Next tariff cycle begins from July 1

Electricity: With only three months left for the next tariff cycle to begin, the Association of Bhutanese Industries (ABI) has again appealed to the government to keep the tariff as “status quo.”

With no improvement in the market situation and price of products dropping, ABI officials said such unfavourable policies further aggravated the issue.

The association has requested the government to reconsider its findings to create a win-win situation for both industries and the government.

In its recommendation, the association emphasized the benefit of selling power to the industries at a subsided rate than exporting it to India considering the value addition to the economy.

“It is more beneficial to sell apple juice rather than selling apples,” the ABI submission stated.

The association also submitted profit and loss comparison statement of five industries for the third quarters of 2014 and 2015. Although the industries’ names were not reflected, the figures indicated losses that the five industries incurred in the third quarter of 2015.

One of the five industries incurred a loss of 162.90 percent in 2015 third quarter compared to 2014 during the same period. The industry made Nu 77.58M profit in the third quarter of 2014 but incurred a loss of Nu 48.79M during the same period last year.

ABI pointed out that international market dynamics and unfavourable domestic policies have affected industries in Pasakha. Under the international market dynamics, cheap Chinese steel flooding the Indian and other markets and the commissioning of new Malaysian plants, and slowdown in the global economy have hit the industries.

ABI submitted that the issue of power tariff and lack of incentives for earning convertible currencies further affected industries. The association also has requested the government to give priority to manufacturing sector.

ABI’s general secretary Jochu Thinley said the profit turnover ratio (PTR) of the six financial institutions, Druk Green Power Corporation (DGPC), and Bhutan Power Corporation (BPC) was higher compared to industries.

PTR of the five energy intensive industries put together is 6.19 percent while its 37.97 percent for the six financial institutions alone. Given the difference, ABI has also requested for “reduction in the industrial loan rate.”

Jochu Thinley also said that the government must use foreign currency reserves more prudently. “We requested the government to provide foreign currency to industries that has potential to substitute import,” he said.

“In 2012 the central bank disposed USD 200M at prevailing market rate to liquidate hydropower loans,” he said, adding that such trading of foreign currency reserves added no value to the economy.

Providing foreign currency to industries, ABI stated would enable increased contribution to government coffers, including increased Indian Rupee and foreign currency earnings that would help create employment opportunities.

Meanwhile, the new tariff cycle is to begin from July this year. DGPC and BPC are supposed to propose new tariff by March 1, 2016 to Bhutan Electricity Authority for review.

ABI, however, is not sure if it has been proposed and reviewed.

In his recent visit to Pasakha industrial estate, economic affairs minister Norbu Wangchuk had asked the industrialists if reducing the tariff to five percent from the existing 10 percent would help.

However, lyonpo Norbu Wangchuk said that the government hasn’t decided on this yet.

Rajesh Rai, Phuentsholing