The total cost escalation for the project is INR 11.24B
Hydropower: The Mangdechhu hydropower project (MHP) may start power generation by the end of next year but with a cost overrun of about 39 percent of the approved investment of INR 28.96B (billion).
According to the revised cost estimate, it will cost around Rs 40.2B to complete the 720MW project based in Trongsa. The total cost escalation for the project is INR 11.24B.
The revised cost estimate was approved on March 23 by the union cabinet of Government of India (GoI).
Any significant cost escalation will increase the loan burden on the government as the project is funded by GoI with 70 percent loan. Thirty percent of the project cost is grant.
Based on the initial estimation, the loan amount will come to INR 20.27B. However, with the revised cost estimate, Bhutan will have taken a loan of INR 28.14B by the time the project is complete.
The loan is to be paid back in 30 equated semi-annual installments at the rate of 10 percent annually.
According to the cost revision report submitted to GoI by the project officials, the total cost escalation was much higher. But GoI did not agree to all the estimates.
The project’s managing director, AK Mishra, said it took more than two years to get the revised cost approved.
According to a news release from the Government of India’s Press Information Bureau, the project will provide surplus power to India as well as augment power availability in the country.
AK Mishra said the cost escalation was imminent due to various factors like inflation and unforeseen geological glitches. “The project is being executed very smoothly,” he said. He added that the project will be completed in December 2017.
The news release stated the factors behind cost escalation were inflation from March 2008 to March 2014, construction of a cut-off wall against permeation grouting upstream coffer dam, exchange rate variations and other causes.
While most of the hydropower projects including Punatshangchhu I and II are behind schedule, the project is one of the major hydropower undertakings that is on track to meet its deadline.
Project officials claim they have won praises for its smooth progress. “We are on schedule to meet the deadline,” he said.
It is estimated that the annual energy generation from the project will be 2.9 billion units.
The Mangdechhu project is one of the 10 hydropower projects planned under the 10,000MW hydropower development programme by the year 2020. An agreement for execution of the project was signed between the governments of Bhutan and India on April 30, 2010.
Meanwhile, to address environmental damage around the project site, the project authority in 2014 signed an agreement with the Gross National Happiness Commission to provide Nu 200M. The money is being spent on various social and environmental schemes to compensate the environmental and social damages inflicted by the project.