India hiked the Nu 2.25 per unit tariff of the 336 MW Chukha by 30 cheltrums to Nu 2.55 per unit.
The hike will be effective from 1st January 2017 since the hike was due from 2017 based on the fact that the Chukha project tariff is reviewed every four years.
Chukha produces around 1800 million units a year.
For 2017 the additional actual export revenue that will come to Bhutan due to the hike is Nu 482 mn as not everything is exported due to growing domestic demand. Hence the total revenue for 2017 based on the export figures is 4 bn.
However, if all Chukha power is exported then the additional revenue would be around Nu 540 mn a year.
In June 2017 a delegation of Bhutanese officials requested for a 25 cheltrums hike per unit to Indian officials who made it clear that based on their calculations the hike would much below the requested 25 cheltrums if at all. Some even suggested a decrease in the tariff given that Chukha had paid its loans and had a low cost of operation.
After this, Lyonchhen Dasho Tshering Tobgay intervened directly and took it up at the political level with New Delhi which has now agreed to 30 cheltrums hike to mark the 50 years of diplomatic ties between the two countries.
The last hike was four years ago in 2014 with 25 cheltrums per unit effective from January 2013. At the time too the higher than expected hike was based on the request of the current government. The Chukha tariff is reviewed every four years on a cost plus basis.
During the 2013 elections the Indian government wanted to reduce the then Nu 2 per unit Chukha tariff by Nu 45 cheltrums to Nu 1.55 per unit after relations between the former government and New Delhi hit an all time low. The reason given then was that a hike agreed to in 2004 saw the Ministry of External Affairs bearing a 45 cheltrums subsidy. The issue was, however, dropped after the election and instead a hike was given of 25 cheltrums in 2014 effective from 2013.
The 1974 agreement on Chukha project outlines that the tariff will be revised ever four years based on factors like Operation and Maintenance costs, weighted average costs of hydro projects in the North East and Eastern region and other factors.
The first tariff hike was in 1990 when the earlier different rates of Nu 0.13 per unit for secondary energy and Nu 0.26 for firm energy fixed in 1986 was made uniform at Nu 0.26 per unit. The second hike in 1993 which made it Nu 0.37 per unit. The third increase in 1995 made it to Nu 0.50. The fourth hike in 1997 made it Nu 1. The fifth hike in 1999 made it Nu 1.50 and the sixth hike in 2005 made it Nu 2 a unit. The seventh hike in 2014 applicable from 2013 January increased it to Nu 2.25 per unit. The tariff hikes in the past usually coincided with the visits of His Majesty The Fourth King to India.
Given that Chukha has the highest tariff rate most of this power is exported as Bhutan uses more power from other projects like Tala, Kurichu and Basochu. This option, however, is not available during winter when power production goes down due to less water flow in the rivers.