Before the 2008 elections and the coming in of Bhutan’s first democratic government, His Majesty The Fourth King and subsequently His Majesty The King had set a realistic target of 5,000 MW by 2020 with India.
These were to all be bilateral projects fully owned by Bhutan and financed on favorable terms like Chukha and Tala.
The 5,000 MW size was chosen by Bhutan as it was realistically feasible for Bhutan, and at the same time would generate a lot of revenue.
India agreed to this due to the 2003 operations, the close ties between the two countries and India’s need for power.
However, the first elected government right from 2008 doubled the target to 10,000 MW by 2020, and the then Manmohan Singh government, given the goodwill for Bhutan, was hesitant to say no and agreed to it.
However, on hindsight, Bhutan has lost out in many ways by proposing this unrealistic doubling of the original 5,000 MW target.
The first impact was that except for Punatsangchu I the 40 grant and 60 loan financing for projects changed to 30 grant and 70 loan increasing the debt burden for Bhutan and reducing the grant component.
Another major impact was that for India to agree to 10,000 MW they proposed that of the 10 projects four of the new projects would be Joint Ventures of 2,120 MW having around 50 percent Indian ownership for at least 30 years with provisions for extensions.
The joint ventures, which are a new experience for Bhutan, has brought in its own set of headaches and problems with profit driven Indian PSUs wanting to extract the maximum concessions.
In 2015 it became amply clear that Bhutan and India would only be doing 5,000 MW by 2021 and of this 2,120 MW, would be joint ventures. The official reason from India is funding concerns due to the huge nature of the reservoir projects like Sunkosh and Kuri Gongri.
However, since the broad agreement is 10,000 MW by 2020 identifying 10 specific projects, Bhutan, as a result, is unable to explore other options for already committed but yet to take off remaining 5,000 MW projects.
A lot of the above could have been avoided if Bhutan stuck to the pre-2008 5,000 MW by 2020 agreement whereby all projects would be fully owned by the Bhutanese and it would have been financed on more favorable terms.
“Common sense is seeing things as they are; and doing things as they ought to be.”
Harriet Beecher Stowe