A Gift from His Majesty The King to the People - Drop in Petrol Prices

“The reduction of fuel prices was not passed down because of the fear in the reduction of the domestic revenue, but to honour His Majesty’s birthday, the government decided to pass the benefit to the people.”

A Gift from His Majesty The King to the People - Drop in Petrol Prices. (Source: http://www.kuenselonline.com)

In commemoration of the 62nd birth anniversary of His Majesty The Fourth Druk Gyalpo which falls on 11 Nov, the government yesterday announced that the prices of petrol would drop by Nu 10.29 a liter and diesel by Nu 7.75 a liter from 11:11 am.

At a press conference yesterday, Foreign Minister and officiating Prime Minister, Damcho Dorji, said the exemption on fuel comes after the Government of India (GoI) recently exempted the levy of excise duty on petrol and diesel.

Although all exports to Bhutan from India have become zero rated with the introduction of the Good and Services Tax (GST) by the GoI since July 1 this year, the excise duty on petrol and diesel was still levied and refunded to Bhutan.

Lyonpo Damcho Dorji said that the exemption at the source of excise duty on fuel imports would result in a 17 percent reduction in petrol prices and a 14 percent drop in diesel prices respectively.

“This is a gift from His Majesty The King to the people,” Lyonpo Damcho Dorji said.

Reduction of fuel prices to honour His Majesty’s birthday

“The reduction of fuel prices was not passed down because of the fear in the reduction of the domestic revenue, but to honour His Majesty’s birthday, the government decided to pass the benefit to the people.”

Lyonpo Damcho Dorji said that the exemption of excise duty would impact the national revenue with the removal of excise duty refund (EDR), the reduced level of sales tax (ST) and green tax (GT) collection as well.

He said that this would mean that the government would have to forego a revenue of Nu 1.514 billion in EDR, about Nu 94 million in ST and GT collection.

“Despite the significant loss of revenue to the national exchequer to the tune of about Nu 2.4 billion, the government had decided to pass on the full benefits of the excise exemption to the general public without imposing any additional taxes,” Lyonpo said.

Drop in fuel prices will stimulate the economy

“The drop in the prices will stimulate the economy by lowering the cost of transportation resulting in a drop in prices for consumer and industrial goods.”

The fuel imports from India is a major import item that accounts for Nu 7.369 billion worth of imports in 2016 besides the import of other goods and services.

The reduction in price is also expected to enhance competitiveness and productivity, which would be a major stimulant to further support a strong economic growth.

Lyonpo Damcho Dorji said that with petrol and diesel being the main drivers of the economy, a reduction in the prices would constitute the biggest economic stimulus ever provided by the government.

“This will benefit the economy through increased economic activities by enhancing the economic growth by 0.18 percent in one year. The tax base in the long run is expected to expand increasing tax revenue to the government.”

Lyonpo urged all businesses to make full use of the economic opportunities, comply with government rules and regulations to pay their fair share of taxes including agencies, entities, and all citizens to support the government’s decision.

He said that since the government is not resorting to any fiscal measures, the government appeals to all businesses to provide equivalent reductions in the prices of goods and services provided to citizens.

“The consumer price index is expected to be reduced by approximately 0.74 percent,” Lyonpo said, adding that the government has instructed the relevant sector agencies to ensure that it benefits all sectors of the economy.

The government would monitor for six months to assess whether the benefits have been passed on to the citizens along with its impact on the economy.

“We’ll review the prices of goods and services after six months,” Lyonpo Damcho said. “If it hasn’t been reduced, then the government would come up with additional measures based on the review.”

Lyonpo said that the reduction in the cost of fuel would result in cheaper prices of goods across the country including the establishment of more entrepreneurs and businesses, thereby creating more employment.

Finance Minister Namgay Dorji, said that both the economic affairs ministry and finance ministry have step up measures in all border areas to ensure that the leakage of fuel does not take place, and if it does happen, it would be dealt with according to the law.

The Information and Communications Minister, DN Dhungyel said that this would benefit the transport sector and prices of goods like cement, construction materials, sand, boulders as well as other raw materials would drop.

He said that the Road Safety and Transport Authority has a system of calculating the transportation cost including taxis when fuel price changes by five or more percent.

“The ministry would start a review of the transportation cost from Monday and complete it within a week or 10 days provided that  the transporters provide all the details,” he said.

 

By Yangchen C Rinzin (This article has been edited for the Bhutan Times)

This article first appeared on Kuensel.

 


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