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Sale of kerosene across border leaks millions in lost revenue

RAA: More than Nu 251.37M (million) worth of revenue was foregone over the last six years through sale of superior kerosene oil (SKO) at subsidised rate to the Indian communities and business units in the border towns of Gelephu and Samdrupjongkhar.

The Royal Audit Authority (RAA), which conducted a special audit on import and distribution of LGP and SKO on the National Council’s directives, stated that the sale of subsidised SKO to the Indian communities was approved by the ministry of home and cultural affairs (MoHCA) and ministry of finance (MoF).

Bhutan is given subsidised SKO of 1,250 kilolitres a month by the government of India. Generally, subsidised goods are made available to individual citizens for domestic purpose. However, auditors found that SKO was sold to the communities of Dathgari, Saralpara and Ultapani in Assam, India bordering Gelephu at the subsidised rate from Bhutan Oil distributor/Bhutan Oil corporation (BOD/BOC).

The report stated that the community of Dathgari was allotted 500 litres of SKO daily, and the communities of Saralpara and Ultapani are given 450 litres and 250 litres respectively every month.

Similarly, the regional trade and industry office (RTIO) in Samdrupjongkhar had also approved sale of 100 litres and 50 litres of SKO every month to Assam Police and Sashastra Seema Bal (SSB) respectively. The RAA observed that a total of 1,290,100 litres were sold to the communities of Indian villages near Gelephu, and 12,600 litres to Assam Police and SSB in border areas of Samdrupjongkhar from 2008 to 2014.

“Such sale had resulted a revenue foregone of Nu 43.92M,” the RAA report released earlier this month stated. Consumers across the border constitute about 33 percent of the total consumption of SKO in Gelephu region, and 0.16 percent of total consumption in Samdrupjongkhar region.

The MoEA’s response to the RAA stated that the subsidised SKO issuance to the community of Dathgari, Saralpara and Ultapani in India was made at the behest of MoHCA with an objective to maintain peace and friendship. Further, those communities played a crucial role during the time of emergency.

Similarly, the issuance of SKO to Assam Police and SSB, according to the MoEA, was also considered in view of maintaining cordial relationship in the security prone areas.

It also stated that they keep on receiving verbal instructions from the higher authorities on the need to maintain this protocol.

Of the Nu 251.37M worth revenue foregone, Nu 207.45M was from the sale of subsidised SKO to business units in Samdrupjongkhar. Despite the availability of industrial SKO, the report stated that business units in Samdrupjongkhar and Phuentsholing were approved purchase of SKO at subsidised rate since 2007. From  2010, seven business units in Samdrupjongkhar and 10 in Phuentsholing were made to pay an additional 50 percent on the existing subsidised rate.

The commercial rate for SKO was Nu 47.59 a litre and its subsidised rate was about Nu 14.29 a litre from 2011. The approved rate from 2010 worked out as Nu 21.44 a litre with 50 percent subsidy.

“Approving subsidised SKO for commercial use had implication on the subsidy granted to the tune of Nu 207.45M for the period from 2008 to 2013,” the report stated. “The supply of SKO at subsidised rate to business units not only deprives the intended Bhutanese citizens but is also against the vision of the two governments for instituting the subsidy to benefit people of Bhutan.”

The RAA also observed that the subsidy the Indian government extended was abused by Bhutanese individuals through deflection of SKO worth of Nu 230.21M in border towns.

The report stated that unethical sale of subsidised SKO coupons to non–Bhutanese openly takes place in Phuentsholing and Gelephu, where both RAA and RTIO team witnessed physically.

Auditors noted that although the genuine necessity of SKO in border towns for heating, cooking and lighting is minimal due to warmer climatic conditions, SKO consumption was unreasonably high throughout the year. “The consumption in three border towns, even after excluding the consumption of business units and Indian communities, is very high representing on average 23 percent of the total SKO consumption in the country,” the report stated.

The MoEA responded that their mandate was to ensure the dealer did not deflect and that the quota item reached the intended beneficiary. It also stated that, once the beneficiary got the quota, ministry’s task completed and that new rules and regulations might be needed to monitor and regulate the beneficiary.

Auditors also found that LPG and SKO outlets are mostly concentrated in urban areas and Bhutan imports far less than the quota granted. The supply of LPG and SKO has not reached the people in remote areas as intended.

The Indian Oil corporation limited (IOCL) is the sole supplier of the subsidised LPG and SKO to Bhutan. BOD and BOC, Druk Petroleum corporation limited (DPCL) and Damchen Petroleum distributor (DPD) are carrying import and distribution licenses of petroleum products in the country.

Rinzin Wangchuk

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