The financial institutions as of December last year provided a loan of Nu 5.5B towards transport sector, which is an increase of more than Nu 1B compared with January last year.
Records with the Road Safety and Transport Authority show that the number of vehicles increased to 94,956 in April this year compared with 88, 227 in June 2016.
This means that about 22 new vehicles were bought every day during the course of 10 months. Almost half of these vehicles imported are plying the streets of Thimphu.
Based on the figures, about every seven people in the country owns a car while in Thimphu, every two persons own a vehicle.
This is, however, even aggravated by auto exhibitions participated by the car dealers and simultaneous loan festivals facilitated by the banks.
Recent figure on the transport was not available as yet.
During the recent auto exhibition, sources said that more than 500 vehicles were sold by the car dealers with attractive offers and discounts. Banks too participated in the exhibition with facilitation of on-the-spot loan approvals.
This has proved counter-productive to the RMA’s revision of guideline on transport loans and government effort of shifting the tax valuation from point of entry to point of sales.
The central bank on August 1 last year issued a circular to all financial institutions informing them about the loan to value ratio on motor vehicle or transport loan being revised from 50 percent to 30 percent with immediate effect.
This means that financial institutions will only provide 30 percent of the vehicle cost as loan and the loan applicant will have to inject the remaining 70 percent as equity.
The rationale was to combat the negative consequences of GST that led to a decrease in the value of imported goods, including vehicles.
While the RMA has adopted the monetary measure that is within its purview, from the government’s side, a fiscal measure was adopted shifting the tax valuation from point of entry to point of sales.
Growing cars and implication
In 2001, total vehicles in the country were recorded at 22,527, of which government and corporations owned 2,666. Within a decade, the number more than doubled to 53,382. Government and corporate owned pool vehicles also nearly doubled to 4,622.
Due to the import ban, between 2012 and 2013, only 477 vehicles were imported.
After adopting the new taxation, the import ban was lifted on July 1, 2014. This resulted in increase of vehicles from 67,926 in 2013 to 69,602 in 2014. In the following year, number of vehicles increased by 5,588. This nearly doubled in 2016 when 9,107 new vehicles were bought within a year.
As of April this year, 94,956 vehicles were imported. This means that 6,729 vehicles were bought in the within a span of 10 months.
Increasing number of vehicle is also directly proportional to increasing import of petroleum products, according to trade statistics.
In 2016, Diesel was the top import item valued at Nu 5.77B. Petrol and diesel combined amounted to Nu 7.53B in fuel expenses last year alone. If the loan repayment be excluded, the entire revenue from hydropower is eroded in importing fuel.
Bhutan trade statistics show that Nu 547M worth of vehicles were imported in 2013 (during the course of the import ban), which shot up to more than Nu 2B in 2014, of which Nu 1.6B were imported from India. In 2017, import of vehicles amounted to more than Nu 6B and constituted about Nu 7B in the preceding year.
As a result, fuel import has been experiencing a corresponding increase in import of fuel. The country imported Nu 6.6B worth of diesel, around Nu 2B worth of petrol in 2017 alone.