Decision a purely “developmental, financial and technical” matter, it tells Bhutan

Facing the criticism of “meddling” in Bhutan’s domestic electoral politics amidst the perception of its being worried about Thimphu’s engagement with Beijing, India has said its decision to withdraw subsidies on petroleum products and excise duty refund to the Himalayan nation was a purely “developmental, financial and technical” matter. It has urged that “no political message be read into it,” and said New Delhi has “no preferences” among Bhutan’s political outfits in the run-up to elections in that country.

Speaking to The Hindu, a senior official said the subsidy cuts must be seen in the context of pressure on the Ministry of External Affairs (MEA) due to tightened budgets, the discrepancy in excise figures leading to suspicions of corruption, and the limited mandate of the interim government in Thimphu to negotiate on such matters.

Bhutan’s ambassador has sent a letter to External Affairs Minister Salman Khurshid, who has not received it as yet. Mr. Khurshid is likely to take a view after returning from Nepal. This means that by the time the Indian Government reacts, only a couple of days will remain for the second elections to the Bhutan Parliament.

Excise discrepancy

The official argued that with greater fiscal prudence, days when budgets were casually cleared for countries like Bhutan were gone. This led to greater “internal scrutiny.” It was not just Bhutan’s outlay that came under the Finance Ministry’s scalpel. With the exception of Afghanistan, all recipients of Indian aid have had their grants and plan outlays revised, delayed or cut.

All that is wrong with the petroleum products subsidy to Bhutan is the timing — a few weeks before the polls. It all began in May last year when experts found a massive discrepancy in what Bhutan claimed it had imported and Indian authorities said had been exported, leading to inflated bills.

Bhutan claimed that in 2010 its import was worth Rs. 2,772 crore and this increased to Rs. 3,367 crore for 2011. But accountants on the Indian side said India’s export to Bhutan was just Rs. 725 crore in 2010 and Rs. 1,026 crore in 2011. A similar gap was found while comparing the respective claims of import and export of petroleum products.

“We were horrified to find this discrepancy, and it could only mean that unscrupulous elements from both sides were misusing what was a special facility. We have repeatedly raised this with Bhutan, but they were living in denial, and we had no choice.”

Explaining the timing of the decision as “pure coincidence,” the official added: “We were waiting for feedback from the IOC and the Ministry of Finance. On Bhutan’s side, the interim government has limited mandate, it hasn’t been able to finalise the budget, and their 10th Five-Year Plan ended on June 30. It is an unprecedented situation.”

India will now wait for a new elected government to have “formal consultations, and a formal agreement.”

‘No political message’

There is a widespread perception in Thimphu that India is sending a message to Bhutan for its engagement with China, and even aiming to damage the former Prime Minister Jigme Thinley’s electoral prospects for meeting Chinese Premier Wen Jiabo in Brazil last year. Polls are slated for July 13.

But the official strenuously rejected the suggestion. “We have very open consultations of an unprecedented level with Bhutan. Mr. Thinley visited India nine times during his term, and came thrice after the Rio meeting. If we had concerns, we have many other ways to relay it.”

India, the senior official said, “contributed in establishment of democracy in Bhutan.”

“We have no intention of trying to influence the electoral outcome. Whichever party comes to power in Bhutan, we have no issues with it. Both parties are for primacy of India and are very, very friendly with us.”

Asked about the impact on Bhutan’s poor due to fuel subsidy withdrawal, the official said India disbursed Rs. 1,500 crore, including Rs. 300 crore in the last week of June. “In a country of 1,26,000 households, there are only 15,600 poor households. If the Government of Bhutan is very concerned, it can provide subsidies.”

The fact was, he noted, there were many more poor people in India than Bhutan, that Bhutan’s per-capita income was double that of India, and with “rising prosperity,” there must be a “rationalisation.”