Indian media has reported that the subsidy on cooking gas and kerosene that was withdrawn on July 1 will be reinstated next month, but the trade officials in Bhutan say they have not received any official information on the matter.
The Indian Oil Corporation (IOC) was informed by the Ministry of External Affairs (MEA), India, just a fortnight before Bhutan went to the polls on July 13, to withdraw the subsidy since it would not be reimbursing the subsidy to IOC.
Prime Minister elect Tshering Tobgay was quoted in the Economic Times asking India to, “Urgently re-start supplies of subsidized gas as it was impacting the poor section of the country.”
Another newspaper, Indian Express, reported that India’s foreign secretary Ranjan Mathai had instructed the petroleum ministry officials to reinstate the subsidy on both fuels from next month.
One of the Indian newspaper also stated that lowering of LPG and kerosene prices in Bhutan will be determined as discussed during a meeting of senior Indian officials chaired by foreign secretary, Ranjan Mathai held on July 19. The meeting was attended by the officials of Oil Ministry and Ministry of External Affairs.
The recent lifting of subsidy, which has doubled and tripled the price of the essential items, would significantly constrain Bhutan’s balance of payments with India. The subsidy element on the two items amounts to more than INR 500mn.
With the subsidy boosted over night, replenishing of cylinder cost about Nu 1,200 in Thimphu and kerosene Nu 55 per litre. Kerosene was Nu 16 per litre with the subsidy.
Earlier this month, the Indian ambassador to Bhutan said the move to lift subsidy came after the government discovered that there was a huge gap between what the Indian Commerce Ministry reported as exports to Bhutan, and what the Bhutanese Trade Ministry has recorded as imports.
Bhutan has a quota to raise 700MT of cooking gas a month and 1,250kl of kerosene a month.
The Indian ambassador even stated that the Chukha tariff will remain as it is today at Nu 2 per unit, and that the practice of Excise Refund would continue in accord with the 2006 trade agreement between the two countries.
According to Zee news, Ministry of External Affairs said that Bhutan’s 10th plan ended on June 30, for which the financial aids and subsidies allowed to Bhutan government, has to undergo fresh negotiation. It was mentioned that the subsidy cut had come as a weak before the election date, where most observers pointed that it was critical move made by India in reaction to the former PM Jigmi Y Thinley’s meeting with Chinese premier during the Rio summit. Leading Indian newspapers also interviewed the PDP president Tshering Tobgay on the matter. Tshering Tobgay reaffirmed the bond of friendship between Bhutan and India and said Bhutan will not undermine Delhi’s sensibilities and interests.
“I would like to reassure the people of India that Bhutan is fully cognizant of India’s sensibilities and interests, and will not in any way undermine them,” Tshering Tobgay was reported as saying in response to a question on Delhi’s reported reservations on last year’s meeting between Jigmi Y Thinley and then Chinese Premier Wen Jiabao in Rio.