Electricity trade provisions in EDP clash with India’s electricity trade guidelines

Three provisions in Bhutan’s umbrella Economic Development Policy 2017 (EDP) dealing with electricity trade clash with India’s  5th December 2016 ‘Guidelines on Cross Border Trade of Electricity,’ issued by its Ministry of Power in consultation with the Ministry of External Affairs.

The EDP says that a Bhutan Power System Coordination Committee (BPSCC) shall be established for efficient coordination, operation and supply within the country and trading of electricity in the region.

The DHI had earlier also talked of exploring the setting up of a Bhutanese power trading company that takes power from projects in Bhutan and trades it in India.

However, India’s electricity trade guidelines says that power can be taken only from a power trading company in another country that has more than 51 percent Indian ownership.

The EDP says the development of hydropower shall be accelerated by promoting construction of projects and inter-linking of transmission grids to ensure energy security and reliability and further integrate with regional grids to promote electricity trade.

The EDP also says the government will continue to review and reform the sector to enhance efficient delivery of electricity services and develop institutional capacity to take advantage of emerging electricity markets in the region.

However, Bhutan’s plans to conduct electricity trade to by exploring the regional market is again stymied by India’s electricity trade guidelines.

Even if the power projects are Bhutan government owned they still do not have access to India’s Primary power exchange market, according to the guidelines.

The primary power market is where the best power tariff rates are available as power buyers come and buy what power is available from the power market. Once the primary market purchase is done then only the secondary market is left where good rates are not available.

Currently Bhutan’s majority owned Dagachu has not been allowed to trade on India’s power market at all affecting Tata Power that is buying the power from Bhutan.

India’s guidelines have also made no mention of trilateral cooperation meaning it does not provide market options in the region apart from India since any power lines or electricity will have to go through India.

As per India’s guidelines instead of Bhutan calling for the highest bids for power from India, for non bilateral power projects, Bhutan will instead have to go for bids announced from India to give its lowest bid. This would mean low power rates for such projects.

The government is currently studying India’s guidelines and will be seeking clarification and explanation on the key points affecting Bhutan from their counterparts in New Delhi.

The Prime Minister earlier indicated that there is nothing that cannot be negotiated with India on this issue.

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