India responds to MoU on trilateral Hydro cooperation but with changes

The Government of India has sent its version of the draft Memorandum of Understanding (MoU) which aims to put in place an understanding between Bangladesh, Bhutan and India to cooperate on trilateral hydropower cooperation.

The good news is that India has finally sent its version of the MoU which was drafted by Bhutan and sent around January 2016 to both New Delhi and Bangladesh.

Bangladesh after a month had largely accepted the Bhutanese version of the MoU with almost no change and sent it back only adding that the time period to form the a steering committee after signing the MoU should be 30 days. Bhutan accepted this minor change.

Meanwhile, both Dhaka and Thimphu waited in a yearlong suspense on what India would say on the MoU or if India would agree at all, despite the many verbal assurances given to the Bhutanese leadership.

The agreement essentially consists of four points and India while responding to the MoU with its observations has sought significant changes in all four points.

Bhutan’s version of the MoU says that Bhutan agrees to allocate a mega hydro project to be developed through a trilateral implementation and funding arrangement in keeping with the laws of the Kingdom of Bhutan.

This would be like the ongoing current bilateral projects like Punatsangchu I & II and Mangdechu which operate under Bhutanese laws.

The Indian observation is that it has removed “in keeping with the laws of the Kingdom of Bhutan,” and has added ‘mutual consultations,’ for Bhutan to allocate a hydroelectric project.

The Bhutanese MoU in the second point says that the energy generated will be shared among the three countries in the proportion to be worked out. It says India agrees to provide the transmission access through its territories for transfer of energy to Bangladesh in keeping with the laws of the Republic of India.

Here India’s version removes the entire second section on transmission access and instead says, “Issues relating to transmission would be worked out on keeping with the relevant laws of the states.”

This has lead to some confusion in Bhutan as there are no clear laws yet in India on cross border power transmission to a third country like Bangladesh. Even India’s recent ‘Guidelines on Cross Border Trade of Electricity,’ is specific on a lot of issues but silent on such transmission lines.

In the third section Bhutan’s MoU says, “Bangladesh agrees to invest in development of a mega hydroelectric project in Bhutan and open its markets for energy imports from Bhutan through India. The payments to Bhutan for the energy imported will be in convertible currency.”

India in its version has removed this entire section.

The fourth point in Bhutan’s MoU modified slightly on the 30 day timeline based on Bangladesh’s recommendation is, “A steering committee will be constituted within 30 days after signing the MoU to expedite the identification of the of the mega hydroelectric project, the project and financial structuring and finalization of the implementation agreement among the three countries.”

The Indian version says “A steering committee will be constituted to expedite the identification of the hydroelectric project and to finalize the implementation modalities between the three countries, including investments by participating entities of the three countries.”

The Bhutanese government on its part has recently sent back a response to India stressing more on the original points in the Bhutanese MoU.

Bangladesh Prime Minister Sheikh Hasina will be travelling to India from April 7th to 10th 2017 and it was originally hoped that the agreement could be signed between the three countries by the early part of April 2017. The Bangladesh PM is also expected to discuss the matter of trilateral hydropower cooperation with India.

However, given the major changes in Bhutan’s version of the MoU it is not clear when exactly the MoU can now be signed. This is not only because of Bhutan but also Bangladesh which had accepted Bhutan’s version of the MoU with only some minimal change. It is not clear if Bangladesh would accept such major changes in the MoU.

The only hope for all three countries on the MoU, which has both economic and geopolitical considerations is that an acceptable way can be found.

The immediate and main goal is the 1,125 MW Dorjilung project where Bangladesh is willing to invest so that it can buy the power and get it transported through India. The project which needs India’s cooperation will also see some Indian investment.

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