Fuel price hiked but petrol still cheaper by Nu 9.48 and diesel by 7.33 due to Nov 2017 excise cut

In line with sharply increasing international crude prices the Department of  Trade announced another hike in petrol and diesel prices effective from the midnight of 1st June 2018.

The price of petrol has gone up by Nu 3.23 to Nu 3.28 depending on the region and that of diesel has gone up by Nu 2.52 to Nu 2.57 per liter.

This means that the price of petrol in Thimphu is now 65.39 per liter and that of diesel is Nu 63.29 per liter up from Nu 62.12 for petrol and Nu 60.74 for diesel since 16th May 2018.

However, both petrol and diesel would be much more expensive without the cabinet cutting fuel prices in November 2017 by removing the excise duty.

Without the cabinet’s November 2017 move removing the duty on fuel the price of petrol today would be Nu 74.87 per liter in Thimphu instead of the current Nu 65.39 and the price of diesel would be Nu 70.62 instead of the current Nu 63.29.

This means a saving of Nu 9.48 per liter for petrol and Nu 7.33 a liter for diesel even at today’s prices.

So each time a Bhutanese fuels at the pump he or she still saves 12.66 percent per liter on petrol and 10.38 percent per liter on diesel.

In 10th November 2017 the cabinet had cut the price of petrol from 63.56 to Nu 54.11 and the price of diesel from Nu 57.88 to Nu 50.57.

At the time of the cabinet’s cut in November 2017 the international price of oil was around USD 62 a barrel which has now climbed to around USD 77 a barrel an increase of around USD 15 or around 24 percent from the November prices.

The cabinet’s price reduction was at the time seen as passing on the ‘benefits of removal of excise duty collection’ under the new GST regime. However, in reality what had simply happened was that there were no additional benefits incurred to the government.

Earlier, before GST, the Indian government collected the excise duty on petrol and diesel exports to Bhutan which was around 12 to 10 percent and then handed the revenue to the Bhutanese government which got it as internal revenue.

After India did away with the excise duty regime and brought in GST, the Bhutanese government had the clear option of imposing taxes on the import of petrol and diesel to make up for the lost excise revenue, which is an important component of the government revenue.

However, the government consciously decided to not impose any fuel taxes to replace the excise duty on fuel and instead let the Bhutanese people enjoy the lowest fuel prices in the region, as an incentive to the economy and to also bring down inflation.

This was made possible in large part due to the government being able to balance its books well with higher revenue from other sources and an improved economic performance.

The evidence of this fact is visible in the much higher fuel prices in neighboring India from where Bhutan actually imports its petrol and diesel.

In Delhi the price of petrol as of 1st June 2018 was Nu 78.29 per liter and for diesel it was Nu 69.20 per liter.

In Mumbai the price of petrol was Nu 86.10 per liter and that of diesel was Nu 73.76 per liter.

This means that the the price of petrol in India’s commercial capital, Mumbai is Nu 20 more expensive per liter than in Thimphu for petrol and Nu 10 for diesel.