Government sets fuel price without discussing with country’s PoL dealers

…PoL dealers suggest the government consider fixing the five per cent green tax (GT)

Yeshey Lhadon

To bring down the fuel price in the country, the government adopted a price-fixing-module – this, the Petroleum, Oils and Lubricants (PoL) dealers said it is a decision taken arbitrarily.

PoL dealers were disheartened that the new pricing structure was released without discussing it with them.

MoEA’s Secretary met with the dealers on Monday.

The dealers were asked to work out the fuel pricing structure and submit their justification on where they are losing out.

PoL dealers have submitted their justification to the ministry.

The fuel dealers in the country claimed that their business incurred loss since the night of June 2, after the government removed operating costs, product loss costs, return on working capital, transit insurance, and financial cost.

Consequently, the PoL dealers requested the government to reconsider the ‘fixed-commission’ module, and suggested the government consider to fix the five per cent green tax (GT).

General Manager (GM) of Damchen, Karma Yenten said that the government hadn’t discussed with the dealers before slashing the dealer’s commission. He said, “We were never consulted or informed, We only knew about it on television.”

“New pricing module is problematic for us, and we are running at a loss,” he added.

State Trading Corporation of Bhutan Limited’s (STCBL) GM, Sugan said, “It was a surprise to us, the government revised the fuel pricing structure without consulting us.”  

STCBL’s Chief Executive Officer (CEO), Tshering Wangchuk said, “The new fuel pricing module that has been fixed arbitrarily by the government is not fair on the dealers.”

The government has increased the freight charge but the dealers said that it was not sufficient.

The deductions made to dealers are impacting their revenue generation. They are having difficulty meeting the cost.

On every tanker of petrol and diesel, the fuel dealers are losing about Nu 24,000 on diesel and Nu 12,000 on petrol.

STCBL brings in about five tankers every day and they incurred a loss of Nu 90,000 to Nu 100,000 for every import. Damchen brings in about 8-12 tankers depending on the demand.

Bhutan Oil Distributor’s (BOD), Deputy Managing Director Partha Sarathi Basu said, “The discussion is going on and it is applicable to every fuel dealer in the country.”

This time, the price of diesel dropped at the source but not by Nu 8.30 whereas the price of petrol increased by Nu 0.80, which at the source was slightly more.

Depot surcharge, a part of the fuel pricing component also impacted the fuel business. The dealers are mandated to pay a depot surcharge of Nu 500 and Nu 600 per thousand litres of diesel and petrol respectively. On 12KL of diesel and petrol, the government charges Nu 6000 and Nu 7200 respectively.

“The government has not reduced a penny from their own revenue, but so much from the dealers,” said a dealer.

He said that the purpose of the depot surcharge is unclear.

The dealers claimed that the government has more room to provide relief to the consumers if they really want to. And the dealers are facing difficulty to sustain a small profit margin. They claimed that they are running the business at a loss after the new pricing module was introduced.

“Government can either subsidize or reduce sales tax, green tax and depot surcharge if they can’t do away with it,” said the dealers.

The Ministry of Economic Affairs (MoEA) has not only removed five components from the domestic pricing structure to reduce the fuel prices but also introduced a new component -fixing dealers’ commission.

Initially, dealers were given 1.5 per cent of the total invoice as commission which is now fixed at Nu 1000 per 1000 litres of fuel. At this price of fuel, the dealer’s commission was reduced by 0.4 per cent. Dealers are used to getting Nu 1,350 commission for every thousand litres of fuel.

“Before transit insurance was mandatory but it is removed now,” said GM, Karma Yenten.

Lyonpo Loknath Sharma also stated that if the dealer’s commission was kept in percentage, the dealers will have more commission with the increasing fuel consumption and increasing price.

However, the dealers said that when the price of the fuel is high at the source, they have to rely on loans from the banks to make payments to the supplier.

“The higher the price of the fuel, the more money we borrow from the banks. And it takes at least a week for the fuel to reach the country and sell it. So, we incur higher cost on interest.”

Moreover, the dealers have to transfer the money to the source bearing the transfer charge.

“More amount means more charges.”

Hence, the dealers are requesting the government to re-consider the ‘fixed-commission’ module.

“Dealer’s commission shouldn’t be fixed but given in percentage. The higher the price of the fuel,  the higher the cost the dealers have to bear.”

The dealers suggest the government consider fixing the five per cent green tax (GT).

The dealers question the government on the reason for keeping GT on percentage. They stated that if the fuel price is Nu 50, the government takes Nu 2.5 for a litre and if it is Nu 100, the government takes Nu 5 for GT.

“A litre of fuel, whether it is Nu 50 or Nu 100 will have the same amount of pollution.”

A litre of fuel will have the same pollution, despite the fluctuation in price. “GT should be fixed, it shouldn’t increase as the fuel price increases.” 

Currently, the base price for diesel is Nu 90.49 and Nu 84.92 for petrol, which is sold at Nu to Nu for diesel and petrol respectively after adding a 10 per cent tax and depot surcharge.

“If we go by this new pricing structure, it may paralyze all the dealers,” said Tshering Wangchuk.

STCBL fuel station at Ramtoktok, is open 24/7 with people employed in three shifts. Tshering Wangchuk said, “If the business is not viable at all, we will have to cut costs somewhere, that could affect the quality of service.”

“That loss for STCBL can be a big dent because we are bringing in a huge volume of fuel, even if you are losing Nu 4 or Nu 5, it’s a huge loss,” added the CEO.

The dealers are calling the government to sit down with all the dealers and come to a negotiation point. 

“Since we were not consulted, we assume that all these decisions have been made in a small room and without actually knowing the ground reality,” said a dealer.

Meanwhile, Economic Affairs Minister, Loknath Sharma said that the PoL dealers in the country have been very cooperative and understanding of this new pricing module though it has a direct impact on their business.

Earlier, the government had said that the pricing difference would be offset through slashing government levied charges on fuel.