Subsidy Phased out, LPG Price Soars High


Price hike caused beeline of consumersAs the decision of government of India came to phase out the subsidy on LPG and kerosene oil, a long queue of LPG cylinders snaked out in the LPG depot in Motithang, yesterday. Bhutan has been enjoying the subsidy on these essential commodities allowed by the GoI for a long time.

The government of India decided to withdraw the subsidy on LPG cylinders given to the class 1 government officials, members of parliament, state legislative assemblies in the first phase, according to NDTV. This decision is to impact Bhutanese LPG consumers and the price of LPG and kerosene is already soared to triple figure of current price. With the withdrawal of government subsidy, a 19kg LPG cylinder will cost Rs.1200.

In Bhutan, the price of a LPG cylinder vary from place to place. As the new price come into effect, refilling a cylinder in Phuentsholing will cost Nu 1145, while in Thimphu it is 1196. In Bumthang the price will be the  highest, Nu 1203, but in Samdrupjonghkhar the price is relatively lower, amounting to Nu 1070. The overall increase of the cooking fuel ranges from 612 to 693 Ngultrums throughout the country.

The interim government of Bhutan is seeking the intervention of external affairs ministry for taking up the matter with Indian government to reconsider the withdrawal of subsidy. “We have requested the external affairs ministry to intervene, considering the impact it will have on the consumers in Bhutan, and to continue to subsidize these products in view of the existing friendly relations between the two countries”, said Tshewang Rinzin, the adviser to economic affairs ministry.

According to the NDTV, such  cutback of the subsidy will ease out the burden on India Government and save Rs 5,000 crore. The government subsidy on LPG estimated for the 2011-12 was Rs 25000 crore.

The urban poor or low income urban families in Bhutan will have to bear the brunt of price hike, which is more than 100%.


  1. The LPG issue is beyond LPG as per the bhutanese anonymous website Bhutanomcs. Most of the time his blog critise the DPT but in this case below, it is eye opening;

    Indo-Bhutan treaty of 1949 was the most precious treaty in the history of our country which probably saved our sovereignty in the turbulent 20th Century. The story of our country could have well been a different one if our Kings have not signed that treaty with India. The farsightedness of our benevolent Kings and the steadfast support of the Government of India and the People of India has protected our people and country from the political turbulence of the bygone century. Tibet and Sikkim lost their independence because they did not have such protection from other countries that Bhutan uniquely received from India. Under the protection of this treaty, India steadfastly and dedicatedly helped our country by providing economic developmental assistance and by guiding our foreign policies. India has always remained as the greatest ally of our country through thick and thin. They had never betrayed us. In 2006, India wholeheartedly supported our country by renewing the Treaty of 1949 and gave us full authority to undertake our foreign policies on our own because they trusted our King and people. The simple truth is that what we are all today is because of India. Even today, we depend on India for everything. Our economy would not exist if not for India. This is a fact.

    Although we have a new treaty with India giving us the authority to steer our foreign relations on our own, yet it does not mean that we should not feel the sensitivities of Indian foreign policies while steering our own. At the least, we should consult with Government of India when expanding our relations with other countries. The geo-politics in the sub-continent has become frosty in the last few decades because of the growing interest of the northern superpower in this region. India has lost many traditional allies. They will never expect any effort from Bhutan to drift away from them because they have nurtured and groomed us for more than half a century. That is why a slight hint of any misstep from us would be a cause for great betrayal for the Government of India. This is what has happened when our democratically elected former Prime Minister, Jigmi Y Thinley met with the Premier of China in 2012 in Brazil. In the 21st Century, China is becoming a superpower in the world and relation with the northern giant is necessary for the betterment of the relationships in the sub-continent. However, it is very important to firstly convince India that Bhutan-China goodwill friendship is in the interest of India too. Otherwise, our country cannot afford to lose our traditional ally, whatsoever. That handshake between our PM and Premier of China could be a simple greeting between the leaders of the two free countries but it has shaken the trust between our country and India as it was unexpected from a faithful ally. It was shocking news to the Government of India as reported in Times of India recently. The anger of the Government of India was expressed through altering policies abruptly though the official pronouncement of their disappointment has not been made public. Some of the subtle policy changes made by the India because of the blunder of the former DPT government are as follows:

    1 – Indian ambassador to Bhutan was replaced after the above event for his failure to not sensing the above developments in accordance to the report by the Times of India.

    2 – During Rupee crisis, India did not even bother to listen to the woes of the former DPT government when they sent their high level delegation to Delhi to seek for assistance. Instead, India sent back the Bhutanese delegation in the pretext of lack of sufficient preparation for the cause of the rupees problem. Let alone think of sending back a high level Bhutanese delegation, India used to always treat very well even low level officials from Bhutan.

    3 – India has always been proactive in helping Bhutan in times of troubles but they did not bother to help us during rupee problems until our HM visited India as the Guest of Honour during the Republic day celebration in January. Only then India released Rs. 4 billion.

    4 – High level delegation of India led by their foreign secretary visited Bhutan only after the dissolution of the DPT government. Foreign diplomacy is very subtle and sensitive and it sends a critical message that they would not want to deal with the government that betrayed their everlasting trust.

    5 – Abrupt change in the immigration policy towards the special travel document holders of Bhutan. Now Bhutanese with such special permit are not allowed to transit through India without proper official passport document.

    6 – India now wants to conduct investigation on the escalation of the hydro-project costs though the revised budget for the ongoing Punatsangchhu projects, which are all done by Indian companies. They know that Bhutan does not have any chance to fudge the numbers, yet they appear to be suspicious of diverting these fund to other socio-economic developmental projects.

    7 – Excise duty refund was due to be received in March or April of this year but India only released that amount on 30th June. In addition, Rs 4 to 5 billion of the 10th Plan have not been released by India, though now the 10th plan is officially over. When one receives rupee assistance or grant from India, it is the wish of the Indian government and it is our responsibility to ensure as much as the money given to us be used to buy things from India. Any donor country will have that policy. By any chance if we buy Chinese buses when there are equally comfortable Indian buses available, it is morally wrong to do such business with other’s money. Times of India have reported about this issue. The complexities and sensitivities of Indo-China relationship is subtle and therefore we have to always be aware of it.

    8 – Starting from the first five-year plans to the 10th FY Plan of Bhutan, India was the biggest donor and supporter of our economic developmental plans. Thanks to the people of India and the Government of India that we are enjoying peace and good livelihood today. Normally, FY plans would be all ready in the last year of the last plan period. Including monetary assistance especially from India would be completely guaranteed. 11th Plan has begun but the Indian government has not even committed 1 rupee so far. This is a great concern for all of us. Why would India do this to us? There is only one reason. Former DPT government has unilaterally divulged away from traditional foreign relation route.

    9 – India provides energy subsidies to low income Indian households to help them meet their basic needs of livelihood. That is why LPG cylinders and kerosene are sold at a subsidized price to the poor people. However, this generosity has led to black market business causing billions of rupee revenue loss for India. In response, India wanted to gradually phase out the energy subsidy program without adversely affecting the poor people. The new energy subsidy program is done using Unique Identification Number (known as Aadhar number), whereby the money is directly transferred to the account holder of the recipient using this number. This program is called “Direct benefit transfer for LPG”. So the poor people of India still receive this subsidy. Because of the generosity of India, they were providing energy subsidies to Bhutan too. Only last year India reassured that this subsidy will continue for Bhutan. That is how we had all been paying less for the LPG cylinders until a few days ago. Now the LPG prices have doubled for Bhutan which indicates that energy subsidy for Bhutan has been discontinued abruptly without any warning. This is not a gradual process of removing energy subsidies. Such action deems a careful analysis because India would never do such things to Bhutan if we have not hurt them badly. Somewhere we have failed to abide by the principles of our friendship that was nurtured for almost century long. The only reason is the above mentioned unfortunate event. I cannot remember anything worse than that would cause India to punish us in this manner. We are already suffering from lack of Rupees. This removal of energy subsidy will only worsen the rupee problem.

    The bottom line is that India has lost faith in the former DPT government. Indian still love us and they will still be very much willing to help us. It is in the national interest of India to support Bhutan always. I have seen Indians debating in their parliament about Bhutan so passionately and almost all of them support assistance package to Bhutan relentlessly. It depends on how we can rebuild the lost trust again. It is difficult to rebuild our friendship to former glory if DPT comes to power again because Indians have lost faith in the leadership of the DPT.

    This is my sole view. It does not represent the views of any country mentioned here. This could be wrong or this could be right.
    Contributes by Sonam T.


    Bhutan China India Triangle

    This article seeks to examine the growing strategic and diplomatic importance of Bhutan for its big neighbours: China and India. China has recently intensified its efforts to woo Bhutan and engage with it directly, despite the lack of diplomatic ties between them.

    To improve relations with Bhutan, China first has to resolve its border dispute with the tiny Himalayan nation. China shares a 470-km-long border with Bhutan. The border is not formally demarcated and the border dispute is a major source of irritant between the two countries that hasn’t been resolved even after they have had 19 rounds of talks so far. China claims a large chunk of the border territories, stretching from Doklam in the west and then from Gamochen to Batangla, Sinchela, and down to the Amo Chhu. The disputed area in Doklam covers 89 square kilometers, while the disputed areas in Sinchulumpa and Gieu cover about 180 sq kms. Frequent Chinese incursions into Bhutan have added to tensions in Sino-Bhutan relations.

    Five Finger Policy
    The Chinese hard power juggernaut is moving in all directions and not even tiny neighbours are out of its ambit these days. In the latest instance of China’s hyper active diplomacy, Beijing is vigorously pursuing one finger of its so-called “five finger policy” – Bhutan. The other four fingers are Arunachal Pradesh, Ladakh (both parts of India), Nepal and Sikkim; while the palm is Tibet. The Chinese objectives in Bhutan, a country with which it has been having a protracted border dispute, pose a major foreign policy and security challenge for India.

    China has played its most important diplomatic card vis a vis Bhutan till date by proposing an exchange formula to resolve the vexed border dispute. With an eye on fortifying its position on Tibet, China has proposed to Bhutan to cede a part of its northwestern territory in lieu of which Beijing would give up its claim over Bhutan’s central areas.

    The area that China wants Bhutan to cede is very close to Chumbi Valley, a tri-junction abutting Bhutan, Tibet and the Indian state of Sikkim and a highly strategic area perceived as militarily vulnerable for the Chinese as the British colonialists had used this as a gateway to launch their military expedition in Tibet in 1904. The British had occupied this area for nine months then.

    The Chinese had first made this package deal offer to the Bhutanese in 2004. Latest indications are that Beijing is once again pushing the envelope at a time when China and Bhutan are on the verge of setting up diplomatic relations.

    Both sides have agreed at the highest level to have full-fledged diplomatic relations for the first time ever after an unprecedented meeting between Chinese Prime Minister Wen Jiabao and his Bhutanese counterpart Jigmi Y. Thinley on the margins of United Nation Rio+20 Conference on Sustainable Development in Brazil in June 2012.

    China’s idea is to resolve its border dispute with Bhutan in one stroke through a package deal, rather than through the sector-by-sector approach that it has so far been having not only with Bhutan but with India too.

    Interestingly, China had resolved its border dispute with Nepal through a package deal only, not through the laborious sector-by-sector approach.

    India’s Worries
    The Indian worry is manifold. First, Bhutan has of late shown its keenness to improve relations with China and the pro-China lobby in Bhutan is getting stronger by the day. India is understood to have given its tacit approval to Bhutan establishing full diplomatic relations with China, not because New Delhi was being magnanimous but because there was hardly any other option before India’s Bhutan policy managers.

    Secondly, Bhutan has consistently kept India out of the loop in matters of its talks with China. Though there is nothing on the ground to suggest that Bhutan is going to play the China card with India – a tactic that Nepal has employed with India for decades – Indian foreign policy czars cannot firmly rule out such a scenario in future.

    Thirdly, Bhutan doing China’s bidding on the border issue would trigger a security nightmare for India as the northwestern Bhutanese territory in question, if ceded to China, would bring Chinese troops within a few kilometers of India’s chicken neck area, the Siliguri corridor that connect India’s mainland with the Northeastern India.

    So far Bhutan has enjoyed extremely good relations with India and the two neighbours share a relationship wherein their citizens do not require visas to visit each other’s country. India is the major propeller of Bhutan’s economy and has been a bulwark for Bhutan’s security. In fact, during the 1962 Sino-India war, Bhutan had permitted India to move its troops through the Bhutanese territory. No wonder then that Bhutan is the only country in South Asia that doesn’t have diplomatic relations with China.

    The evolving Bhutan-China synergy is perhaps more significant, and doable, than the Pakistan-Russia synergy that showed signs of germination a few years ago but did not quite take off. The Sino-Bhutan dalliance may gather full steam in the near future. After all, the Chinese have been immensely successful in wooing India’s next door neighbours: Sri Lanka, Bangladesh, Maldives and Nepal. With Nepal particularly, the Chinese success strike rate has been phenomenal. Beijing’s move to build a highway right up to Mount Everest base camp is no less than a diplomatic and strategic coup.

    Roadmap For Future
    However, now that Bhutan is modernising and opening up its economy like never before, India has to be in sync with the changing times. The best way to do it is not to resist the inevitable but to make things all the more difficult for the rival. In the changed circumstances, while India does not have the luxury of shaping Bhutan’s foreign policy anymore, New Delhi is still not without an option.

    India can counter China in Bhutan by doing the next best thing: ensuring that the Bhutanese diplomatic space is opened to other foreign powers to achieve a strategic balance. Japan is one power that is waiting in the wings. It is not surprising that Tokyo has already announced its intent to open its own diplomatic mission in Thimphu by 2014.

    One should not be surprised if the two developments – establishment of diplomatic relations between Bhutan and China and Bhutan and Japan – take place concurrently. Once that happens, the United States and other Western powers will not be far behind.