The Bhutanese Leading the way.
P I Construction to start in first quarter of 2026
During his recent visit to Bhutan, Prime Minister Narendra Modi inaugurated the 1020 MW Punatsangchu II project which has been generating and exporting power, however, there was no announcement on the tariff rate.
This left some puzzled as the tariff rate was expected to be announced, as this is the longest delay in announcing the tariff rate for any bilateral hydro project.
However, a source said the issue is not tariff negotiations which is already over, with the starting tariff to be Nu 5.10 per unit and the levelized tariff (average tariff over 35 years) to be Nu 5.67 per unit.
The source said the delay is due to the fact that as part of the tariff negotiations it was decided that the loan repayment period be extended from the 15 years to 17 years, and so this additional two year extension needs to be cleared by the Indian Cabinet.
This takes time as a Cabinet note needs to be prepared and circulated.
The above means that the P II tariff will likely be announced soon once the cabinet approval is given in India.
P II commissioning was carried out in phases. Units 1 and 2 came online in December 2024, followed by Unit 3 in March 2025 and Unit 4 in May. Unit 5 began generating electricity on 17th July 2025 and the final Unit 6 joining the grid on 27th August 2025.
Bhutan could start exporting power to India from P II from 20th September 2025 onwards. The tariff of Nu 5.10 per unit will be applied to all power exported since 20th September.
The expected annual revenue from P II at full generation is expected to be around Nu 20 billion (bn) a year, of which the loan repayment is Nu 8 bn and Operation and Maintenance (O&M) costs are expected to be Nu 2 bn a year.
For this year, given that there was less generation since units had to come online one by one, the revenue expected is Nu 12 bn or less, and the O&M costs is expected to be Nu 800 million (mn).
The loan component will kick in after the first two years of commissioning. The project is expected to generate 4,357 million units of electricity annually.
The project took 14 years and Nu 88.5 bn to complete.
P I
During the visit of Prime Minister Modi, the joint press release said the leaders welcomed the understanding reached regarding the resumption of work on the main dam structure of the 1,200 MW Punatsangchu-I hydroelectric project and agreed to work for expeditious completion of the project.
It has been learnt that there was a PHPA-I authority meeting just before Prime Minister Modi came in, and it was agreed that the rectification or stabilization measures on the right bank and the dam construction would be done and it was decided that the original dam contractor Larsen and Toubro (L&T) would do both.
A decision before the authority was whether to give L&T the job or close their contract and go for a new contractor. However, this would entail more costs and time delays and so the authority decided to stick to the original contractor.
Earlier in August, the Technical Coordination Committee (TCC) which comprises senior technical experts from both countries had agreed to the right bank stabilization recommendations of the Joint Technical Team of both countries.
TCC also gave directions, at the time, to the PHPA 1 management to work out a program and schedule on how the P I project construction can start.
The PHPA management has been given a time of one month to come up with the plan and preparations, which was supposed to be presented to the authority.
L&T is supposed to get back with its cost comparison for the stabilization measures and construction is expected to start in the first quarter of 2026.
The Indian side had earlier proposed a 30-degree slope, but the Bhutanese proposal of 26 degrees was agreed to, and it will now result in more overburden being removed, and hence a safer right bank.
It has been learnt that things were stuck on this until Bhutan offered to pay the Nu 4 billion extra that would go due to the additional excavation required in the 26-degree slope.
