Bhutan Seeks to be India’s Hydel Plant

Jan 6th, 2014 | By | Category: Bhutan, Energy, Hydropower

Times News Network: Giant cranes scoop out mud from deep inside the mountains. Frenetic construction activity is on as a state-run company in this tiny landlocked Himalayan country races to complete one of the crucial hydropower plants.

Workers at the site of the Dagachu hydropower plant are busy giving final touches to the project which is expected to go on stream by the middle of 2014.

The 126 megawatt plant is the first under the public-private-partnership model and has already connected 9,000 rural households in Bhutan. The plant, located in the remote Dagachu river, has been built under the PPP model and is the first foreign direct investment for the Himalayan country.

This is also the world’s first cross-border clean development mechanism (CDM) project. The CDM allows emission reduction projects in developing countries to earn certified emission reduction credits and these can be traded and sold to meet part of the emission reduction targets under the Kyoto protocol.

The state-run Druk Green Power Corporation holds 59%, the Pension and Provident Fund ofBhutan 15% and the Tata Power Company 26% in the project. The Asian Development Bank (ADB) is the lead financier and has provided $80 million for the project along with funding from an Austrian commercial bank.

Bhutan is banking on hydropower exports to India to revive the fortunes of its faltering economy. Several large projects are underway and companies such as Jaypee, Larsen & Toubro and Gammon India are taking part in the massive construction underway.

“At this stage of development, we are highly dependent on exploiting the water resources of Bhutan,” said Sonam Tshering, Bhutan’s secretary of economic affairs.

The urgency for building hydropower plants in the picture-postcard country is palpable.

Bhutan is grappling with a large current account deficit estimated at 20% of its gross domestic product. The sale of electricity from these projects to a ready-and-captive market in India will help it earn precious foreign exchange to sustain its economy. New Delhi has lent a helping hand and, in turn, will receive steady supplies to meet its growing energy needs.

“The best part of the hydel power development in Bhutan is that hydro power projects are all funded by the Government of India through a very generous combination of grants and loans,” said Nam Dorji, Bhutan’s finance secretary.

In 2010, electricity exports from Bhutan to India amounted to 5.579 kilowatt hour, helping the country earn about $223 million, according to ADB data.

India and Bhutan signed a pact in 2008 to develop hydropower projects in the country and about 10,000 megawatt power would be exported to India by 2020.

The development of such projects augurs well for the region. “Regional trade in energy can help send energy from places that have excess, such as Bhutan, to countries in need of energy like India, optimizing the region’s energy resources,” ADB said.

“The recently established India-Bangladesh transmission line could ultimately allow energy to go from Bhutan to Bangladesh,” the multi lateral agency said.

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