Bulk of Mangdechu revenue will go to finance pay hike

The annual implication of the pay commission’s pay hike is Nu 4.238 bn a year and 17.913 bn in the next four years. However, if increased salary hike grants to be given to the autonomous Royal University of Bhutan and other institutions and increased student stipends are included then the total cost implication is around Nu 20 bn.

With such a huge cost implication in the 12th plan, the pay commission report identifies the 720 MW Mangdechu Hydroelectric Project as the main source of revenue to finance the civil service and public servants pay hike.

The report predicts Nu 19.625 bn in Mangdechu project revenue coming in the coming four financial years from 2019/2020 to 2022/23.

This is compared to the additional pay and allowances expenditure of Nu 17.912 bn in the same period.

In addition to the Mangdechu project the pay commission identifies other sources of funding under the larger head of additional sources of funding coming to a total of Nu 10.984 bn in the coming four financial years.

However, this funding head is doubtful in several areas. It projects Nu 1.8 bn in revenue by imposing a five percent green tax on fuel. It is far from sure if the cabinet will agree to tax fuel. It then makes the other assumption that the cabinet will agree to the monetization of vehicle quotas and hence lead to collection of Nu 2.411 bn in vehicle monetization taxes.

This head also assumes that the government can levy a Nu 500 per head sustainable development fee on regional tourists to raise Nu 1.7 bn in the coming four years.

However, the Tourism Council of Bhutan currently has no such plans and moreover it would be a hugely complicated and sensitive move that cannot be done overnight.

In another leap of faith, the report says that GST implementation in Bhutan from 2021 to 2023 will lead to Nu 4.442 bn in additional revenue. This assumption looks like a brave one given India’s experience with GST.

In addition, it says the government has also embarked on promoting financial thrift with the institution of Finance Committee at the Agency level to ensure optimal utilization of the limited resources.

The report says that it has also recommended rationalizing the mileage and minimum travel distance for purpose of TA/DA besides doing away with the mobile purchase allowance. These initiatives and recommendations are expected to generate some savings.

At the end of the day the only solid source of additional revenue to finance the civil servants pay hike comes from the Mangdechu project.

This follows a long tradition of generous hikes being given with the inauguration of Chukha and Tala projects in the past.

This is in turn also raises the question if the benefits of Bhutan’s hydro projects will accrue mainly to civil servants and be used mainly to fund their pay hikes.

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