The Bhutan Chamber of Commerce and Industry (BCCI) has submitted a paper to the government studying and recommending impacts, of the five percent fuel tax, on the country’s economy.
In its five recommendations to the government, the chamber highlighted that demand for fuel remained inelastic irrespective of price changes. Fuel consumption will keep increasing and imposing a green tax will only accentuate import figures.
Value of fuel imports has been increasing in recent times, although subdued by decrease in international oil prices. It has reached Rs 8.4B in February this year, more than the value of electricity the economy exports to India.
Today, it is likely to increase further with over 6,000 cars that were imported after the ban on import of vehicles were lifted July last year.
BCCI’s annual report states that demand would remain inelastic since there were no alternative energy sources available in the country today. Cars that use alternative energy sources are yet to pick up pace. Of the 6,000 cars that were imported, only around 40 were electric cars.
An official from the chamber over a telephone said, imposing green tax was not working in favor of the government, as it has not led to a decrease in aggregate demand for fuel in the economy.
The increase in fuel price was only going to jack up prices of other commodities and thereby affect the overall economy. “When fuel prices increases, prices of all other commodities also increases since it becomes expensive to transport them.”
In this way, the impact, the official said, would escalate thorough out the economy.
With people paying more for fuel, the annual report states that the government of India might assume that people of Bhutan has the ability to pay higher prices for fuel, which would consequently lead to withdrawal of subsidy.
It has been nine months since the government starting levying a five percent green tax on every litre of fuel.
The government is yet to respond to the chamber’s paper.
