Explained | Bhutan’s Sustainable Development Fee for tourists

What is the Sustainable Development fee Bhutan is charging tourists? What does it mean for Indians?

October 14, 2022 01:13 pm | Updated 01:13 pm IST

Tourists have long eulogised Bhutan’s unspoiled charms, its peace and its pristine environment, but the Himalayan kingdom’s economy has been struggling following the COVID-19 pandemic.

Tourists have long eulogised Bhutan’s unspoiled charms, its peace and its pristine environment, but the Himalayan kingdom’s economy has been struggling following the COVID-19 pandemic. | Photo Credit: Reuters File

The story so far: After keeping its borders closed for more than two years to contain the spread of COVID-19, Bhutan reopened its gates to travellers on September 23 as part of its efforts to revive a struggling economy.

Earlier this year, the National Assembly of Bhutan gave its nod to a set of rules, which requires all tourists entering Bhutan to pay a tourism tax, known as the Sustainable Development Fee, or SDF. While Indian tourists will be charged Rs 1,200 per day per person, the fee for tourists from other countries has been increased from $65 to $200. Travellers from India, Maldives and Bangladesh were earlier allowed free entry into Bhutan without an advance visa or a daily tourism fee.

Emergence and development of tourism in Bhutan 

Often called the last Shangri La, Bhutan is known for its natural grandeur and rich heritage. For a long time, the country remained isolated to preserve its natural beauty and culture. 

It was in 1974 that Bhutan first opened its borders to foreign travellers to support its economy. The Himalayan kingdom adopted a “high value, low volume” strategy, considering the possible negative consequences of tourism on the socio-cultural and natural environment and promoting itself as one of the most exclusive destinations. Bhutan permitted tourists only in groups and allowed a maximum of 30 people who were required to pay $130 per day. The cost of this Minimum Daily Package Rate, or MDPR, included transport within the country, food, guides and at least a 3-star hotel accommodation. At the time, 287 tourists visited Bhutan. 

File photo of a group of foreign tourists with a local guide walking past a row of shops selling handicrafts in Thimphu.

File photo of a group of foreign tourists with a local guide walking past a row of shops selling handicrafts in Thimphu. | Photo Credit: Singye Wangchuk

In 2012, the all-inclusive daily package was increased to $250 for the peak season of March to May and September to November, and $200 for December to February and June to August. The fee was increased to reduce the tourist inflow and minimise its adverse impact on the country’s culture and environment, the government said. An additional fee of $65 per person per night as a Sustainable Development Fee was also introduced. The SDF did not apply to regional visitors, or tourists from countries granted an exemption by Bhutan, which included India.

What is the Sustainable Development Fee?
The Tourism Levy Act of Bhutan 2022 describes SDF as the “tourism levy on all leisure tourists per person per night and applicable throughout the year as a contribution towards sustainable development initiatives undertaken by the government and to compensate for the negative environmental impacts associated with tourism.”
The revenue is used to develop roads, bridges, and schools, provide free education and health services, promote and preserve culture and tradition, and support the preservation of the natural environment in the country.

The decade saw rapid growth in the tourism industry, marked by a rise in regional visitors. The overall figure crossed the 2-lakh mark in 2016. Three years later, Bhutan welcomed 3.15 lakh tourists — a 15% jump from the previous year. These included 72,199 international tourists and 2.43 lakh regional visitors — 20% more than in 2018 — of which 2.3 lakh were regional visitors, mainly from India, as per a report on the overall sector performance in 2019.

Over the years, the tourism industry emerged as a major sector in Bhutan with significant contributions toward socio-economic development through revenue generation and employment. According to the latest Tourism Establishment Census of Bhutan, around 52,000 of Bhutan’s 7.8 lakh population were employed in the industry in 2019. Tourism and related activities generated gross revenue of Rs 23,337.15 million in 2019, the majority of which was earned from transport, tour operators, travel agents and reservation services, as per the report.

In 2019, the tourism industry in Bhutan made significant contributions to the socio-economic development through revenue and foreign currency generation and employment creation.

In 2019, the tourism industry in Bhutan made significant contributions to the socio-economic development through revenue and foreign currency generation and employment creation. | Photo Credit: Source: Tourism Council of Bhutan

Why was a tourism policy the need of the hour?

Tourism, along with hydropower and agriculture, is one of the largest contributors to the economy in Bhutan. The industry, however, has brought with it social, cultural and environmental challenges. Along with concerns over the negative impact of tourism on Bhutan’s ecology, the increase in the number of visitors resulted in traffic congestion at tourist sites and highways and an increase in accidents. It also resulted in quality issues in accommodation services, waste management problems, mushrooming of non-certified tourist facilities, and unethical business practices.

The Tourism Council of Bhutan (TCB) expressed similar concerns. “With our limited infrastructure and carrying capacity it has become increasingly challenging to maintain our policy of high value, low volume and ensuring an authentic and quality experience for tourists,” it said. 

As the government grappled with fears of destructive effects of the industry on the country’s sensitive ecology and rich cultural heritage in absence of set guidelines, a new tourism policy was framed in 2020 to regulate the flow of tourists and “change and adapt” with the evolving demands of the industry. The government announced that “regional tourists” would have to pay a daily fee of Rs 1,200 to travel in Bhutan. The new set of rules, which were to come into force in July 2020, could not be implemented because of the pandemic.

Meanwhile, the two years of shutdown dented the economy as the tourism industry remained closed. Arrivals dropped by 91% from 3.15 lakh visitors in 2019 to 29,812 visitors in 2020, while direct revenue declined by 92% to $19.84 million in 2020 from $23.4 million in the previous year.

Graph showing trend of arrival of tourists in Bhutan

Graph showing trend of arrival of tourists in Bhutan | Photo Credit: Source: Tourism Council of Bhutan

What are the new rules and how much will Indians have to pay?

Earlier this year, the National Assembly passed the Tourism Levy Bill of Bhutan 2022, which proposed an increase in the SDF for international tourists to $200 per night from the previous $65. The daily tourism fee for those from India, Maldives and Bangladesh remained unchanged at Rs 1,200, as laid down by the 2020 policy.

As per the rules, in addition to the SDF, Indian visitors are required to show their voter card, passport or any other identity proof at the immigration check posts, while the birth certificates of children will have to be produced.

As per an official, the new rule for tourists from India will remain in effect for two years, following which it will be reviewed and could be revised. The SDF for those from other nations, meanwhile, has been increased to $200 per night from the previous $65 fee. 

The tourist fee will be used on projects like planting trees, upskilling tourism workers, maintaining hiking trails, reducing reliance on fossil fuels and electrifying vehicles to offset tourists’ carbon footprints, an official was quoted as saying by Reuters.

People visiting Bhutan will no longer have to pay the minimum package fee (MDPR). They can now directly contact hotels, guides and tour operators. A guide, meanwhile, remains mandatory for all tours except from the entry point until the first hotel. Tourists can book and arrange tourism services through an online booking portal identified by the Tourism Council of Bhutan. Visitors have to stay in hotels and accommodations certified by the TCB.

Day tourists who do not travel beyond the first designated point and children aged five years and below will not be required to pay SDF. Those between six and 12 years of age, meanwhile, will have to pay Rs 600. In addition to the SDF, Bhutan will levy an entrance fee for visits to monuments or sacred sites. The rule was notified in a circular in July.

Prime Minister of Bhutan Lyonchhen Dr Lotay Tshering said the new rules were in line with Bhutan’s ‘high value, low volume’ policy.

Does any other country levy a tourism tax?

Over the years, several countries have introduced tourism taxes, which are different from visa fees, to promote sustainable tourism and combat the problem of mass tourism. 

In Europe, many countries levy a hotel tax. Germany has a culture tax and a bed tax in some cities. Venice introduced an entrance fee ranging from 3 to 10 eurosin 2018. Tourist tax in Switzerland depends on the location. Bulgaria also levies a tourist fee on overnight stays. The Netherlands levies two types of tourist tax — land tourist tax for accommodation and water tourist tax for accommodation on cruise ships.

Some states in the U.S. also charge hotel tax— called occupancy tax.

Some countries charge a “departure tax”, which is the fee paid by visitors for leaving the country. In 2019, Japan charged the “sayonara tax”, which was used to enhance infrastructure ahead of the 2020 Summer Olympics.

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