The agreement for the 2560 MW Sunkosh project, by all indications, was supposed to be signed last year as part of the 50 years of diplomatic relations.
Bhutan’s Foreign Ministry listed it as one of the highlights of the celebrations and the former Prime Minister said that the project would be a monument to the Indo-Bhutan friendship.
However, while the former government secured India’s in-principal commitment to implement Sunkosh as an Inter-Governmental project, after initially shelving it in 2014, the then government could not get India to sign on the dotted line.
Fast forward to 2019 with a new government, the Sunkosh project is still stuck due to differences over the implementation modality.
Turnkey vs Improved current model
In a sign of reduced trust, the Indian side wants to implement the Sunkosh project on a Turnkey model with full management control, unlike the current system of shared management control.
Turnkey is a project implementation where the Sunkosh project construction would be given to an Indian company which would do the design and construction with full control and only handover the project after completion, with no Bhutanese participation.
Bhutan has refused to accept such a model and has instead proposed that the current arrangement be kept with some reforms.
The reply and the reforms of the current system was sent around two months ago to New Delhi by Bhutan.
The Prime Minister Lyonchhen (Dr) Lotay Tshering said that Bhutan has conveyed that a Turnkey project modality will not be favorable to Bhutan.
The Minister for Economic Affairs Lyonpo Loknath Sharma said, “Our experts have given our views. The main view of our experts is that Turnkey will not be good for us and we don’t want to go for it due to structural problems and it will be similar to Joint Ventures or something like that and it will create problems for us.”
Lyonpo said that Bhutan’s suggestion is that the project should stay in the current Inter-Governmental mode.
“But within the current practices there can be some improvements and the improvements that might be possible is in the management, how to do the project, having a task force, a monitoring task force. We have given the suggestions and we stand by that,” said Lyonpo.
The experts’ recommendations are based mainly on the High Level Hydropower Committee Report instituted by the former government in May 2017 to come up with a clear, robust and consistent strategy for hydropower development in Bhutan.
The report says that project governance bodies and the management teams should be professional, dynamic and transparent, and supported by competent technical expert committees.
It says the practice of appointing management teams by respective governments could be done away with and instead the governing bodies should agree to select and appoint professional management teams based on competencies and whose retention should be based on performance.
It calls for competitive selection processes in the selection and appointment of project employees, while there should be preference should be given to Bhutanese and to building local capacity.
With increased Bhutanese loan components in the GOI projects, the report calls for more active participation of the Bhutanese from the preparation of DPRs to the approval of DPRs to project financing and management.
The report says that based on past experience, changes in design and engineering at the implementation phase it points to the need for design and engineering units for each project that is responsible to review design and drawings submitted by the contractors and consultants.
It calls for a separation of consultants between project investigations and actual project implementation as the practice of retaining the same consulting firm compromises the possibilities for changes and innovations and is also a conflict of interest.
The report says that there could still a lot of room for easing the difficulties faced at the Operation and Maintenance stage with better supervision during the construction stages and with the adoption of the best technologies.
In short, while the Indian side wants complete control, the Bhutanese side has identified that the solution is to put in competent individuals at all levels and have the management supported by expert committees.
More Bhutanese participation would also lead to more accountability as the projects would stay with Bhutan.
The other major issue holding up the project is the cost component as the Sunkosh project is expected to exceed Nu 200 bn. In the past, Indian officials had even proposed to do the project as a Joint Venture which Bhutan turned down.
Here Lyonpo Loknath said, “Because it is a huge project, the cost will be huge and so getting the money for the project has always not been very easy as the GoI has to get the money. They do have problems getting the funds easily but the GoI has always tried getting funds and even for Sunkosh they have not backed out. They are committed for that and there is no severe funding issue.”
Lyonchhen said, “We already have the 30 grant and 70 loan model and that will be continued in the other projects. I don’t think there will be much changes in the financial modality.”
Apart from the main issues of implementation modality and the funding, one excuse that could hold up any agreement on the project is the upcoming Indian general elections, which are expected to be over only by the end of May 2019.
Lyonpo Loknath said that while bureaucrats and specialists are working at their level the final approval will have to come from the government of the day in India which is very busy as the elections are nearing.
He said that a real decision on Sunkosh would be expected only after the elections.
The Prime Minister said that the Sunkosh project is very much in the pipeline and that he did bring it up in his meeting with Prime Minister Narendra Modi during his state visit.
“I talked with the Indian Prime Minister and they all were very positive, but we haven’t discussed really on the timeline,” said Lyonchhen.
Lyonchhen said that it was mentioned in the meeting but it could not be taken up in detail.
Both Lyonchhen and the MoEA Minister said that Sunkosh would be pursued once the 720 MW Mangdechu project is commissioned.
A Dorjilung concession
The Sunkosh project is expected to take precedence over the trilateral 1,125 MW trilateral Dorjilung project where Bangladesh and Bhutan had agreed to build the project in Bhutan, awaiting a yes from India to sign the MoU- as the power has to be evacuated over India.
The Dorjilung project was earlier in the official agenda of Lyonchhen who will be visiting Bangladesh soon, but it was recently dropped and is not a part of the official agenda.
This is a major development as the Dorjilung project would have been the first time that a third country is investing in Bhutan’s hydropower sector and is also purchasing power.
It appears that to get the GoI on board for Sunkosh the current government has made a concession on the Dorjilung project.
The Hydropower Committee report, from which the government seems to be taking a lot of cues, gives two strategic options to go forward with hydropower development.
Option one recommends starting Sunkosh by 2019/20 and the 2640 MW Kuri Gongri by 2023/24. It says once Sunkosh is completed the third IG project can be started.
The second option is that either Kuri-Gongri or Sunkosh can start in 2019/20 or 2023/24. The second project Dorjilung could start in place of one of the above projects not being done. It says the third balance IG project can be started once one of the two projects above is completed. Then an additional fourth project can be considered based on viability as Dorjilung is half the size of either Sunkosh or Kuri Gongri.
With Dorjilung on the backburner the prime focus is on getting Sunkosh as the next project.
The Sunkosh project is important for Bhutan as it will not only mean more hydro revenue, but given that it is a storage project, it can stand to command higher tariff rates and also provide more power for the winter months when power production in Bhutan is low.