5% green tax and sales tax on fuel to continue

Economic Affairs Minister says fuel dealers have misunderstood the new revision

The government has decided not to subsidize or waive off the 5% green tax and 5% sales tax on fuel, according to Economic Affairs Minister Loknath Sharma.

The minister said doing so will only make the cost of food commodities higher.

“If we take away the 5% green tax on fuel, it will make fuel prices 5% cheaper but doing so will only directly transmit 5% cost to the costs of goods,” Lyonpo said.

Lyonpo said, “We need these taxes. When businesses, CIT and BIT, and government revenue are not good. The government doesn’t want to give subsidies on fuel and face the consequences like other countries including Sir Lanka.”

However, fuel dealers in the country proposed to the government the removal of the 5% green tax and depot surcharge to reduce the fuel prices and reinstate some components that the government has removed.

The economic affairs ministry has removed five components including working capital, product loss, financial cost, operating cost, and transit insurance in the new pricing module.

Lyonpo Loknath Sharma said some of the components are duplicating and they revised and removed them but fuel dealers felt that the ministry has removed some of the components to bring their profit down, which is not correct.

“In the case of fuel, it is not that somewhere the price of fuel is high but if we waive off the 5% tax also it will not bring fuel prices down,” the minister said, adding that the cost of fuel price will hardly come down to 1-2 rupee.

In addition, Lyonpo said the pricing model doesn’t make fuel cheaper, even if they reduce some of the components which are given to fuel dealers.

“Fuel is such a thing there is no market price, they can’t charge the price. Otherwise, different dealers will have different fuel prices,” Lyonpo Loknath Sharma said.

However, fuel is highly regulated, and at what price do dealers get from India certain things are given to dealers including transportation costs, commission for operation costs, and salaries among others.

“In India, they are giving Rs 2-4 as dealers’ commission in addition to other costs,” Lyonpo said.  

Further, the minister said fuel dealers have misunderstood the new revision.

“I think fuel dealers are unhappy because while doing revision, whatever commission and cost they receive will reduce,” the minister said.

Lyonpo further explained that till 2016, at whatever fuel prices dealers receive from India, 15% is directly added to dealers. This means they use to get all the 15% extra added with all the provisions from India.

“After 2016, there is a different pricing mechanism, where pricing committee has directly drawn away 15%,” Lyonpo said, adding that they visited India to evaluate and calculate dealers’ commissions, transportation costs, operation costs, transit insurance rates, loss of product, and evaporation.

However, after revising all these, the committee has come up with 10-11 components, so some of the components are duplicated and removed, that’s why dealers are not happy with the revision, according to the minister.

“Fuel will be hardly cheaper by playing with their components,” Lyonpo said, adding that fuel dealers are claiming the government is playing with their components, suggesting bringing down the 5% green tax and sales tax.

Lyonpo said that the 5% green tax and 5% sales tax are a government component and they have no say on this. Dealers only have to pay the BIT and CIT.

Meanwhile, on the pricing components, Lyonpo said that since there are grievances on pricing components it seems to be not fair for them and they have already submitted to the pricing committee that was formed in 2016.

“If the grievances are current and if they are under loss, we should continue it,” Lyonpo said.

Lyonpo shared that the Russian-Ukraine war has directly impacted fuel, fertilizer, and food commodities.

“So none of the big countries also could not produce goods because they are not getting raw materials like before. Many countries have been now doing away with subsidies.”

Kinley Yonten from Thimphu