A monumental agreement has recently been signed between India and Bhutan in the energy sector that is expected to have long-lasting regional significance. The two nations have inked a concession agreement concerning the 600 MW Kholongchhu Hydropower Project. This venture is unique as it marks the first-ever Joint Venture (JV) project between India and Bhutan. The JV includes partners Satluj Jal Vidyut Nigam (SJVN) from India and the Druk Green Power Corporation (DGPC) from Bhutan.
Kholongchhu Project: A Detailed Overview
The Kholongchhu Hydropower Project sits among four additional projects agreed in 2008, these served as a part of India’s commitment to aiding Bhutan in achieving a total 10,000 MW of installed capacity by 2020. The Kholongchhu project, which harnesses the power of the river Kholongchhu located in Bhutan’s Trashiyangtse district, is expected to be completed in the second half of 2025. This project operates on a 50:50 joint venture basis between India and Bhutan, marking it as a significant step in bilateral relations, cooperation, and synergy.
The Significance of the Project
The Government of India will provide, as a grant, the equity share of the Bhutanese DGPC in the JV company once the project is commissioned. This signifies the beginning of a 30-year concession period, where both JV partners will run the project, following which full ownership will transfer to the Bhutan government. This venture will notably aid in creating a steady source of clean power for India, simultaneously contributing towards its renewable energy targets. Furthermore, this project is likely to offer numerous employment opportunities, aiding economic growth and socio-economic development within Bhutan.
Strategic Importance for India
Bhutan holds geographical importance to India as a member of BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation). Collaborative efforts on such development projects not only enhance the mutual engagement between the nations but also prove instrumental for India in implementing its Act East-Look East Policy. Moreover, this project is poised to become a milestone in energy generation and trade-related activity.
Concerns Associated with the Project
Despite its potential benefits, several concerns have been voiced around the Kholongchhu Hydropower Project. One of the main issues arises from the new power tariff guidelines on Cross Border Trade of Electricity – CBTE, laid down by India. These guidelines caused a pause in the project since December 2016 until they were amended following negotiations with the Bhutan government. Another concern revolves around the JV-model for the project. Delays in project implementation can lead to higher financial risks and impact Bhutan’s growth, exports, and revenues.
Previous and Ongoing India-Bhutan Hydropower Projects
Before the Kholongchhu Project, the Government of India had constructed three Hydroelectric Projects (HEPs) in Bhutan totaling 1416 MW, which are currently operational and exporting surplus power to India. Apart from these, India also recently completed the 720 MW Mangdechhu HydroElectric Power Project and is currently working towards expediting other ongoing projects.
The Way Forward
Both India and Bhutan place significant emphasis on “hydro-power development” as a key area of mutually beneficial bilateral cooperation. In this context, the Kholongchhu Project represents a continuation and strengthening of this enduring partnership. However, the delay in project implementation has contributed to financial escalations and missed opportunities. Therefore, all project specifics ought to be rigorously worked out before the onset of construction, ensuring that the community can reap the benefits promptly.