A joint statement on the visit of His Majesty The King to India announced that the Bhutanese side welcomed India’s offer to revise the tariff of the 336 MW Chukha project to Nu 3 per unit, which represents a 17% increase over the earlier tariff.
The tariff currently is Nu 2.55 per unit which after the hike of 45 cheltrums makes it Nu 3 per unit.
The hike has been due since January 2021 and if the Indian side announces it to be effective from then, then Bhutan can get Nu 1.485 billion (bn) extra in back dated revenue from January 2021 to January 2023 which is a period of two years.
While Chukha generates around 1,800 million units in a year, due to rising domestic consumption Bhutan sold India 1,700 million units in 2021 and 1,600 million units in 2022.
In 2023 Bhutan is expected to sell even lesser at 1,300 million units due to even higher domestic demand. This would mean an additional Nu 585 million (mn) revenue (0.45 into 1,300 units).
In 2023 the total Chukha export revenue would be around Nu 3.9 bn.
The additional Chukha revenue will provide some relief to government revenues struggling with a high fiscal deficit or revenue gap.
Background of hikes
The last hike was agreed to in February 2018 and it was made effective from 1st January 2017.
At that time Bhutanese officials had proposed a hike of 25 cheltrums but the Indian counterparts wanted to go much lower with some not even keen for a hike.
Finally, the decision was pushed up to the political level between the two then Prime Ministers and a hike of 30 cheltrums per unit was agreed to pushing the Chukha unit price from Nu 2.25 to 2.55 per unit.
This hike meant that the project could earn an additional Nu 540 mn a year since it generated 1,800 million units a year pushing total revenue from 4 bn to around 4.540 bn.
The actual exact export revenue figures depend on the annual production of power and also how much of it is exported.
The hike before that was in 2014 with 25 cheltrums per unit effective from January 2014 pushing the potential revenue of Chukha at the time from Nu 3.6 bn to around Nu 4 bn a year if everything was exported.
At the time too the higher than expected hike was based on the request of the former government.
The first tariff hike was in 1990 when the earlier different rates of Nu 0.13 per unit for secondary energy and Nu 0.26 for firm energy fixed in 1986 was made uniform at Nu 0.26 per unit.
The second hike in 1993 which made it Nu 0.37 per unit. The third increase in 1995 made it to Nu 0.50. The fourth hike in 1997 made it Nu 1. The fifth hike in 1999 made it Nu 1.50 and the sixth hike in 2005 made it Nu 2 a unit.
The seventh hike in 2014 of 25 cheltrums applicable from 2013 January increased it to Nu 2.25 per unit. The tariff hikes in the past usually coincided with the visits of His Majesty The Fourth King to India.