Fuel prices drop drastically but transportation prices need to do better

A common complaint of people is that when fuel prices move up, the vehicle and transportation fares also move up, but when fuel prices come down, the drop is not as sharp.

People anticipated that as fuel prices fell drastically over the last few months due to Indian Oil companies finally selling fuel to Bhutan at the same price as Nepal and removing bulk charges, the price of transportation and hence products would also fall drastically, but the drop is not the same as the drop in fuel prices.

Last year in March 2022 the cost of petrol in Thimphu was Nu 95.21 per liter and diesel was around Nu 100.50 per liter.

Currently, the price of petrol in Thimphu is Nu 66.05 per liter as of June 16 at midnight, while the price of diesel is Nu 64.24 per liter through June 30.

This is a drop of around Nu 30 for petrol and Nu 36 for diesel compared to last year.

Diesel is the most common fuel used in Bhutan for transportation of goods and people and though prices dropped by around 36% the drop in transportation rates is not as steep.

A 36-year-old Eicher truck driver with 13 years of driving experience, Ugyen Namgay said, “When the price of fuel was around Nu 90, when we used to go to Trashigang from Thimphu, we used to charge around Nu 45,000, and now that the price of fuel has gone down, I charge Nu 37,000 to go to Trashigang.”

The drop is only around 17%.

The shortest route travelled by the truckers is from Phuntsholing to Thimphu.

53-year-old jumbo driver Gembo said, “I always travel from Phuentsholing to Thimphu. I used to charge Nu 23,000 when the price of diesel was Nu 100 but now, I only charge Nu 20,000.” This is a drop of only 13%.

The hope is that a drop in transportation prices will lead to a drop in the prices of goods, but shopkeepers say the transportation charges are still high.

An employee of shop 8/11 in Thimphu said, “Transportation cost does play a role in determining the price of the goods, and the recent decrease in the price of fuel has not dropped our transportation cost because we are still paying Nu 21,000 to Nu 24,000 per truck from Phuentsholing.”

He said, “The transportation cost is still high since the drivers say there is a road block, they have to halt for the night and take a different route.”

The owner of Phuntsho Kuenphen Enterprise said, “The price of the goods does depend on the cost of the fuel and other factors as well. If the transportation cost is less or more, we add the minimum percentage of transportation cost. Upon determining the cost of the product, we will calculate how much tax we have to pay and add it to the cost of the product.”

Yangchen, a vegetable vendor, explained that the price of fuel has always affected how much it costs to carry items from Phuentsholing.

She said, “We used to be charged Nu 100 each sack of our goods, but it escalated to Nu 150 to Nu 200 due to citing increase in the price of fuel. Despite the drop in fuel prices, the cost of transportation has not decreased. We have always been charged more.”

She said that the cost of the vegetables depends not only on price of the vegetable charged by farmers and its availability but also on the transportation cost.

The sharp drop in petrol prices has also not seen a sharp drop in taxi rates.

Karma, a taxi driver, stated, “The cost of the fare we charge does depend on the price of fuel. Normally, the Bhutan Construction and Transport Authority (formerly RSTA) sets the taxi fares, however, when the cost of fuel is higher, taxi drivers charge customers accordingly.”

“According to the distance we travel, we typically charge an additional Nu 10 to Nu 20 when fuel prices are higher. For instance, if the local charge was Nu 100, we used to charge Nu 120 when the fuel prices were up,” he added.

It was justified that they negotiated with the customers while charging the extra amount.

He claimed that taxi drivers do decrease their fares if there is a decrease in fuel prices.

He said another factor that leads the taxi drivers to charge a little more is when there is an increase in rent and prices of goods.

However, regular taxi users say that they have not noticed any drop in the taxi fares which are the same.

Bus driver Chandra said, “Although there is a decrease in the fuel price comparatively, this does not determine the price of the ticket; it was Nu 200 before and it is still Nu 200 with the drop in the fuel price.”

Though truck drivers have the autonomy to determine their charges, buses and taxis do not as BCTA reviews the price every six months.

An official from BCTA said, “We review the price every six months, and it will come into effect on the 1st of February and the 1st of August. This is to get a complete picture of operational costs.”

Sections 222, 223 and 225 of the Road Safety and Transport Regulations 2021 state that the Authority shall approve schedules and fares for commercial passenger vehicles. Fares shall be reviewed and revised on a six-month basis in February and August of every year using the fare computation model in Schedule VIII of the Regulations.

The official from BCTA said, “When the Taxi and Bus fare was revised on February 1st, 2023 there was an upward increase due to an increase in the operational cost, which includes fuel prices, spare part prices, billing, etc.”

The next Bus and Taxi fare revisions are expected to happen on August 1, 2023.

It is with that being clear not enough of the benefits of the fuel price decrease is being passed on to passengers and consumers, the reporter asked the Office of Consumer Protection (OCP) regarding how they supervise truckers and companies to make sure they are not overcharging clients after a drop in fuel prices. In response, a representative said that the OCP does not fix prices because they are determined by market forces.

It said if a regulatory body sets the price and the firms don’t abide by it, the OCP steps in and investigates cases of deceptive advertising and consumer deception.

If the benefit of the drastic drop in fuel prices are not being passed on fairly by transporters or even shops, then the government may have to do a study and find out how it can be passed on.

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