Bhutan could lose billions in revenue in 11th plan due to delay in Punatsangchu I

The Punatsangchu Hydroelectric Project Authority (PHPA) managing director (MD), R.N Khazanchi confirmed to The Bhutanese that the November 2016 completion date of the Punatsangchu I would no longer be feasible.

This is on account of the sinking of the right slope situated above the dam site by as much as five meters in July 2013, leading to stoppage of the dam excavation works. The slope sinking is significant given the large area that it covers, and also because the right side of the dam would be resting on that particular slope.

He said this will raise additional costs to the Nu 94 bn revised estimate of P I.

The MD said the exact time period of the delay and the additional costs to deal with the geological surprise would be known once a technical team from Central Water Commission and Geological Survey of India give their reports by mid-September.

Generally, in hydro projects across the world, after red tape hassles, the second major factor resulting in project delays are geological factors.

All of the above developments, especially on the time escalation, will severely impact Bhutan’s 11th plan revenue projections, and in doing so, both the 11th plan and current expenditure in the next five years could be tighter.

The latest draft 11th plan is Nu 213.966 bn of which around 74 bn is grant or soft loans given by donors and lending institutions, and Nu 139.816 bn is the projected domestic revenue from internal sources like tax, hydropower, tourism, dividends, etc.

However, in the event that the P I is not completed within the 11th plan, the domestic revenue would see a Nu 16.258 bn shortfall. This is because the draft 11th plan’s revenue projections have currently shown P I generating government revenue from November 2016 to cover the 2016 June-2017 July financial year and 2017 June -2018 July financial year. The revenue would be high because the first 12 months of production as it would not include any loan repayment figures. The PDP government would dissolve in only August 2018.

This will mean that domestic revenue for the 11th plan would fall to Nu 123.558 bn.

Therefore, it will reduce the entire 11th draft plan from Nu 213.966 bn to Nu 197.708 bn.

The current expenditure like salaries, TA/DA, fuel, stationeries, etc., and also capital works like roads, hospitals, and schools will take a hit due to the loss in revenue.

This is because of the Nu 213.966 bn plan Nu 121 bn is for current expenditure and Nu 92 bn is for capital expenditure.

Since current expenditure can only be met through domestic revenue as per the Constitution the reduced Nu 123.558 bn revenue will be just enough for the Nu 121 bn current expenditure.

On the other hand, the Nu 92 bn capital expenditure could see a sharp drop to around Nu 78 bn. The problem here is that all developmental activities in the 11th plan like roads, water, schools, hospitals, etc., come under the capital plan.

The Gross National Happiness Commission Secretary Karma Tshiteem said, “If the project is delayed and the revenue is impacted, then we have to make adjustments in the plan.”

He said one option would be approaching donors like India for more funds to cover up the loss of revenue or go for more concessional borrowings.

He said certain projects, instead of being fully funded by the government, may have to go in for public private partnership models.

He also said that the government of the day may have to also prioritize certain activities over others. He said the government may also have to cut corners and expenses.

Tenzing Lamsang 





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