The traditionally unique bilateral relations between India and Bhutan is characterized by trust and understanding which have matured over the years. Cutting across regime lines on both sides, India and Bhutan have enjoyed an all-weather relationship. The special relationship has been sustained by the tradition of regular high level visits and dialogue between the two countries. Prime Minister Narendra Modi’s gesture to travel to Bhutan as the first destination of foreign visit after assuming office in 2014, when he would have been welcomed in any other country is a reaffirmation of the friendship and proof to the world that the two countries, despite the differences in size, enjoy a relationship that is problem free and mutually beneficial.
Mutually beneficial economic linkages between India and Bhutan have been an important element of the bilateral relations. India continues to be the largest trade and development partner of Bhutan. Planned development in Bhutan began in the early 1960s. The First Five Year Plan (FYP) of Bhutan was launched in 1961. Since then, India has been extending financial assistance to Bhutan’s FYPs.
Cooperation in the hydropower sector between India and Bhutan is a true example of mutually beneficial relationship, providing clean electricity to India, generating export revenue for Bhutan, and further strengthening the bilateral economic linkages. The two countries have successfully concluded several power sharing agreements.
Indo-Bhutan hydropower cooperation began in 1961 with the signing of the Jaldhaka agreement. The Jaldhaka project is situated on the Indian side of Indo-Bhutan border in West Bengal. The major part of power produced at Jaldhaka hydropower plant was exported to southern Bhutan.
A landmark development in the history of Indo-Bhutan hydro-relations took place in 1987 with the commissioning of the 336 MW Chukha Hydropower Project (CHP). Bhutan’s first mega power project, CHP was fully funded by the Government of India with 60 percent grant and 40 percent loan at the interest rate of 5 percent payable over a period of 15 years after commissioning. The then Indian President R.Venketaraman inaugurated the project.
The success of one project has made way for other projects based on confidence, economic viability and shared benefits. The resounding success and economic wellbeing brought by CHP made way for newer projects. The 1,020 MW Tala Hydroelectric Project, one of the biggest joint projects between India and Bhutan, was also fully financed by the Government of India, with 60 per cent grant and 40 per cent loan.
The two countries have also signed the Agreement on Cooperation in the Field of Hydroelectric Power (HEP) in July 2006, which outlines the framework for cooperation in the field of Hydropower. In May 2008, during the visit of the then Prime Minister Dr. Manmohan Singh to Bhutan, the two sides signed the Protocol to the 2006 Agreement concerning Cooperation in the Field of Hydroelectric Power and agreed to increase the export of electricity from Bhutan to India from 5,000 MW to 10,000 MW by the year 2020. Of these, three projects totalling 2940 MW (1200 MW Punatsangchu-I, 1020 MW Punatsangchu-II and 720 MW Mangdechu HEPs) are under construction. Out of the remaining 7 HEPs, 4 totalling 2120 MW (600 MW Kholongchhu, 180 MW Bunakha, 570 MW Wangchu and 770 MW Chamkarchu) will be constructed under a Joint Venture (JV) model. Under the May 2008 Protocol, the two governments also established the Empowered Joint Group to expedite the development of hydropower projects in Bhutan.
In April 2014, the two countries also signed the “Framework Inter-Governmental Agreement” concerning development of Joint Venture Hydropower Projects through the Public Sector Undertakings of the two countries. This Inter-Governmental agreement provides the framework for implementing the four HEPs of Kholongchhu, Bunakha, Wangchu and Chamkharchu totaling 2120 MW, subject to completion of the due process of appraisal of their Detailed Project Reports (DPRs) including techno-economic viability, on a Joint Venture-model between Public Sector Undertakings of the two countries. This Inter-Governmental Agreement would also facilitate the commencement of these four projects and further strengthen hydropower cooperation between the two countries.
During his visit to Bhutan in 2014, Prime Minister Narendra Modi laid the foundation stone of the 600 MW Kholongchu hydro-electric project, a joint venture between India and Bhutan. This project, which is to be developed by SJVNL along with Druk Green Power Corporation, is estimated to cost more than Rs 3,868 crores to be contributed in the ratio of 50:50 by both the JV partners.
Bhutan is endowed with abundant water and hydropower forms an important sector of the Bhutanese economy. So far, Bhutan has commissioned three major hydropower projects while three more HEPs; Punatsangchu I (1200 MW), Punatsangchu II (1020 MW) and Mangdechu (720 MW) are scheduled to be commissioned in 2018-19. The sale of hydropower accounted for the largest share of the country’s GDP. It is also the most important export item contributing about 40 percent of Bhutan’s total exports. Druk Green Power Corporation, which controls all electricity generation plants of the country, is the highest tax payer of the country.
India’s support in the development of the hydropower sector in Bhutan is the centrepiece of Bhutan-India economic cooperation and is one of the main pillars of bilateral cooperation. The cooperation in the hydropower sector is full of opportunities and has been recognized by both Bhutan and India as being mutually beneficial. India finds her interests fulfilled in alleviating their power deficiency by supporting Bhutan and Bhutan in turn finds an opportunity to optimize its national income through power exports to India. This sustainable win-win situation for both sides makes the relationship between the two nations even stronger and long lasting.