Reaping the benefits of subsidies

The honeymoon period for 17 business establishments will soon be over, as the trade department will withdraw the subsidised kerosene that the private companies had been enjoying for years.

The immediate reaction, as expected, was business entities writing to the government requesting the subsidy to continue. The reasons were predictable – that it would lead to closure of businesses besides downsizing or laying off employees and reduced revenue to the government.

These are genuine reasons. The subsidised kerosene is almost three times cheaper than the market rate. Those industries that use the fuel have a comparative advantage over those across the border. Bhutanese industries depend on subsidises for competitive edge weather it is cheap electricity or kerosene.

But the subsidy the government of India generously provided is not put to the best use. It is not fulfilling the intended purpose. The subsidy on kerosene is for the general Bhutanese population. It is not for a few industries or businessman.

Called the poor mans’ fuel, the subsidy was intended to benefit the poorer section of the people who depend on kerosene for cooking and lighting. In the urban areas, it is largely used for heating. However, with electricity, especially free electricity now penetrating almost every village, the use of kerosene is heavily reduced. We can safely surmise that there are not many villages that use kerosene stoves. It would be electric cookers or solar powered lights.

The rush for kerosene is seasonal and only in a few places. Outside Thimphu and perhaps Paro, there are not many who depend on kerosene for heating in winter. Even in the above places, latest heating gadgets, powered by electricity, is being increasingly preferred.

Ironically, the majority user of kerosene is in the border towns indicating that the subsidy is misused. Besides the industries that are benefiting the most from the subsidy, kerosene is sold back in the Indian market. It is so lucrative that trade officials have found that all five members in a family would avail a coupon. The fuel is sold at a higher price across the border. In places like Phuentsholing this illegal trade happens in broad daylight right under the noses of authorities.

It is not right to misuse a subsidy provided by another government. The dependence on kerosene has changed over the years with development penetrating deeper into the villages. If there are any who depend on kerosene, the subsidy should reach them.

Fuel, a necessity is heavily subsidised by the government of India with the intention that its closest and friendly neighbour benefit from it. If subsidies on some items are now not fulfilling the purpose, we could think of others that could. For instance, the liquid petroleum gas (LPG) has become the most sought after fuel in the country for cooking.

The general population would welcome a further reduction in its price and do away with the subsidy on kerosene.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply