Balancing Relief and Reality

2026-03-30 - 13:11

The government’s decision to subsidise diesel under the National Fuel Price Smoothening Framework (NFPSF) comes as both a relief and a warning. Relief, because soaring global fuel prices, driven by geopolitical tensions are already pushing up the cost of living. Warning, because such relief comes at a steep and unsustainable price. The subsidy is costing Nu 3 to 5 million a day, with Nu 1 billion earmarked in just a few months. There is little doubt that intervention was necessary. Diesel is not just another commodity; it is the backbone of Bhutan’s economy, powering transport, agriculture, construction, and trade. Left unchecked, rising diesel prices would cascade into higher food prices and broader inflation, hitting ordinary Bhutanese the hardest. In this sense, the government’s move is understandable and even responsible. However, subsidies are, by nature, temporary solutions. The real question is not whether the government should act, but how long it can afford to do so. At the current rate, the fiscal burden is significant, and if global prices remain elevated, the pressure on public finances will only intensify. The NFPSF attempts to address this through a ceiling-and-floor mechanism by subsidising when prices rise too high, and building a buffer when they fall. In principle, this is a sensible approach and mirrors practices in other countries. But in Bhutan, where institutional mechanisms are still evolving, the success of such a system will depend heavily on transparency, discipline, and public trust. There are also legitimate concerns about how the buffer fund will be managed. While officials have assured that safeguards will be introduced, past experiences in the region show that such funds can easily drift into general revenue use if oversight is weak. Clear rules, regular disclosures, and independent scrutiny will be essential. Ultimately, the subsidy buys time but it does not solve Bhutan’s structural vulnerability to imported fuel shocks. That solution lies in reducing dependence, improving efficiency, and accelerating alternatives. A strong economy is the source of national strength. Yoshihide