Working Group from Petroleum Ministry expected to come this month to discuss fuel MoU and prices

A few months ago the Ministry of Foreign Affairs (MFA) and the Ministry of Economic Affairs (MoEA) drafted and sent an MoU to Delhi on fuel supply as an effort to have the first ever MoU between the two governments focusing mainly on the consistent supply and also lower pricing.

This came on the backdrop of several stories by this paper showing how Bhutan should actually be paying much lesser for fuel as Indian domestic taxes should not apply to us and also how fuel in Nepal sourced from the same PSUs in India was cheaper than in Bhutan. Nepal has an MoU with the Indian government on fuel supply.

The Department of Trade made several attempts to get a price break up of the fuel sent to Bhutan from the Indian PSU Oil Companies but they did not share the break up.

The MoEA Minister Loknath Sharma during his visit to Delhi a few months ago raised the need for an MoU with India’s Minister for Commerce and Industry, Piyush Goyal which was conveyed to India’s Petroleum Minister who responded that an MoU should be okay and should not be a problem. This was also after the MoEA Minister made it clear that Bhutan was not asking for any subsidies.

After Bhutan’s MoU was sent to India it has now been learnt that India’s Petroleum Ministry has agreed to sent a team of working group officials to discuss and negotiate the MoU.

The tentative date is sometime in November but the list of the delegation has not been shared yet.

The team was supposed to come here earlier but the visit had been postponed.

The delegation is expected to have technical people and at this stage no senior person is expected to come.

A senior official said, “The positive thing is they have received our draft and if they send a team then at least some negotiations will happen. Our point is the same. We just want to have an MoU so that there is no problem in the future.”

“For example, if we don’t sign an MoU at the government to government level and the PSUs act funny then we are in trouble. So supply is the main important part. For pricing also, we want to arrive at a pricing which is transparent as just now we feel that the pricing is not transparent and even our dealers don’t know the pricing module exactly and there is no break up,” the senior official added.

The MoU sent from Bhutan earlier basically enshrines that there will be continuity and consistency of supply of not only petrol and diesel but also jet turbine fuel for airplanes, kerosene and other industrial grade fuels, especially keeping in mind about what is happening around the world and Bhutan’s inability to import from other countries. 

The MoU importantly mentions that the price will be an ex-factory price excluding all taxes and levies and when the PSUs dealing with Bhutan would give invoices every fortnight with proper price break ups.

This is important as the ex-factory price essentially means the cost of the raw crude, cost of processing, cost of transportation and other administrative costs after which fuel to Bhutan should not have any other levies.

If this is agreed to and followed in letter and spirit, then fuel prices to Bhutan should come down.

The MoU also lists multiple entry points for fuel to enter Bhutan through all entry points as currently they enter only through a few places like Phuentsholing, Gelephu and Samdrupjongkhar. This leads to fuel re-routing at times which adds to cost and time.

During his Delhi visit the minister was told by some Indian officials who enquired with the PSUs that Bhutan had been charged bulk pricing for a long time.

Lyonpo had said Bhutan’s request is to not charge Bhutan with bulk pricing as it is higher than other prices, and at the same time Bhutan is also not asking for any subsidies.  

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