Calls it a gift from His Majesty The King to the people
In commemoration of the 62nd birth anniversary of His Majesty The Fourth Druk Gyalpo, 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 11:11AM today.
At a press conference yesterday, Foreign Minister and officiating Prime Minister, Damcho Dorji, said the exemption on the 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 the exemption at source of excise duty on fuel imports would result in 17 percent reduction in petrol price and 14 percent in diesel respectively.
“This is a gift from His Majesty The King to the people,” Lyonpo Damcho Dorji said.
“The reduction of fuel price was not passed down because of the fear in the reduction of the domestic revenue, but to honor His Majesty’s birthday, the government decided to pass the benefit to the people.”
Lyonpo Damcho Dorji said the exemption of excise duty would impact the national revenue with the removal of excise duty refund (EDR) and reduced level of sales tax (ST) and green tax (GT) collection.
He said this would mean the government would have to forego 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. “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 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 reduce by approximately 0.74 percent,” Lyonpo said, adding the government has instructed relevant sector agencies to ensure that it effects across all sectors of the economy.
The government would monitor for six months to assess whether the benefits have been passed on to the citizens, its impact on the economy.
“We’ll review the price of goods and services after six months,” Lyonpo Damcho said. “If it hasn’t reduced, then the government would come up with additional measures based on the review.”
Lyonpo said the reduction in the cost of fuel would result in cheaper price of goods across the country including the establishment of more entrepreneurs and businesses thereby creating 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 leakage of fuel doesn’t take place, and if practiced, it would be dealt as per law.
Information and communications minister, DN Dhungyel, said that this would benefit the transport sector and prices of goods like cement, construction materials, sand, and boulders including 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 within a week or 10 days provided the transporters provide all the details,” he said.
Yangchen C Rinzin