on this invoice price that Bhutan has to add 5% sales tax, 5% green tax, depot surcharge, transportation, shrinkage, operating cost, product loss and others which gives the final price at the pump.
The invoice price is changed in the middle and beginning of every month.
On 16 March 2023 the invoice price of Thimphu was Nu 69.39 for petrol and after adding the above local taxes and charges it was Nu 82.04 per liter at the pump.
Similarly, the invoice price for diesel was Nu 72.47 and after adding the taxes and charges it became Nu 84.10 per liter at the pump.
On 1 April 2023 when Bhutan was to get the oil at the same rate as Nepal the invoice price for petrol dropped to Nu 58.08 for petrol and (69.38 at the pump after local taxes and charges) and Nu 60.67 for diesel (70.97 at the pump after local taxes and charges).
Last year in 1 April 2022 the invoice price for petrol was Nu 79.73 for petrol becoming 93.75 at the pump in Thimphu and Nu 86.97 for diesel becoming Nu 100.65 at the pump.
The senior Indian official also indicated that apart from the Nepal price drop there was also a general drop given to Bhutan after India’s Ministry of Petroleum and Natural Gas started discussing an MoU proposed by Bhutan on fuel prices breakdown and supply.
This is where the other bulk charges must have been done away with too.
Stories by The Bhutanese
The Bhutanese in a series of exclusive stories on the issue since April 2022 pointed out two things.
First, that Bhutan should be getting fuel cheaper by Nu 30 to Nu 35 per liter since we should not pay any Indian taxes or hidden charges.
Secondly, Nepal has been buying cheaper petrol and diesel than Bhutan for decades.
Based on the stories, the former Ministry of Economic Affairs took up the issue with its counterparts and also involved the Ministry of Foreign Affairs.
The then MoEA minister Loknath Sharma (currently Minister for Energy and Natural Resources) took up the issue with his counterpart in his visits to Delhi, Kolkata and Bengaluru.
The former MoEA also formulated an MoU on selling fuel which gained in principal acceptance by India’s Ministry of Petroleum and Natural Gas in March 2023, but was awaiting to get political clearance at the higher levels in the ministry and eventually the Indian Cabinet.
It all started when this reporter in November 2021 pointed out to the MoEA Minister that Bhutan maybe overpaying for fuel and sent the break up and some figures to the minister looking for a response.
The minister asked the Department of Trade to look into it and after three months of calls and letters the Indian Public Sector Undertaking (PSUs) oil companies Bharat Petroleum Corporation Limited (BPCL), Indian Oil Corporation Limited (IOCL) and Hindustan Petroleum Corporation Limited (HPCL), assured that there was no overcharging, but declined to give the break up of fuel costs, including to the minister.
The Trade Department which had been used to unquestioningly accepting the price invoice sent from Indian oil companies for decades could not pursue the matter further at the time.
The Bhutanese did its own investigation into the issue and published its first article on the issue on 2nd April 2022 pointing out that more than half the price of fuel in India is due to central and state government taxes which is not applicable to Bhutan. So Bhutan should be getting the fuel cheaper by around Nu 30 to 35.
It pointed out that the cost of petrol in Delhi was INR 95.41 in March 2022 and in Bhutan it was Nu 95.21 per liter when Bhutan’s price should be much cheaper.
The paper in its second article on 9 April 2023 pointed out that Nepal is getting cheaper fuel than Bhutan from the same suppliers which is around Nu 13 cheaper per liter for diesel and around Nu 12 cheaper per liter for petrol. This is taking into account the currency difference too.
This was going on for decades with no one in Bhutan aware about the issue.
The difference in the fuel price with Nepal alone meant that every year Bhutan was paying more than Nu 1 billion more for fuel than it should.
This was followed by 11 more articles and an Editorial by this paper pointing out to various facets of the issue as well as giving updates from April 2022 to March 2023 with the latest development being a draft MoU in Delhi.
Nu 2 bn to Nu 3.3 bn saved a year
The recent price slashes for petrol and diesel for Bhutan when compared to Delhi is 31.71% for petrol and 28.31% for diesel.
In 2022 Bhutan imported Nu 11.39 bn worth of petrol (2.638 bn) and diesel (8.752 bn). Going by the 2022 import figures and the above discount Bhutan stands to save Nu 3.314 bn a year.
In 2021 Bhutan imported Nu 8.348 bn of petrol and diesel and if the discount is applied here then the saving is still Nu 2.430 bn a year.
If your monthly fuel bill is Nu 2,500 or Nu 30,000 annually then you will save Nu 9,513 for petrol vehicles and Nu 8,493 for diesel vehicles in a year with the discount.
If one compares the 1 April 2022 invoice price to 1 April 2023 invoice price then the savings are around Nu 3.1 bn.
Now even if you discount the Nu 10 per liter of fuel price reduction due to a dip in international prices the cut for petrol still comes to 19.99% for petrol and 17.16% for diesel due to the Nepal price and removal of bulk pricing.
Comparing it to the 2022 fuel import data the savings is still Nu 2.064 bn a year.
Fuel is Bhutan’s largest import and the biggest drain on the foreign reserves. Any reduction in prices will positively impact the balance of trade, reserves and inflation.
The senior Indian official acknowledged that apart from the government follow up, the stories by The Bhutanese had an impact on throwing light on an issue which senior Indian officials themselves were not aware about. They acted when the issue came to their attention.
It is interesting to note that the Indian oil companies reduced the oil price on 1st April 2023 to the same level as Nepal, just before His Majesty The King paid a state visit to India from 3 to 5 April 2023.
Slash in Kerosene prices
The cut in 1 April 2023 was not only for petrol and diesel but there was sharp reduction in Kerosene prices too. The price of kerosene was cut Nu 9.38 per liter which is a 11.66% cut.
Earlier it was Nu 80.4 per liter at the pump and after the cut it became Nu 71.07 per liter.
In 2022 Bhutan imported Nu 73.64 million (mn) worth of Kerosene and it is used mainly in rural areas but also in urban areas for heating.
Draft MoU
The draft MoU of March 2023 between the two sides on pricing says ‘GoI will facilitate export from India to Bhutan at ex-factory price excluding all domestic taxes and levies.”
It also says that GoI shall arrange for the concerned PSU to provide detailed invoice break up every fortnightly as when requested by the RGoB.
The other purpose of the MoU is uninterrupted supply of fuel. Here the MoU says ‘GoI shall facilitate the uninterrupted flow of MS, HSD, LPG, Lube, Grease, SKO, FO, LDO, ATF, Bitumen and any product as per mutual agreement.’
The third aim is to get fuel from multiple entry points to Bhutan for fuel trucks apart from Phuentsholing, Gelephu and Samdrupjongkhar.
Here the MoU says, “GoI shall mandate OMCs for delivery of POL and related products through mentioned 9 ports of entry or any other port as mutually agreed.”
No official information yet
Meanwhile, the Department of Trade is still not yet officially informed by Indian Oil companies about the 1 April 2023 move to give Bhutan the same prices as Nepal and the removal of bulk pricing. This is understandable in some respects as a written communication indicating this would be admitting that Bhutan was being charged more for fuel by the oil companies for decades.
From the information available it looks like India’s central government stepped in quietly to ask the Indian Oil companies to correct the anomaly, and they did it in a low key manner.
With the current low prices in fuel the government has a host of options at hand. It, like Nepal, can add a surcharge on the low fuel prices to raise much needed revenue or, on the other hand, it can ensure that transportation prices are reduced for buses, taxis and goods carriers which in turn will bring down inflation and the prices of goods.
The MoU, once finalized, can also be explored to see if there can be additional price reductions in the future, though the current cut is a big win by itself.
Note: Some more data has been added here in addition to the print version.
