Last May, the trade and industry ministry issued a notification that it will not issue anymore licenses to such industries. Licenses issued earlier were on a first come first serve basis and on the capacity for hard currency earnings.
The ministry has so far issued three licenses for palm oil factories, of which two are running, five for copper industries and three for polyester yarn.
Now the ministry has said that it is reviewing the fiscal policies that govern these industries particularly on duty exemption and on value addition.
The minister also said that the trade between Bhutan and India was regulated by the trade agreement, which was perhaps one of the most liberal trade agreements in the world.
It was therefore a responsibility to make sure that this does not result in facilitating entry of restricted third country goods into India through whatever means and harm the spirit of the free trade agreement.
Ministry officials said that they would like to see the private sector doing well but not through these kinds of mechanisms because they were not sustainable.
For example the import duty on polymer yarns in India has dropped from 24 percent to 8 percent cutting away a huge margin for polymer industries in Bhutan. The same could happen with other industries as well, trade officials said.
The bigger problem, trade officials said was that these industries were using hard currency but earning in soft currency, as governed by the trade agreement, which was not healthy given that hard currency earnings were limited.
Trade officials said the review is aimed at coming up with clear transparent policies and linking duty exemption to hard currency earning and significant value addition.
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