The Hydro Committee report has come out against private ownership of hydro projects.
The report also recommends that the government itself, through entities like DGPC should not invest in hydropower or at best limit its investment to only certain special projects.
It says that as long as the hydropower sector receives enough investments through other investment models (Inter Governmental, Joint Venture) it is suggested that till 2030, the government and the private sector need not invest in the hydropower sector.
This, the report says, will ensure that huge debts that would otherwise have to be sourced from local banks for hydropower development could be available for the other sectors – preventing crowding out of other opportunities by hydropower, according to the report.
It says the government should not use its own financial resources for hydropower development but only develop them if concessional financing from outside the country is available like in the case of Dagachu and Nikachu.
The report says that the impact at the national level of a few private entities/individuals holding equity in a hydropower project in terms of resources coming into the hands of a few needs to be considered.
A big concern of such huge national resources going into a few private hands is the creation of inter-generational inequity at a scale never seen before.
Though not mentioned in the report, another concern among policy makers of private ownership in hydro projects is fronting. There were reports in the past of private companies in the neighborhood tying up with Bhutanese fronts to construct and own projects in Bhutan, though eventually no private investment was allowed in projects.
The hydrocommittee report points out that while the development of the hydropower projects under construction or in the pipeline will help meet Bhutan’s domestic energy requirement and its revenue projections till 2030, it will not directly be able to address another key economic concern of the government: unemployment.
“To help address the issue of unemployment, advantage has to be taken of the energy available to set up energy intensive industries and in diversifyingthe economy,” said the report.
With the aim of diversifying the economy, the report says that the government itself may not need to make additional investments in hydropower development, but instead use the funds available to open up new sectors of economic opportunity or strengthen existing opportunities.
It says that strengthening and diversifying the economy at the scale required will call for substantial financial investment from both the government and the private sector which is best used in non hydro sectors.
Another reason is the fear expressed by the report that too many projects all over the place will lead to wider environmental and social impact and as a result public support for the sector will decline resulting in clearance and other issues.
It is recommended that Bhutan’s hydro development stick to some large mega reservoir projects under the IG model so that the returns are much higher and the impact is limited.
The report points while pointing out the advantages and flaws of the IG mode, says that it has worked well for the cooperation in the hydropower sector for Bhutan and India. It says it is the best model for Bhutan as it allows the development of projects without having to make investments or taking on any risks while retaining full ownership of the project and it is beneficial for GoI too as the tariffs are kept low.