A Study of the India-Bhutan Energy Cooperation Agreements and the Implementation of Hydropower Projects in Bhutan

This report generates a preliminary analysis of the energy cooperation between India and Bhutan, the modalities and conditionalities of the agreements signed by them, and the implementation of hydropower projects in Bhutan. The study selected six projects as case studies for detailed analysis – Chhukha, Kurichhu, Tala, Punatsangchhu I, Punatsangchhu II and Mangdechhu Hydroelectric Projects (HEP).

Since commissioning the first hydropower plant in 1988, Bhutan has largely expanded its economy by exploiting natural resources for the generation of hydropower. The country’s relation with India has provided it with the necessary technical and fi nancial assistance and India’s huge power deficit has created the market for Bhutan’s surplus power. While the country claims a hydropower potential of about 30,000 MW, the installed generation capacity reached 1,608 MW in 2015 with the completion
of the sixth project.

Hydropower projects in Bhutan have largely been implemented though bilateral agreements with India. In July 2006, the two countries signed a framework agreement on hydropower development and trade and undertook to develop 10,000 MW of hydropower from 10 large projects. The hydropower sector has undoubtedly benefi tted Bhutan’s economy through substantial contributions to the national revenue and by providing the much-needed boost to kick-start the industry and service sector. However, the sector is currently facing a multitude of problems, particularly of economic and environmental nature.

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Author: Lakshmi Premkumar / Vasudha Foundation  / 2016