Why Diesel price has become higher in Bhutan than in India

2026-03-23 - 08:31

From 16th March 2026 onwards there was a major hike in petrol and diesel prices as petrol increased from Nu 63.29 per liter in Thimphu to Nu 85.30 and diesel increased from Nu 70.18 to a whopping Nu 108.17. Given the war in Iran and the shut down of the Strait of Hormuz by Iran, a price hike was expected, but what surprised several Bhutanese people was that diesel prices in India were lower than in Bhutan. As of 16th March 2026, the price of petrol in Delhi is Nu 94.77, but diesel is Nu 87.67 per liter. Indian subsidy for Indians Many Bhutanese questioned how India can have lower diesel prices when Bhutan itself gets its diesel from India. The Bhutanese looked into the issue and found that the simple answer is that Indian Oil Marketing Companies (OMC) like IOCL, BP and HP are not passing on the real international costs of fuel to their Indian customers, and are absorbing huge losses in the form of fuel subsides. However, since Bhutan and Nepal are foreign countries, the actual increase in international prices are being passed on with no subsidy. This is clear when one looks at the fuel price in Delhi on 1st March, which was Nu 94.77 for petrol and Nu 87.67 for diesel, indicating the price on 16th March was not increased. Is Bhutan being charged more than Nepal? From April 2022 to June 2023, this paper carried out a series of investigative stories exposing how Bhutan was being overcharged for fuel by Indian OMCs, especially compared to Nepal, which was getting the same fuel from the OMCs at the time for a lesser cost. In April 2022, Nepal was being sold cheaper diesel by the OMCs at a price of INR 12.23 per liter lower than Bhutan. Similarly, petrol was cheaper by INR 11.48 per liter lower than Bhutan at the time. It was this kind of overcharging that was resulting in petrol and diesel in Bhutan being the same price or even more expensive than in India, and it had been going on for decades. The stories of The Bhutanese resulted in the former government, and especially the then Minister for Economic Affairs, Lyonpo Loknath Sharma, taking up the matter with his Indian counterparts and the Petroleum Minister in India, Hardeep Singh Puri. The OMCs started selling diesel and petrol at the same price to Bhutan as Nepal from April 2023, which resulted in a substantial drop, and since then the price of petrol and diesel has always been lower than in India with billions in annual savings for Bhutan. The Bhutanese investigated again to see if the OMCs are not only passing on higher international costs to Bhutan in fuel, but if it has gone back to the old policy of charging Bhutan more for fuel than Nepal. To check this, The Bhutanese compared the prices at which Bhutan and Nepal are buying petrol and diesel from India before levying their respective domestic taxes, dealer commission, local transportation charges, etc. As of 16th March 2026, Bhutan is buying petrol from the Indian OMCs at Phuentsholing at Nu 71.85 per liter and diesel at Nu 93.60 per liter. This is before applying the 5 percent GST, 5 percent Excise Tax, domestic transportation costs, local dealer charges, etc. This paper enquired with the Nepal Oil Corporation (NOC) on its purchase price from India, and which said it was paying Nepalese Rupees 112.18 or Nu 70.72 per liter for petrol and Nepalese Rs 147.55 or Nu 93.02 per liter for diesel. This is almost the same price that Bhutan is paying, which rules out the possibility that OMCs have gone back to charging Bhutan more than Nepal. Are OMCs fairly passing international price increase to Bhutan? Back in April 2022, when The Bhutanese investigated the fuel prices, the paper also looked at international fuel prices, transportation costs, processing costs, etc., to check what should be the fair price of fuel in Bhutan. Back then, the international Brent crude oil was USD 104 per barrel as of 1st April 2022. A barrel is 159 liters. With the INR at 75.97 to the USD at the time, the price of crude was INR 7,900.88 per barrel or Nu 49.69 per liter of crude oil. As per several fuel price sources, online and news sites in India the price to transport crude oil, process it, refinery margin, logistics, operational costs ranged from around Nu 4 to Nu 10 per liter even with a generous estimate in April 2022. So, the price of fuel should have been INR 54 to INR 60 per liter in April 2022, ready to be sold to petrol pumps. However, things have changed now drastically due to the Iran War and the shut down of the Strait of Hormuz through which India gets around 45 percent of its crude oil. While the international Brent crude oil price is USD 107.88 per barrel as of Friday afternoon, this price applies more to countries that don’t depend on the Strait of Hormuz. Most Asian countries like India, China and others depend on the Strait for crude oil. India is currently buying the Dubai and Oman crude which is USD 150 to USD 160 a barrel due to shortages. India was buying discounted and sanctioned Russian crude at USD 60 a barrel until February 2026 but it is now buying the same for USD 100 a barrel, and not much it is available, as China is also competing for it. The result is that due to the physical shortages caused by the war, the average price at which India is buying crude oil internationally, also called the Indian crude oil basket, has shot up. The Indian crude oil basket average price in February 2026 was USD 69.01 per barrel, but the average price in March so far is USD 117.09 per barrel. This average price will go up as the crude oil basket price for 19th March 2026 alone has touched USD 156.29 per barrel. To make a bad situation worse, there is huge international shortage of diesel pushing up international diesel prices even higher. While India does not import diesel but has the refining capacity to convert diesel and even exports it, India has priced diesel at USD 165.72 per barrel due to global shortages and rising demand. This is why there has been such a sharp spike in diesel prices from India to Bhutan and Nepal. The average price of petrol for March is USD 122.69 per barrel. If the above is not enough then the INR has declined sharply against the USD for the last few years, and especially more so after the Iran War, as India has to use up its USD reserve to import increasingly expensive fuel. As of 20th March 2026, 1 USD equals INR 93.40. Taking the Indian petrol price of USD 122.69 per barrel, then the 159 liters in the barrel is worth INR 11,459.24 or INR 72.07 per liter. Bhutan is charged the average price for 14 days only till 15th March, but at the rate at which the crude oil basket price is going up, the prices could go up even more by 1st April when the next revision is due for Bhutan. It is clear that Indian OMCs are absorbing losses by not passing on the real international costs to customers in India. The losses are INR 22 to 26 per liter. The OMCs recover these losses later, when the international fuel price goes down, they don’t bring down prices in India easily, which allows them to recover their losses and even make profits. Seeking answers about Bhutan from NOC The Bhutanese sent a series of questions to the Department of Trade (DoT) on Wednesday for the reasons for the price increase given by the OMCs, why diesel price is higher in Bhutan, does Trade have a way to check if the increase claimed by OMCs is in line with international prices, and the formula used by the OMCs to calculate fuel costs for Bhutan. The DoT did not respond to the query of The Bhutanese and instead some of the questions of The Bhutanese (without our consent) were likely used to give a public advisory on fuel prices through the Prime Minister’s Office (PMO) on Thursday which was unclear, incomplete and caused even more confusion among the public. Its only main point was that the increase in prices was not because of any new taxes, fees or charges introduced by the Government, but due to impacts of the ongoing conflict in the Middle East, which has increased global oil prices by more than 50 percent since the conflict began. With the DoT and the government tightlipped and unclear by Friday, The Bhutanese had no option but to approach the Nepal Oil Corporation (NOC) in Kathmandu, Nepal which is a government company that buys all fuel for Nepal from India and fixes the prices there equivalent to our DoT. The Bhutanese asked the NOC Deputy Director and Spokesperson, Manoj Kumar Thakur, if the prices being charged by the Indian OMCs to Bhutan and Nepal are fair and in line with international prices. The NOC Deputy Director said that when they received the increased prices from Indian OMCs (similar prices to Bhutan) they went through the price build up first and then used the international services of Platts and Argus, which are two leading Price Reporting Agencies (PRAs) providing benchmark prices for physical energy and commodity markets. Manoj said they have purchased certain services from these companies and could use this to check the international prices, and see if the OMCs prices were in line with it. NOC then checked the Average Freight Rate Assessment (AFRA) which is a widely recognized system used in international shipping to assess the average cost of transporting crude oil and refined products, rather than reflecting a single, instantaneous market rate. The NOC Deputy Director said they looked at the above data, and did their analysis and found that the prices from Indian OMCs were more or less in line with international prices and trends. On the higher price of diesel, the Deputy Director said that diesel is in higher demand and it is more expensive to extract diesel from crude as it needs a higher boiling point. The NOC Deputy Director said that while they are buying fuel from Indian OMCs at Nepalese Rs 112.18 (INR 70.72) per liter for petrol and Nepalese Rs 147.55 (INR 93.02) per liter for diesel, it was selling them at Nepalese Rs 172 (INR 107.70) for Petrol and Nepalese Rs 152 (INR 95.18) for diesel after taxes and charges incurring a loss of Nepalese Rs 18 (INR 11.27) per liter for petrol and Nepalese Rs 51 (INR 31.94) per liter for diesel. NOC would recover such losses from either not cutting fuel prices when it goes down or through government subsidies since it is a government company. At the end of the day, given the huge fuel oil shortages in Pakistan, Sri Lanka and Bangladesh, the issue right now is not just price but also supply, and if the Iran War prolongs then expect prices to shoot up even more. Subsidy Update On Saturday, the government announced it has taken a significant policy decision to introduce a National Fuel Price Smoothening Framework (NFPSF). Following a special session of the Lhengye Zhungtshog convened on 21 March 2026, the Government approved the framework as a timely measure to mitigate the impact of rising fuel prices. Under this framework, price-smoothening interventions for diesel will take effect immediately, as current domestic price is above the ceiling price requiring a subsidy injection of Nu. 16 per litre. However, in the case of petrol, interventions will not be required at the moment since the domestic price is below the ceiling price. The immediate reduction in High-Speed Diesel (HSD) prices from Nu. 108 per litre to Nu. 92 per litre for Thimphu (Other Dzongkhag prices will be reduced by Nu. 16 per litre) will deliver broad-based relief across the economy. As the backbone of Bhutan’s productive sectors, diesel powers agriculture, construction, manufacturing, logistics, and public transport. Lower diesel prices will therefore significantly reduce secondary inflationary pressures on essential goods and services. The NFPSF aims to moderate the impact of global fuel price volatility on the domestic economy. Under this framework, ceiling, and floor price for fuel will be established and shall be reviewed forthnightly. This will ensure that the fuel price in the economy remains within the absorptive capacity and macroeconomic situation of the economy. Accordingly, the government will determine the level of intervention. One of the few Indian tankers allowed through the strait of Hormuz by Iran