LPG & Kerosene subsidy: What is it about?

The Government of India (GOI) has stopped subsidizing liquefied petroleum gas (LPG) and kerosene to Bhutan resulting in massive increase in prices of these commodities in Bhutan.  There are reports that people have started looking for alternatives such as electricity fired cooking stoves, firewood stoves etc. The price increases were shocking to the poorer section of Bhutanese and are almost beyond their affordability range.

Is the objective of the LPG & kerosene subsidy (LKS) withdrawal aimed at punishing poor Bhutanese, who  want no harm to an insect leave aside our Indian friends? I do not think this is what GOI wants? Do they want to look like big bully in South Asia? They know the risk and  will not let  Rs. 0.58 billion/year subsidy issue reach that level. Is it intended to put a permanent dent in the Indo-Bhutan relationship? The relationship is much bigger an issue to both the countries than the subsidy withdrawal  that they know can be resolved at mutually acceptable and beneficial way. So, it is not what they want but more about what they do not want. In geopolitics there is huge difference between the two. Do they care which political party comes to power in Bhutan as long as “what they do not want” is taken care of?  Why should they? Theoretically. The preference obviously would be to the one who would not let them resort to future “subsidy cut”.

But for us, it is a problem, in fact a huge problem because it cuts across the entire population.  Some feel the pinch and others tight squeeze. The poorer section of the people are suffering hard. More than 60% of the household is affected directly. We need to find the solution to the problem at the earliest.  The quickest solution obviously is Royal Government of Bhutan (RGOB) cross-subsidizing LPG and kerosene to poorer section until a solution to the problem is worked out and agreed.  Can’t RGOB come up with cross-subsidy package  to take care of poorer segment of  our people as a near-term easing of problem?  We are not used to work things out but used to  take easier route taking things for granted.  Aren’t we?

We live in multi-dimensional environment. One-dimensional approach to resolving a problem needs to change.  Both the political parties have promised approaching GOI as soon as they are voted to form the government to resolve the LKS problem. They need our vote to  form the government first, and will then work on resolving the problem that affects day-to-day life of more than 60% of the population. What a meager and convenient response to an emergency?  Yes, it is, in my humble view. Why two parties could not come up with bi-partisan solution to the problem in immediate-term first, including how we should mobilize Nu 48 million/month (or much less may do) to meet the GOI subsidy deficit?  Then they could talk of how they would resolve the issue on a longer-term. Are domestic airport/education city/bulldozer to gewog/helicopter service/feeder roads of more priority than massive LPG/kerosene price hike in immediate-term?  To me, a Bhutanese family not being able to properly cook their evening meal because they cannot afford kerosene is an emergency deserving action by the country. The lead should have come from the two political parties. Painfully both political parties want our votes first.

Frankly, I did not know about GOI’s subsidy on LPG/kerosene until one of my construction workers from Dadgiri (India) came to me couple of months back for 10 lit. kerosene from my quota. When I asked why he wanted kerosene from Bhutan, he said it was much cheaper here in Gelephu. It was obviously subsidized I thought, but did not give much attention then. We not only give less attention, but take things for granted.  We took for granted LKS of Rs 0.58 billion. That’s why we are unprepared when the subsidy is withdrawn.  There is no back-up plan. I do not believe blanket passing of the entire Nu 0.58 billion to the people irrespective of their ability to pay the price hike a back-up plan.  I am talking here not only poor micro-economic management but also blind economic dependence, the issues as important as that for the country!

We live in the digital world that is more and more referred these days as the “global village”.  The more inward looking you are, fearing intellectual as well as physical externalities, weaker you become as an economic inhabitant of global village. The World Bank says Africa is now on the verge to take off like China was 30 years ago. It is opening up through political and economic reforms. They want to pursue inclusive growth and become proactive members of global village. The reason why west is giving more attention and China is giving much priority to Africa.

Deep understanding of economic issues and sharp analytical ability enable us to see things ahead of time. If not the events catch up and give us a rude awakening, like the LKS withdrawal. No country in the world is economically independent. The economic inter-dependence is inevitable, and in many ways healthy and beneficial only if we understood deeply the issues, analyzed and harmonized to our advantage. If not, in an inter-dependent environment, the stronger dominates brutally. The domination is reflected in trade balance.  Many say the modern-day war is not fought with ammunitions but with trade.  How many countries invaded another nation sending army across the border in last 50 years? I recollect none.

I do not believe it is only size that matters.  Economic smartness matters more. If only size mattered why do you think Nestle products (from Switzerland) dominated the supermarkets of the world, from China to Russia to United States to Brazil? Economic inter-dependency is healthy, one-way dependency is severe, but blind dependency lethal. To avoid this macro- and micro-economic management must be smart and strategic. If not, the consequence is right in front of you. And, this isn’t the last. There is no use worrying about things that cannot be changed. Worry drains energy and damages soul.  I read that the Sanskrit character for funeral pyre and worry are similar because former burns the dead and latter living. It is worth going back often to Reinhold Neibuhr’s words in The Serenity of Prayer: “ God, give us the grace to accept with serenity the things that cannot be changed, courage to change the things which should be changed, and the wisdom to distinguish one from other.”  And then face the challenges, not run away from it!