Hydropower projects in Bhutan are an example of win-win cooperation, providing a reliable source of inexpensive and clean electricity to India, generating export revenue for Bhutan and cementing our economic integration. So far, Government of India has constructed three Hydroelectric Projects (HEPs) in Bhutan totalling 1416 MW (336 MW Chukha HEP, 60 MW Kurichhu HEP and 1020 MW Tala HEP), which are operational and exporting surplus power to India at a rate of Rs 1.98 per KwH (for Tala HEP and Kurichhu HEP) and Rs 2.25 per KwH (for Chukhha HEP). About three-fourth of the power generated is exported and rest is used for domestic consumption. Hydropower exports provide more than 40% of Bhutan’s domestic revenues, and constitute 25% of its GDP.
The ongoing cooperation between India and Bhutan in the Hydropower sector is covered under the 2006 Agreement on Cooperation in Hydropower and the Protocol to the 2006 agreement signed in March, 2009. Under this Protocol, Government of India has agreed to assist Royal Government of Bhutan in developing a minimum of 10,000 MWs of hydropower and import the surplus electricity from this to India by the year 2020. Currently, there are three Inter-Governmental(IG) model HEPs viz. 1200 MW Punatsangchu-I, 1020 MW Punatsangchu-II and 720 MW Mangdechhu under construction. The GoI funding terms are 40% grant and 60% loan at 10% annual interest for Punatsangchu-1 and 30% grant and 70% loan at 10% annual interest for Punatsangchu-II and Mangdechhu. Three separate authorities, headed by Minster of Economic Affairs of Bhutan, are implementing the projects.
In April 2014, an Inter-Governmental Agreement was signed between India and Bhutan for development of four more HEP’s of capacity 2120 MW (600 MW Kholongchhu, 180 MW Bunakha, 570 MW Wangchu and 770 MW Chamkarchu) under the Joint Venture Model. These projects will have both the JV partners owning 50:50 shareholdings each in the JV-company. Debt-equity ratio would be 70:30, with equity shared equally between JV partners. Further, MEA is providing Druk Green Power Corporation’s (Bhutanese) share of equity as grant.
Other HEP’s that are in DPR stage are 2560 MW Sankosh Reservoir project and 2640 MW Kuri Gongri Reservoir project. In the discussions held between the two sides on the possible models of cooperation in Hydropower in December 2015 ,GOI side has indicated two possibilities to take up these projects 1) A 100 % Indian PSU implemented project on the lines of Arun –III project in Nepal, where Government of Nepal awarded the project to SJVN ltd on the basis of international competitive bidding and 2) Through Line of credit ,where in the Government of Bhutan does the project completely on its own with an attractive EXIM Bank Rupee Line of Credit with a specified Indian content. GOI also conveyed to Bhutanese side that given the present day realities, GOI would no longer be in a position to finance large projects through the inter-governmental model.