As you may be aware, Bhutan Power Corporation has submitted a proposal to revise the domestic power tariff rates from July 2013 to July 2016. This is laudable in principle, as the Bhutan Power Corporation is seeking to both increase Government revenue and curtail the wastage of power. However, what is not appreciated and, in fact, rather alarming is the size of the proposed increase in the tariff rates. The proposal is worrying, to say the least.
The proposed rates, if accepted by the Bhutan Electricity Authority, will have a huge financial impact not only onpower intensive industries, but also on the average Bhutanese citizen. It will effectively deal a crippling blow tothe private sector – which, we are told, is the country’s engine of growth.
With the proposed tariff structure, the average Bhutanese home will have to spend double the amount on their electricity usage. With the monthly electricity bill already comprising a significant portion of an average family’s finances, this revision will raise the cost of living in Bhutan and make electricity a luxury commodity for the average Bhutanese.
It is ironic that we, a nation with surpluselectricity,would prefer to export electricity at cheap rates while pricingit beyond the reach of a vast majority of its own citizens.
The table below shows the impact of the proposed tariff structureacross various customer categories –
BPC’s financial performance over the last five years has been nothing short of outstanding, having declared an average profit after tax of Nu. 837.8 billion over the last five years. Being a monopolylets you do that. BPC has an average profit margin of 26% over the past five years. In comparison, the average business entity operating in a competitive environment must make do witha proft margin of 10% to 15%.
The stand taken by the owner of BPC on this issue, the Druk Holding and Investments (DHI), has also beenextremely disappointing. One of the main reasons for DHI’s formation,as enshrined in its charter, is to lead, complement and spearhead the growth of a dynamic private sector. The way the tariff proposal has been formulated – if approved – will lead to the closure of a number of business houses rather than promoting the private sector. This comes at a time when the Bhutanese economy is already in dire straits with the Rupee shortage and credit crunch. A move like this will do nothing but aggravatethe situation further.
We hope that all the agencies involved in the tariff revision process see the bigger picture and use their common sense and arrive at a tariff that,while enhancing BPC’s revenue, also leaves some breathing space both for the ordinary citizens of the country and the private sector.