India should support Bhutan-Bangladesh hydro deal

On 11th July 2013, an article by a respected investigative journalist in The Indian Express newspaper, said that given the state of diplomatic ties India would not stop at just withdrawing kerosene and LPG subsidies.

It quoted internal Ministry of External Affairs notes that proposed slowing down 10th plan funding for the remaining activities, not giving any commitments for the 11th plan and more importantly cooling down cooperation in the hydropower sector to the extent of giving only five to 10 percent grant and increasing the interest rates for loans.

The above was just before the 2013 general elections by when relations between the Indian government and the former government had reached its lowest point.

To be fair, all of the above measures were either withdrawn or not implemented after the 2013 polls when the current government came to power and relations improved.

However, a nagging doubt has remained on the hydropower front due to India backing out of the ‘10,000 MW by 2020’ agreement and instead settling for 6,476 MW by 2022, which includes four joint venture projects. It excludes the two mega reservoir Inter-governmental projects of 2,585 MW Sunkosh and 2,640 MW Kuri Gongri projects that would have been big money spinners for Bhutan.

The official reason from India since 2014 is that funding is becoming a problem, given the size and number of the projects.

Ever since, there has been whispers in Thimphu among many circles, including friends of India, asking if this is a deliberate strategy by India to prevent Bhutan from becoming economically self reliant after the pre-2013 experience with the former government.

The seed of the question was sown by The Indian Express report in 2013 and its water has been India diluting the 10,000 MW by 2020 agreement.

In hindsight, the 2008 proclamation of 10,000 MW by 2020, like the ‘Golden Rail’ project was an announcement made by the then two Prime Ministers that was not entirely based in ground reality. Even some in Bhutan wondered about 10,000 MW by 2020.

In India news reports from 2008-09 itself showed the then Indian Power Secretary H.S Brahma complaining about lack of funds and having multiple meetings to look at ways to reduce the grant component and go for more joint ventures.

This is precisely what happened around 2009 as the grant from Punatsangchu II onwards became 30 grant and 70 loan and four joint venture projects were introduced.

However, doubts remain in Bhutan, and there is a concealed sense of dismay that India backed out of major aspects of an important understanding on hydropower development between the two countries.

At the same time, given that India is Bhutan’s closest friend and main developmental partner such doubts have been kept out of any official meetings or even public discussions.

Now, India has the perfect opportunity to not only assuage any such doubts but also nip it in the bud by giving support to Bangladesh’s proposal to invest in hydropower development in Bhutan.

Bangladesh needs the power and is willing to come up with the money to invest in Bhutan. India, after investing in multiple projects in Bhutan is out of money, for now, to invest in more. Bhutan being sensitive to Indian concerns is offering Bangladesh a project outside the 10,000 MW agreement. All of this should come together perfectly.

What is promising so far is that the three governments actually talked about the issue and some progress has been made with Bangladesh agreeing to a Bhutan drafted MoU. The concern now is that New Delhi is taking a bit longer than usual on giving its nod to the tripartite MoU.

Concerns in Delhi could range from the impact of third country players in Bhutan on the hydro scene to the impact of a competitor in a relative monopoly. There may even be bureaucrats citing other petty reasons, etc.

However, being the bigger country, India should look at the bigger gains in diplomacy in the longer run. Such a move will not only further strengthen ties with Bhutan and further enhance trust, but it will also improve India’s relations with Bangladesh. The biggest plus will be that India will not have to spend anything for such a major diplomatic coup apart from sparing some land for a power line corridor to Bangladesh.

Moreover, even from the economic standpoint, Bangladesh in no way can compete with India in Bhutan for hydropower projects given the much smaller economy of Bangladesh. It is also highly doubtful that Bangladesh can offer the same generous terms that India currently does.  In fact the small but vocal number of critics of the Indo-Bhutan power deals in Bhutan will see that the grass may not be greener on the other side.

India will always remain the biggest investor and buyer of Bhutanese power and any deals with India would presumably be independent of deals with Bangladesh.

India should also back this deal due to geo-political considerations, especially at a time when there are competing foreign interests in South Asia.

While Bhutan has always stuck with India through thick and thin, the same cannot be said for Bangladesh which is being actively wooed by India’s main competitor – China. Currently Bangladesh has a government that is friendly to India and so saying yes to a deal with Bhutan, where India does not even lose a penny makes all the more sense. China can give Bangladesh many things except for the thing that it needs most, which is reliable power. Goodwill in Bangladesh is also a big prize for India given that trust built up in Bangladesh will give flexibility and leverage for similar transit agreements for India in the future. Bangladesh also sits on large gas reserves which India has not been able to effectively invest and tap so far due to past trust issues. India should see the opportunity here. This will also complement Prime Minister Modi’s regional focus well.

Bhutan does not have anti-India politics like some of its neighbors, but with the advent of democracy there is a constituency who find India’s well meaning embrace a bit stifling at times.  This feeling will be exploited to the hilt by shrewd politicians in their own domestic power games in the future. Support by India for the Bangladesh deal will blunt attacks by such naysayers and will go a long way in building trust among both the leadership and masses of Bhutan.

Looking at it from the regional angle, such a deal between the three countries under the SAARC Framework on Energy Cooperation will show India as a leader who can make things happen within SAARC even if one or two members are not willing to cooperate.

At the end of the day there is everything to win and nothing to lose, and so India should step up to its leadership position and support a deal where all three countries stand to gain both economically and diplomatically.

Diplomacy is the art of letting somebody else have your way

David Frost


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