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The cooking gas issue

There is much anxiety about the present shortage of subsidized cooking gas in the country. It is not pleasant to see long lines of consumers waiting to replace a gas cylinder. This is not the first time that such a problem has cropped up. Over the years, the Department of Trade, as the regulating body, has introduced new measures like registration of consumers, issue of tokens and new cylinders at market price to streamline distribution and to cope with rising demand. A complaint that is often heard from the regulator is hoarding of the product by households. This is probably true. The reason of hoarding is precisely due to the uncertainty of getting a refill when needed. The new measures may have been useful but only partially.

In the past, the supply was adequate with monthly import quota from India that was increased periodically. Meanwhile, the number of consumers has risen with split smaller families and increased urbanization. They find the liquefied gas not only an efficient mode for cooking but also convenient and healthy. Our people also have more disposable income today to spend on gas cylinders instead of continuing to use firewood, the conventional fuel. In fact, for conservation reasons, cooking gas and biogas have been promoted in rural areas. The use of electric stoves is not as popular as gas cylinders because electricity is more expensive. Biogas use is not wide spread due to various factors including unavailability of raw materials the year round.

What surprises me is the existence of two-price system for cooking gas at present. You do not need an economist to tell you that such a system is not viable. It is basic human nature that no one will pay a higher price for a product when the same is available at a cheaper rate.  Even commercial entities like hotels and restaurants will avoid buying the costlier cylinder however you cajole them. And regardless of sincerity of the motive, examples of politicians to replace their ordinary cylinders with costlier ones are rarely emulated by an ordinary person. I am however, glad to hear that the Ministry of Economics Affairs has realized the futility of their decision and are planning to remove the dual pricing system.

My take is to cross subsidize cooking gas from earnings of hydro-electricity export if the subsidy on cooking gas is to continue.  For this purpose, an energy fund should  be established. The fund will receive grants mainly from the income generated by electricity export to finance the subsidy element. This will enable Bhutan to import the product at prevailing market rate in India to meet its demand. With Bhutan’s advantage in hydropower generation, our people rightly expect and must receive additional benefits from hydro-electricity export like the people in Gulf countries do from petroleum exports.

Notwithstanding our excellent bilateral relations,  how long can Bhutan continue to rely on subsidy? The subsidy amount is in any case deducted from their yearly financial grant to Bhutan. So, subsidy does not really constitute an additional benefit. In fact, India itself is in a dilemma over removing subsidy on cooking gas altogether. In the face of subsidy reduction or removal in other products like diesel, continuing to subsidize cooking gas is an anomaly in pursuing a market-based pricing policy. It is only a matter of time when subsidy is totally removed in India. As a basic essential product, it remains subsidized mainly for political reasons.

Reduction of electricity prices for household consumption accompanied by introduction of a tax discount to popularize electric stoves will be a logical step to take if the above option is not pursued. Simultaneously, encouraging greater use of biogas and exploring the feasibility of importing liquefied gas from Bangladesh and other countries are other suggestions.

In sum, time is ripe for finding a durable solution to the problem of cooking gas shortage, especially as we will soon graduate from the LDCs status to a middle-income developing country. Perhaps a study should be commissioned soon to examine all dimensions of the problem in a coordinated and multi-disciplinarian approach.

 

Contributed by Achyut Bhandari 

Former DG (Trade)

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