Will India-Bhutan relations go downhill from now?

by Jul 12, 2013

India has messed up big time with its only tried, tested and trusted neighbour Bhutan by unilaterally stopping subsidies for its LPG and kerosene supplies – a decision that it is likely to reverse soon.

Official sources conceded that the timing of the move was wrong when Bhutan was in the middle of elections – an exercise that would be completed as soon as on 13 July – and admitted that the move initiated by the Indian Oil Corporation (IOC) for putting an end to the Indian subsidies had indeed been given a green signal by the Ministry of External Affairs (MEA).

The move was immediately interpreted as a carrot-and-stick policy of a sulking New Delhi, given the fact that Bhutan is on its way to establish full-fledged diplomatic relations with China for the first time. The Indian move also exposed New Delhi to the risk of getting sucked into the domestic politics cesspool as the ruling party Druk Phuensum Tshogpa (DPT) was accused of spoiling relations with the all-important neighbour India.

The Indian move put Bhutan in the category of Nepal, Maldives, Sri Lanka and Bangladesh where India is seen, or allegedly seen, to be taking sides in domestic politics. This is a worrying sign for diplomatic relations between India and Bhutan.

Representative image. AFP.

Representative image. AFP.

The sources agreed that New Delhi’s “timing” for the move could have been better and that India could have and perhaps should have held its horses before doing what it eventually did.

But the Indian explanation for its perceived villainous move sounds equally convincing, though it may make sense economically and administratively – not politically. Bhutan is a special neighbour, after all; the only one to have waged a war against India-centric insurgents on its soil by way of Operation All Clear against ULFA in 2003.

Thankfully, the strategic importance of Bhutan for India is not lost on the MEA or the Indian government, despite New Delhi’s “unwise” move – as characterized by Pavan K Verma, India last ambassador to Bhutan who resigned from the Foreign Service in January this year and donned a political role with the Janata Dal (United).

The Indian explanation for its strange, rather inexplicable, move is rooted in economics. Government sources have the following explanation for the bizarre Bhutan move.

The cooking gas and kerosene subsidy to Bhutan was withdrawn because of “serious budgetary issues” as Bhutan’s subsidy budget ended last month without a replacement in place.  Moreover, the Bhutanese subsidy budget with regard to LPG has shown an upward trend to the tune of over 40 per cent.

But the question is that the subsidy amount in question could not have exceeded Rs 200 crore and this is chickenfeed for a nearly two trillion dollar Indian economy, especially when the matters pertain to strategic and diplomatic interests of India.

The official sources harped on the same point and pointed out that Bhutan is “a special neighbour” for whom the Indian purse strings have traditionally been loosened and will continue to be so in the future as well. They pointed out that in the 2013-14 fiscal year alone Indian aid to Bhutan has totaled Rs 3600 crore which is almost one-third of the MEA’s entire budget.

“We will find a way to deal with the situation. We have assured them that we will enter into plan negotiations when new government is in place, which is expected in another two days.  We need to go into careful accounting. We will find a solution that is welcomed by all,” official sources said on Thursday.

Meanwhile, Pavan Verma went ballistic on New Delhi’s Bhutan move and dubbed it “ill-timed”. In an interaction on Bhutan, organized by the Observer Research Foundation on Thursday, Verma commented thus: “We should have waited till a new government took charge there and negotiated with them. If I was the advisor, I would have never advised such an unwise decision.” He also remarked that it was his belief that the Indian government would soon revoke this decision.

But the moot point is how Indian diplomacy could commit such a mistake which could cost the nation dear. The debate in the context of India and Bhutan is strikingly similar to the questions repeatedly put in context of India-UK relations. British legislators have often complained why the UK should continue to give aid to a resurgent India. The same argument can be weaved in the context of India-Bhutan relations.

Bhutan, with a tiny population of just seven lakh, is doing very well in the GNH (Gross National Happiness) framework. In just about five years or so when its ten hydroelectric projects of 1000 mw each, being built with Indian assistance, become operational, Bhutan’s per capital income is set to be five times that of India’s.

But then continuing with its aid programme for the Bhutanese still makes sense as certain things have to be done by way of diplomatic symbolism. This is perhaps the reason why the UK is still continuing with its aid programme for India despite stiff opposition domestically.

The most important reason for India to continue with its liberal aid for Bhutan is the obvious reason: the China factor. India cannot afford to turn Bhutan into another Nepal and give Thimphu a reason to play the China card with India, something that Nepal has been doing for decades.

politics trump card game

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