RENUKA RAI | Chukkha
Phuentsholing’s struggle to keep consumers from crossing the border to Jaigaon is not simply a competition between two neighbouring markets. A new report shows that the growing retail leakage is closely linked to household expenses, with Bhutanese consumers paying significantly more for several everyday goods in Phuentsholing.
The Cross-Border Retail Competitiveness Study, conducted by the Competition and Consumer Affairs Authority (CCAA) under the Ministry of Commerce, Industry and Employment, found that 94.9 percent of surveyed Phuentsholing residents rely on Jaigaon for at least some of their shopping, while 75.9 percent prefer Jaigaon as their primary shopping destination.
The strongest reason is price about 90.1 percent of the 312 residents surveyed said lower prices were the main reason for shopping in Jaigaon. The study also found that 70.5 percent of respondents cross the border at least once a week, with 38.5 percent doing so twice a week or more.
The findings suggest that cross-border shopping has become deeply embedded in the daily economic life of Phuentsholing residents rather than being occasional shopping behaviour.
The price survey, which compared 91 products across 10 categories in Phuentsholing and Jaigaon, found major differences in several essential goods.
Fresh fruits and vegetables showed the largest gap. On average, the surveyed produce was 155.47 percent more expensive in Phuentsholing. Every fruit and vegetable included in the survey was more expensive on the Bhutanese side.
Tomatoes were 237.4 percent more expensive in Phuentsholing, while potatoes cost 232 percent more. Cabbage was 222.9 percent more expensive and red onions 131.8 percent more. Bananas and oranges were also considerably more expensive, with price differences of 60 percent and 48.7 percent respectively.
For households buying vegetables regularly, such differences can add up quickly. The study attributes the gap largely to structural weaknesses in the supply chain. Bhutan depends heavily on imported produce during winter and spring, while local retailers often have to buy through several intermediaries instead of sourcing directly from Indian wholesale markets. Each additional layer adds a markup before the product reaches consumers.
The gap is not limited to food; household appliances were on average 19.7 percent more expensive in Phuentsholing, with some individual products showing much larger differences. A 194-litre Godrej refrigerator, for instance, was 44.6 percent more expensive in Phuentsholing, while an electric kettle was 32.9 percent more expensive and an induction cooker 29 percent more expensive.
School items were another area of concern. Twelve of the 13 products surveyed were more expensive in Phuentsholing, with an average difference of 10.86 percent. School socks showed a premium of 41.4 percent, while some notebooks were between 18 and 30 percent more expensive.
The impact could be particularly significant for families with school-going children, as school supplies are recurring expenses rather than one-time purchases.
Hardware products were, on average, 12.31 percent more expensive in Phuentsholing, while Mahindra pick-up spare parts cost 10.4 percent more. These differences can also affect small businesses and transport operators that depend on vehicles and equipment for their livelihoods.
However, the study also provides an important example of where Bhutanese retailers are already competitive.
Consumer electronics were the only category in which Phuentsholing was uniformly cheaper, with prices averaging 6.32 percent below Jaigaon. A Vivo T4X 5G phone was 13.4 percent cheaper in Phuentsholing, while a Samsung 43-inch television was 6.8 percent cheaper.
The study links this advantage to the presence of authorised distributors and more favourable import conditions. Unlike several other product categories, electronics can enter the Bhutanese market through a more direct supply chain, reducing the number of intermediaries and associated markups.
The finding is significant because it suggests that consumers are not crossing the border simply out of habit.
Where Phuentsholing offers competitive prices, consumers are willing to buy locally.
Electronics were not among the major categories purchased across the border, while fresh produce and school items, which have some of the largest price differences, were among the most commonly purchased in Jaigaon.
The study therefore concludes that price differences are a major factor behind cross-border shopping.
But price is not the only problem, The focus group discussion with 20 micro and medium-sized retailers identified a series of structural barriers that make it difficult for local businesses to compete with their counterparts in Jaigaon.
Retailers face multiple layers of costs, including goods tax, annual income tax, border-related charges, MDP fees, customs clearance agent fees, transportation costs, commercial rents and staff salaries.
At the same time, retailers in Jaigaon have direct access to India’s wholesale distribution network and can purchase even small quantities at competitive margins.
Bhutanese retailers, by contrast, often lack direct access to manufacturers or primary distributors and must rely on Indian intermediaries and secondary wholesalers. Minimum order requirements also make direct procurement difficult for businesses operating in Bhutan’s relatively small market.
The lack of authorised distributors for many brands further increases the cost. The study also raises concerns about a conflict between distributors and independent retailers. In some categories, distributors operating in Bhutan also participate directly in retail, allowing them to compete with the very retailers they supply.
Informal trade adds another layer to the problem. Retailers reported that goods are transported across the border through private vehicles without customs inspection or taxation. Unlicensed door-to-door vendors, informal online sellers and briefcase traders also operate outside the formal regulatory system.
For registered businesses that pay taxes and comply with regulations, this creates an uneven playing field.
The study notes that informal sellers do not carry the same tax and compliance costs as licensed retailers, allowing them to sell goods at prices that formal businesses may struggle to match.
Beyond prices and supply chains, consumers also appear to be attracted by Jalgaon’s wider product variety and shopping experience.
About 62.2 percent of respondents cited wider product variety as a reason for preferring Jaigaon, while 39.7 percent pointed to better customer care and 30.4 percent to convenience.
This means that even if prices become more competitive, Phuentsholing may still need to improve its overall retail environment to persuade consumers to shop locally.
The study recommends a coordinated response rather than isolated measures by individual businesses.
One immediate recommendation is to review GST, MDP fees, customs clearance charges and other import-related costs to identify areas where targeted reductions could lower retail prices.
It also recommends stronger monitoring of commercial goods entering through private vehicles, while distinguishing genuine personal imports from commercial-scale activity.
In the medium term, the study calls for Bhutanese retailers to be given better access to Indian wholesale markets. A Bhutan-side aggregation or cooperative buying mechanism could help small retailers meet minimum order requirements and secure better prices.
The government is also encouraged to attract authorised brand distributors to Bhutan and consider separating wholesale distribution from retail operations where conflicts of interest exist.
Improving Phuentsholing’s retail environment is another recommendation, including better organisation of shopping areas, wider product availability, access to credit and stronger workforce training in customer service, product knowledge, inventory management and digital payments.
The report also recommends conducting similar price surveys annually to track whether policies are reducing the gap between the two markets.
For Phuentsholing, the challenge is therefore larger than losing shoppers to a neighbouring town. Every time a household crosses the border because a bag of vegetables, school supplies or a household appliance is substantially cheaper in Jaigaon, money that could circulate within the local economy leaves Bhutan.
The study makes clear that individual retailers cannot solve this problem alone. The price gap is rooted in taxes, supply chains, distribution arrangements, border controls, access to finance and the overall retail environment.
When Bhutanese businesses have access to efficient supply chains and competitive import conditions, they can offer prices lower than those across the border and consumers respond by shopping locally.
For Phuentsholing, the task now is to replicate that success across more categories. The question is no longer simply how to persuade people not to shop in Jaigaon. It is how to make shopping in Phuentsholing affordable, convenient and competitive enough that consumers no longer need to cross the border to make their household budgets work.
