This is because while the project cost shot from Nu 7bn to Nu 9bn there isn’t adequate rupee reserve in Bhutan to cover the cost escalation
Druk Holdings and Investment has requested the Indian government for Rs 2bn in grant to cover the additional cost overruns of the originally Nu 7 bn Dungsam cement project.
This request for the additional grants would mean that the project cost has shot up from Nu 7bn to Nu 9bn now.
DHI put forward the request to GoI in April first through the Gross National Happiness Commission and then the Ministry of Foreign Affairs which has forwarded the request to the Indian Embassy.
A DHI official said, “The Nu 2 billion cost overrun is mainly on the account of civil works with the increase in prices of steel, cement, fuel and additional works like excavation to deeper depths than expected.”
The DHI CEO Karma Yonten said that GoI was approached through GNHC and MFA as the Dungsam Cement project was originally a GoI initiative. “The other reason also is that with the cost escalation, rupee crunch and now credit crunch there was no other option,” he said.
The Indian Ambassador Pavan K. Varma confirmed that the Indian embassy had received the request for the Rs 2 bn grant.
“We have received the request and with our recommendations we have sent it to the Government of India along with several other requests (rupee loans) from Bhutan. We will pursue each of them and the Government of India is naturally well disposed,” said the ambassador.
The ambassador said that he would be leaving for Delhi on Sunday to meet the Indian Finance minister Pranab Mukherjee to discuss these issues.
The DCCL project had earlier taken Nu 3bn in grant from GoI, Nu 2 bn as domestic borrowings from Bank of Bhutan, Bhutan National Bank, National Pension and Provident Fund and Royal Insurance Corporation of Bhutan, and Nu 2.1 bn from Indian banks like State Bank, Union Bank, Punjab Bank and EXIM bank. The DCCL project has already missed two deadlines of December 2011 and March 2012 to a variety of factors from heavy monsoons to unavailability of laborers.
The CEO said that project should now be complete by October 2012. The Dungsam Cement project located in Nanglam is thrice the size of Penden Cement and when completed will produce 4,130 tonnes of cement a day of which around 3,600 tonnes will be exported to India. The project is also expected to generate 2,000 jobs.