The upstream JV reservoir project would benefit Chukha, Tala and the Wangchu projects which are downstream
The only reservoir Joint Venture (JV) project which is the 180 MW Bunakha project has been stuck for more than two years now since its DPR received approval from the Bhutan government in February 2014.
This approximately 29 bn project which would greatly benefit three other downstream projects is not stuck due to some insurmountable odds.
It is stuck due to a refusal by the Satluj Jal Vidyut Nigam (SJVN) to pay upfront Nu 1.17 bn as its share of a cost sharing arrangement for downstream projects that would benefit from Bunakha.
The SJVN will own 50 percent of the Wangchu JV project which is downstream of Bunakha and would benefit from the reservoir’s stored water. So as per the cost sharing agreement since Wangchu has to pay around Nu 2.358 bn to Bunakha for additional power gains, SJVN’s share is Nu 1.17 bn.
It has been learnt that SJVN is not willing to pay the amount during the construction phase of Bunakha but would only like to pay it with interest once Wangchu project comes online.
On the other hand DGPC which owns Tala and Chukha and 50 percent of the yet to be constructed Wangchu project is willing to pay its share of the cost sharing arrangement.
Chukha has to pay around Nu 3.235 bn, Tala around Nu 6.190 bn and DGPC Nu 1.17 bn for its 50 percent share of the Wangchu project. This would go up once interest during construction and cost escalations are included for Bunakha.
Otherwise the Bunakha project would not be viable as even with such cost sharing its power generation would come to around Nu 5.12 per unit.
As per the Inter Governmental Agreement of the total cost sharing amount for Bhutan coming to around Nu 10 bn, the equity portion coming to around 30 percent would be paid by the Indian government.
For Bhutan, Bunakha makes a lot of long term sense as it would be the only reservoir project on the Wangchu River with much more water storage capacity then the run of the river projects. In addition to benefitting the three projects it would provide more energy security in winter, and also be able to charge higher rates for peak power rates and also be part of a lucrative renewable energy mix, backing up sudden shortages from solar and wind power projects in India.
At the current tariff rates, because of Bunakha, Chukha would gain an additional Nu 575 mn in revenue a year, Tala would gain Nu 972 mn a year and Wangchu would gain Nu 420 mn (at Chukha tariff rates).
However, given that the above projects would have to invest in Bunakha’s construction the average tariff for the addition power generated due to Bunakha would be around Nu 3.72 per unit.
The Bunakha JV project would be owned 50 percent by DGPC and 50 percent by Tehri Hydro Development Corporation (THDC) for a period of 30 years before reverting fully to DGPC.
The cost sharing agreement is there in section 3.5 of the Inter Governmental Agreement on JVs which says, “The cost of Bunakha project excluding cost of power generating equipments will be apportioned with downstream projects of Chukha, Tala and Wangchu in the proportion of additional energy benefits.”
In the last meeting held on the issue with SJVN in August 2015 the SJVN had promised to take up the issue with its board but even with a year passing there has been no feedback from SJVN on paying its share upfront.
In April 2016 the Bhutanese side raised the issue with an Indian government delegation led by the Power Secretary P.K Pujari.
The Bhutanese side had emphasized the need to stick to the agreement negotiated for all JV projects. The Indian Power Secretary said that all JV projects should be done in accordance with the agreement.
However the power secretary requested the Bhutanese side to consider implementing Wangchu without linking it to Bunakha and Chamkarchu I and the Indian government would discuss the Bunakha issue separately.
This paper got in touch the Sanjay Uppal an Additional General Manager of SJVN who looks after the projects with Bhutan. He decline to comment and gave a number for a Delhi coordination office which was not answered despite several calls including previous attempts. Despite requests the Manager declined to share the contact information of the CMD of SJVN who sits in the head office in Shimla. The SJVN website also did not have contact information on the Shimla head office.