The Kurichu Project is one of the hydro power projects built on the inter-government model.

10,000 MW Hydro Projects 10 November, 2009 - According to a Times of India (ToI) news story, India’s investment in Bhutan’s 10,000 MW hydro projects could have an adverse impact on their annual budgetary provisions if it is in the ‘inter-government model,’ according to records of a recent meeting called by the Indian power sector officials.

The record, according to ToI, says that India, under the inter-government arrangement, is committed to building projects of 10,000 MW by 2020. For this to happen, India will have to take up many projects at one go on a fast-track, requiring an investment of Rs 500 billion at Rs 45 billion per year till 2020.

The ‘inter-government model’ referred to is how hydro projects have been done within Bhutan in partnership with the Indian government.

For example, the Punatsangchu project, where 40 percent of the money is grant and 60 percent is loan money given by India, and on completion the project is completely owned by Bhutan.

The other option is the joint venture model, where an Indian public sector undertaking (PSU) together with the Bhutanese government invest in a hydro project, where the PSU will get up to 49 percent ownership of the project for 30 years.

When Kuensel contacted the Indian power secretary, Harishankar Brahma, in Delhi, he said, “The government of India is committed to 10,000 MW by 2020 and isn’t going back on that. There are no funding problems and we’ll build the project no matter what the cost.”

Harishankar Brahma said that, so far, it was agreed that three to four projects would be on an inter-governmental model and the remaining seven would be discussed. He further told Kuensel that the issue would be further discussed between the Indian ministry of external affairs and the Bhutanese government.

In March 2009, when Lyonpo Khandu Wangchuk visited Delhi, Bhutan and India had agreed to 10 hydro projects, where six projects with a total power of 9,340 MW would be carried out on the ‘inter governmental model’. The remaining four with 2,236 MW would be on the joint venture model.

This came to a total of 11,576 MW, whereby a cushion of 1,576 MW was added just in case some projects were unfeasible, or there were other problems.

Even in July 2009, during the prime minister Lyonchhoen Jigmi Y Thinley’s visit to Delhi, the Indian prime minister Dr Manmohan Singh recommitted that 10,000 MW would be done in time.

According to the ToI report, the records suggests that, if the present inter-government arrangement is changed to a joint venture model, India may have to pay a higher rate for power it buys from such projects in Bhutan, since India gets power at a much cheaper rate from Bhutan due to the financial aid it extends to these projects.

“I wouldn’t be overly worried as GoI is committed and these must be part of normal discussions among themselves on how to meet the commitments,” said the managing director of the Druk Green power corporation. “As far as possible, the inter-governmental model will be best for Bhutan, as the government will have 100 percent ownership of the project and financing will be assured.”

According to sources in Bhutan, Bhutan and India have already recently agreed to the intergovernmental model on Sunkosh, Punatsangchu 1, Punatsangchu 2 and Mangdechu, coming to around 6700 MW, with others under discussion.

Currently, Bhutan supplies electricity to India at Nu 1.80 per unit from the 1,020 MW Tala and 64 MW Kurichu and at Nu 2 per unit from the 336 MW Chukha project.

Bhutan pays more then Nu 3 billion in repayments to India annually on loans taken to build hydropower plants. Bhutan earns around Nu 6 billion in dividends and taxes.

India’s annual budget (2009-10) is Rs 10,000.208 billion.