Trade Dept announces formation of committee to review LPG prices

In a press conference, the Joint Secretary, MoEA, Sonam P Wangdi said, “MoEA has initiated the formation of multi-task force to review the entire Petroleum Products PoL pricing structure and other elements associated with the PoL sectors.” The formation of multi-task force is under process involving officials from different sectors and agencies, he added.

He added that the profit margin for the dealers, at 2 percent of invoice price, is considered as one of the lowest in any industry and is comparable to the lowest in India and much lower in bordering states of West Bengal and Assam. On an average, price of diesel is Nu 5 to 6 lower per liter and price of petrol is Nu. 9 to 10 lower per liter in Bhutan.

The pricing also ensures that dealers operate a viable business. In 2013, the BoD/BoC made a net profit of Nu 34mn, DPCL earned Nu 6.30mn, whereas DPD suffered a loss of Nu 12.50mn. Therefore, he said the profits are extremely low compared to the turnover of Nu 8bn. The principal companies, Indian

Oil Corporation Ltd. and Bharat Petroleum Corporation Ltd., have a market share of 50.54 percent and 49.45 percent respectively in Bhutan.

He said that the PoL pricing was approved during the 56th session of the Lhengye Zhungtshog , which was held on 28 December 1999. In 2009, outsourcing to independent consultant was reviewed and approved by the Ministry of Economic Affairs (MoEA). This was after a RAA report found that between 1999 and 2014 the private LPG distributors took Nu 29 mn of loading and unloading costs and Nu 112 mn in home delivery charges they should not have collected.

The press conference, however, did not address the issue of the difficulty of people in getting new gas cylinders with a card system that keeps a family limited to one new gas every six years.

The trade officials said that the Government of India has allocated Liquid Petroleum Gas (LPG) quota of 1250 kiloliters (KL) per month and 15,000 KL per annum through the Indian Oil Corporation Ltd. (IOCL) to Bhutan since 2005.

The quota grant is distributed in Bhutan by three main dealers,

Bhutan Oil Distributors (BOD), Druk Petroleum Corporation Ltd (DPCL) and Damchen Petroleum Distributors (DPD) by means of a competitive system through 46 retail outlets. Among the 46 retail outlets, BOD and BOC together control 25, DPCL controls 8 and DPD controls 13 retail outlets.

Petroleum (PoL) products worth Nu 8.432bn was imported in 2014, comprising of Nu 5,911.3 8mn for diesel, Nu 1,819.94mn for petrol, Nu 182.95mn for LPG and Nu 74.60mn for kerosene. The pricing of PoL products in Bhutan is based on the Indian framework. It is moderated to ensure the most affordable price to the consumer and viability of the dealers.

According to a press release from the Department of Trade (DoT), kerosene distribution has been streamlined since September 2007 through a coupon system, in which a monthly quota of 10 liters is given to every household. Since the introduction and implementation of the coupon system, the trends of people using kerosene has been drastically reduced by about two thirds of the allotted quota.

In addition to the coupon system, the industrial kerosene was introduced in 2007 for all commercial activities, whereby commercial firms requiring industrial kerosene can place their orders to PoL dealers.

The GoI has also allocated a quota of 700 metric tons of LPG per month, which weighs about 14 .2kg.

Out of 700MT, 500MT per month has been allocated to the western region and the DoT has identified the Raninagar LPG bottling plant, IOCL, West Bengal as the lifting point.

Moreover, 100MT each per month has been allocated to both the eastern and central regions, with the lifting points at Sarpara, Guwahati, Assam for the eastern region and Bongaigoan, Assam as the lifting point for the central region. As a mean to ease the shortfall of quota, DoT also introduced industrial LPG in 2012, for all the commercial activities.

As per the 2014 Import Bill, DoT has registered 30,000 cylinders (516MT) of LPG distribution all across the nation. The coverage of the PoL services has enhanced by 155 percent with the increase of retail outlets from 18 in 2003 to 46 fuel and gas stations in 2014.

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