Inevitable Diesel price hike hits Bhutan

A drastic Nu 5 per liter or 12% hike on diesel price in the country starts today

Bhutan is directly hit by India’s first diesel price hike, a substantial increase by Indian Rupee (INR) 5 per liter after more than a year. As usual Bhutan felt the pinch today that is 24 hours after the price hike was effective in India.

A senior official with the department of trade (DoT), Tshering said “It will come into effect from midnight (yesterday)”.

The price for diesel has now increased from Nu 41.75 yesterday to Nu 46.74 today in the capital.

Regional trade director in Samdrup Jongkhar Karma Dukpa said the difference in price hike will vary from “region to region”. While the hike will be lower in border towns, it will be much higher in the regions that are far away from the borders owing to transportation expenses.

However, all the fuel stations in the capital didn’t see any additional rush for diesel as many were not aware of the hike.

Since the price has increased at source, Tshering of DoT said the hike is “inevitable”. “We have no other alternative than to increase the price,” he added. “With no resources, refineries, reserves and no import of crude, we are 100% dependent on the Indian government’s decision,” he explained.

The diesel price hike will have massive implications given the fact that most heavy-duty machineries, public transport service vehicles in the country run on Diesel-powered engines.

Price hike on petrol causes little or no increase in the prices of food items but a sudden inflation is now expected to be triggered since the goods carriers of the retail-outlets as well as the trucking industry in Bhutan are exceedingly dependent on diesel-run automobiles.

Chairman of the Singye Group of Companies, Ugyen Tshechup Dorji said “the increase in the prices will compel every business houses that requires diesel to immediately revise the whole company’s financial structures like the prices of their products”.

He said, “It goes without saying that overall impact will be very huge on anything that requires transportation or diesel”.

He said given an increase in the fuel price by more than 10% even the material costs will increase and there will be huge impact on factories using machines such as stone crushers.

However, Secretary General of the Construction Association of Bhutan (CAB), Chheku Dukpa said “I feel like there will be little impact on contractors compared to civil servants who are dependent on salaries”.

He said majority of the contractors are currently handling government projects and the overhead costs are supposed to be borne by the government. “So when the budget is from the government, the impact is also on the government,” he explained.

Diesel, a heavily subsidized fuel in India is used mainly by farmers and in trucks and buses and has become increasingly popular as many middle class families look to cut their fuel bills.

“This is a cruel joke on the common man in the country. It has hit farmers hard during the peak paddy sowing season. We will not allow this hike. We will not allow this government to loot the common man like this,” BJP Vice President Mukhtar Abbas Naqvi was quoted as saying by NDTV.

Similarly, the hike will not spare the Bhutanese farmers as well, especially in the western region that have adopted partial mechanized farming such as the use of power tillers, rice mills and diesel cars for transport.

The Gup of Shengana village in Punakha, Samten Phuntsho said farmers will be hit hard with such “huge” hike in the price of diesel. “The primary victims are always the common people like us,” he said.

Samten Phuntsho said, although the rice plantation season is over, there are a host of agricultural activities that rely on machines. “We require fuel to till our land to cultivate crops including vegetables which needs to be transported for supply and sale in major towns,” he explained.

Chairperson of the economic affairs committee of the National Council, Rinzin Rinzin said any increase in fuel price will automatically increase prices of goods and services. “An increase in the fuel price by more than 10% means the cost of goods will also increase by 10%,” he said.

The increase in cost of the government’s construction activities such as hydropower projects will work out to millions given a 10% hike in fuel price.

However, Joint managing director for Mangdechhu Hydroelectric project Authority Chencho Tshering said majority of the heavy duty machineries used by the project is dependent on electricity except for a few such as transport trucks. “We are buying around 15 megawatts (MW) of electricity approximately, for peak times and some 8MW generally,” he added.

Unlike petrol, LPG and kerosene, Bhutan doesn’t enjoy any subsidy on diesel and the rates in India are equally applicable in Bhutan.

Indian and international media reports stated the price hike is “aimed at reining in the fiscal deficit and staving off the threat of becoming the first in the BRICS (Brazil-Russia-India-China-South Africa) group of emerging economies to be downgraded to junk”.

A cabinet committee by the Indian Prime Minister reportedly agreed to raise diesel prices by 12% and restricted sales of subsidized LPG cylinders to six per consumer annually. It left petrol and kerosene prices unchanged.