Sun, Jul 21 2013
New Delhi: The issue of increasing the price of electricity generated from Bhutan's Chukha hydropower project may become another bone of contention between India and its Himalayan neighbour.
While the tariff revision from the 336 megawatts (MW) project is long due, it has now emerged that India's foreign ministry in 2007 had said prices will not be raised till 2016 and after that, a protocol established for the Tala hydropower project will follow.
"The tariff revision discussions for Chukha with Bhutan are to start. We will be guided by the ministry of external affairs," said a government official requesting anonymity.
India is helping Bhutan build 10,000MW of hydropower with concessional finance, with the overall investment expected to be about $10 billion. Around 90% of the power generated through these projects will be sold to India, which already has power grid links with Bhutan, to meet the country's growing energy demand.
The latest development comes in the backdrop of deterioration of ties with India. India recently cut subsidies on cooking gas and kerosene to Bhutan, which many perceived was its displeasure for Bhutan leaning towards China. However, the People's Democratic Party (PDP), which had campaigned on developing stronger ties with India, won the parliamentary elections in the Himalayan nation in July.
According to the protocol agreed between the two countries for Chukha, the power tariff revision is to happen every four years and will include the increase in the operations and maintenance charges. In addition, the increase will also reflect the past four years cost increase of India's northeastern hydropower projects.
In comparison, the Tala protocol says tariff revision will reflect a 10% increase every five years till the loan is repaid, followed by a 5% tariff increase after every five years. With Bhutan in favour of the Chukha protocol to be followed as it is more advantageous, India's power ministry has written to its external affairs counterpart for a clarification. The tariff from the Chukha project is now `2 per unit.
"The foreign ministry's response is awaited. Both these projects have separate protocols. They (Bhutan) have informally indicated that they are in favour of Chukha protocol as it is more advantageous for them. Why will they give it up? We will be guided by the ministry of external affairs," said another government official, who also declined to be named.
India's ties with its neighbours have been fraying, and efforts to step up energy diplomacy with Myanmar, Bangladesh and Sri Lanka aren't having the desired results, with China becoming increasingly influential by wielding its considerable economic might.
Queries emailed to a foreign ministry spokesperson on Thursday remained unanswered. A Bhutan embassy official said the concerned official in Thimpu was unavailable to answer questions.
Tala, Chukha and Kurichhu account for around 95% of the power generated by Bhutan and were developed on a joint inter-governmental development model as part of India's economic diplomacy efforts to exert strategic influence in its neighbourhood.
"If India takes a position which is unfair to Bhutan, it will not be in interest of long-term bilateral relationship. The perception of an exploitative neighbour is affecting our relationship. In the larger context of reliable, equitable and emphatic partnership, India has to be extra careful about Bhutan's sensitivities and shouldn't behave as a colonial power," said C. Uday Bhaskar, former head of the National Maritime Foundation.
"We have to nurture Bhutan for a long term for tapping their hydropower potential. It should be a win-win relationship, more so from Bhutan's perspective," said Bhaskar, who is now associated with the South Asia Monitor, a New Delhi-based policy forum.
Of the 10 projects to be developed with India's help in Bhutan, Punatsangchhu-I, Punatsangchhu-II and Mangdechhu projects are under construction. But the projects are facing funding constraints.
"These funding constraints have taken place over the last one year. The delays started happening in this fiscal," said the second official quoted above.
Mint reported on 27 March about India's foreign ministry plans to part-finance the construction of hydropower projects in Bhutan. Under the new funding plan, the projects will be developed by Indian state-owned firms such as NHPC Ltd, Tehri Hydro Development Corp. Ltd and SJVN Ltd through joint ventures, with equal equity contribution from Bhutan and Indian governments. To finance India's equity portion, equal contribution will be made by the Indian state-owned firm and the foreign ministry.
Bhutan, strategically located between India and China, has the potential to generate 30,000MW of hydropower but has a capacity of just 1,490MW. Apart from hydropower projects, India has also helped Bhutan build the Penden cement plant, Paro airport and the Bhutan Broadcasting Station.
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