The pandemic triggers price hike of goods and services

Rajesh Rai  | Phuentsholing

With strenuous and expensive import conditions in the recent time after the lockdown relaxed, the cost of commodities have spiked in the market.

Albeit negligibly, the cost expenses have been passed down onto the end consumers.

While this change is new, without appropriate measures in place, the price hike may not return to its initial status. Many feel such an increase would linger for a long time.

Traders in Phuentsholing say their selling prices are lower than the MRPs, but they agree the jump in prices compared to the prices prior to lockdown.

For instance, if a trader sold a noodle packet with an MRP of Nu 40 at Nu 30 before, he now sells it at Nu 33. It is still below the MRP but the selling price has increased.

The cost factors 

Increase in transportation cost and loading-unloading-transshipment at the mini dry port (MDP) are some of the main attributing factors.

Before the pandemic, a vehicle from across the border was enough to transport the goods to stores in Bhutan.

Today, a vehicle from Jaigaon brings the goods up to the MDP. The consignments are then unloaded and transshipped to another vehicle adding up costs.

Although the rates of the loaders at MDP were revised prior to the lockdown, many importers still say they are charged higher at times.

Recently, online registration of Indian vehicles before the goods enter Phuentsholing was initiated by the trade office to maintain transparent registration procedure. Importers must register the vehicle details online a day before bringing in the goods.

But this has left importers desperate, as they are unable to register.

Due to this problem, importers say they incur a separate expense of demurrages (money that must be paid when goods are collected later than the agreed time).

Demurrage charges go up to Nu 1,000 to Nu 3,000 a night, sources say. This is again added to the selling price charged on the customers.

In some cases the price hike is because of the increase in rates at the factories in India, including the additional costs of transportation and coolie charges owing to the pandemic impact.

Essentials 

With more than 80 percent of the country’s total import passing via Phuentsholing, most Bhutanese will be affected due to the increased price hike on essentials.

A wholesale dealer, requesting anonymity said prices have increased because of the increased costs incurred while importing.

He said he sold a packet of noodles at Nu 30 these days compared to Nu 25 prior to the lockdown. The trader sells a carton of edible refined oil (wholesale) at Nu 1,800 to Nu 1,850 depending on the volume customers buy. Before, it was sold at Nu 1,780 to Nu 1,800.

He said they were imported from Kalchini and Hasimara. Prior to the pandemic, he used the same vehicle to bring the goods to the go-downs and his total expenditure was around Nu 7,000 to Nu 8,000. Today, he pays the same amount to get the goods up to the MDP.

After the goods arrive at the MDP, it has to be transshipped to another vehicle, which is an extra cost, he said, explaining that the importers cannot go to MDP and the driver does the work for him.

“Government has revised the rate but it’s still high at times. Loaders charge Nu 7,500 after negotiation for a six-wheeler truckload,” he said.

Owner of Kalimpong Store said while the transportation charges have increased, companies in India have also increased the rates.

“MRP has also increased,” he said. “Costing has also increased in India. Many companies have closed. Labour charges have also increased.”

He said the MRP of flour (atta and maida) was Nu 45 a kg before, which has now increased to Nu 60 a kg.

Different stores and grocery shops have different rates. Kuensel found the retail price of rice brand Raj Bhog (25kg) is Nu 930 in a shop, while it was Nu 950, Nu 1,000 and Nu 1,030 in three other stores.

Way forward

Although the number of loaders at the MDP has increased to 160 today, additional activities of potato and apple exports engage most of them leaving very few to attend to the imported goods and commodities. The handling capacity then drops.

Loaders are able to handle about 40 to 60 truckloads in a day. This also has affected the import flow as it gives rise to a backlog of loaded vehicles and incurs more demurrage costs, which indirectly adds up to the selling prices.

However, if importers have their own warehouses, a lot of the costing could be done away with. With their own warehouses, the loads do not have to enter the MDP; loads can be taken straight to the stores. The stores have their own labourers.

This reduces cost implications of loaders, transshipment and transportation.

Meanwhile, the regional trade office in Phuentsholing has received applications for 80 warehouses and 49 have been approved so far.

Sonam Rinchen of Tamshing Enterprise said that his warehouse is already operating. Having a warehouse is an advantage.

“From my point of view many aren’t ready with warehouses and that’s why their selling prices are higher,” he said.

He said that during the initial phase of the pandemic, companies in India had increased the rates. But today, it is due to the labourers and transportation costs and warehouse would make the difference.

“We have eight labourers and their rate and MDP rates differ,” he said.

Hardware 

Sales of hardware goods have decreased due to the slowdown in the construction sector. But there is still a marginal price hike in some items due to the costs.

The owner of Pandey Hardware Stores said that the price of a few hardware items have increased. Most products’ prices have not changed.

“But it is negligible. Maybe about one to two percent at the most,” he said. “For example, prices of tarpaulin sheet and green net have slightly increased.”

The changes in prices, he said, is also due to increased labour, transportation and transshipment charges. Labour and transportation charges have also increased in Jaigaon.

Suresh Hardware’s Vipul said the hardware item prices are almost the same. “Prices of some items have increased from the factory,” he said.

Another hardware dealer, Lobsang Tshering said that there is still no issue of price hike in terms of the hardware items.

But the flow of the materials from India into Bhutan has been disturbed due to the current online vehicle registration system with the trade office.

“If we order today, because of the current registration system with the trade, it takes at least more than 10 days for the vehicle to enter,” he said.

“Although rates have not increased but the availability of items are less. But if the system remains like this, the rate will automatically go up.”

Lobsang said that the prices would shoot up mainly due to demurrage charges. It will be added to the selling price. This registration protocol must be researched and changed so that it will help, he said.

Thimphu bound goods

Transporting the goods beyond Phuentsholing also bears extra cost.

After the consignments from Jaigaon are brought to the MDP, it has to be transshipped in a different vehicle, which will be then cleared and driven up to Rinchending.

For this, a separate driver has to be identified. This is to ensure Phuentsholing-based drivers don’t drive beyond the Rinchending check post.

This cost of hiring a driver between Phuentsholing and Rinchending is an additional cost to Thimphu importers. Hiring a driver between MDP and Rinchending costs anywhere between Nu 500 to Nu 2,000.

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