The Bhutanese Leading the way.
After a record long wait, the two countries of Bhutan and India have finally signed the all-important Power Purchase Agreement (PPA) for the 1,020 MW Punatsangchu II (P II) project. The Bhutanese side was represented by Druk Green Power Corporation (DGPC) and the Indian side was represented by NTPC Vidyut Vyapar Nigam Limited (NVVN).
This means that power trade for P II is now formalized, and Bhutan can begin receiving payments for electricity exports from P II from September 2025 till April 2026.
A total of around 800 million units has been exported at the agreed tariff rate of Nu 5.10 per unit and the payment to be received is around Nu 4 billion (bn).
A sum of Nu 780 million (mn) was already released after the signing ceremony on 20th May 2026 via videoconferencing.
The tariff rate of Nu 5.10 per unit was announced in 9th April 2026 when the Protocol to the Agreement between the Royal Government of Bhutan and the Government of India was signed for the P-II Project Export Tariff when the Indian Cabinet Minister for Power, Housing and Urban Affairs, , Manohar Lal, visited Bhutan.
The levelized tariff, or average tariff over the 35-year period, will be Nu 5.67 per unit.
However, in what was a surprise, the PPA was not signed at the time.
In past projects like Chukha, Tala and Mangdechu the power purchase agreement was signed early on and power exported from when generation started.
In the case of P II there was a long and deliberate delay.
P II commissioning was carried out in phases.
Units 1 and 2 came online in December 2024, followed by Unit 3 in March 2025 and Unit 4 in May. Unit 5 began generating electricity on 17th July 2025 and the final Unit 6 joining the grid on 27th August 2025.
Bhutan should have been allowed to export power from December 2024 itself and earn the tariff rate, however, there was delay on the Indian side in announcing the tariff rate. The official explanation was that it was taking some time to get the loan repayment period for P II extended from the 15 years to 17 years by the Indian Cabinet.
Bhutan could start exporting power to India from P II from 20th September 2025 onwards only, with the tariff rate announced only in April 2026 and the important PPA signed a few days ago.
This meant a notional loss for the generation before that which had to be used domestically at a lower tariff rate.
There is a belief in some circles in Bhutan that the export and tariff announcement of P II was deliberately delayed as a pressure tactic for Bhutan to agree to a dam on the 1,200 MW P I project, as Bhutan was initially pushing for a barrage and to also agree to certain specifications around the dam and other measures around P I.
However, now with the PPA signed things should flow smoothly.
Meanwhile, the scope of works for the stabilization of the right bank of the P I project is being finalized.
