Of all the money Bhutan spends on imports, petroleum and related products top the list. Bhutan imported petroleum and related products worth US $ 47.2 billion, about Nu 2.1 billion, in 2005 according to the Royal Monetary Authorityâ€™s annual report.
Diesel was among the top imports in 2005 valued at Nu. 1.3 billion (USD 29 million). That same year Bhutan imported Nu.460 million worth of petrol including aviation spirit.
Total fuel imports constituted six percent of the overall GDP at the end of 2005. While increasing vehicle numbers estimated at 30,000 in 2006, 3,000 more than 2005, were contributing to the increasing imports the value of imports was also rising because of price hikes in recent years the report states.
Total imports increased from 79,462 kilolitres (one kilolitre is 1,000 litres) in 2004 to 85,157 kilolitres in 2005, a seven percent growth. In terms of value the increase was from Nu.1.6 billion to Nu. 2.1 billion, a growth of 21 percent.
The prices of both diesel and petrol peaked in June 2006 to Nu.33 a litre for diesel and Nu. 45 a litre for petrol. This was an increase of Nu. 2 for diesel and Nu. 4 for petrol from June 2005.
The report pointed out that the impact of international price hikes was felt more in the transportation and construction sectors, which consequently made consumer goods and services more expensive.
This was reflected in the inflation rate, which reached 6.2 percent in the second quarter of 2006, up from 3.1 percent in the first quarter. The price of housing, water, electricity, gas and other fuels which constitutes 25.7 percent of the expenditure basket had increased to 4.9 percent against 2.9 percent during the same period. This development was largely due to the rise in fuel prices in India.
Rising fuel prices also had an adverse effect on Bhutanâ€™s external trade particularly with India, states the report. In 2005 the total merchandise imports amounted to Nu.12.8 billion of which imports of mineral products including oil totalled about Nu 2.8 billion. With rising prices and overall demand for petroleum products in the country, the increasing burden of paying import bills would lead to further deterioration of the countryâ€™s current account balance with India the report states.
Bhutan imports most of its finished products of petroleum and related oils (diesel, petrol, kerosene, lubricating oils and liquid petroleum gas) from India.
The price of kerosene and liquid petroleum gas are subsidised by the government as it is mainly used for domestic purposes.
To minimise the dependency on fuel imports several policy measures taken by the government include encouraging use of electricity by exempting import tax on electric domestic appliances and subsidising electricity tariff for domestic use.
But with increasing import of vehicles and road transport as the only means of domestic travel for land locked Bhutan dependency on petroleum products is likely to continue to increase in the future. Source: Kuenselonline