Government to review hydropower policy and Act

Tashi Dema

The government is in the process of reviewing the national policy as well as legislation on hydropower development to align national priorities with the Constitution of the Kingdom of Bhutan, the vision of His Majesty The King, and overall national interests.

The policy for the development of hydropower emphasises 100 percent government ownership, inter-governmental bilateral arrangement with partner countries, and sub-regional and regional arrangements with full ownership resting with the government of Bhutan.

The director of Department of Hydropower and Power System, Karma P Dorji, said that the policy review was needed for Parliament to deliberate the amendment of the  Bhutan Electricity Act 2001.

He pointed out that the Constitution mandated the State to harness natural resources and accrue the benefits to the people of Bhutan. “We also drew inspiration from His Majesty’s commands on the significance and importance of hydropower,” he told Kuensel.

Both the policy and the Bill limits private sector participation.

Karma P Dorji, however, emphasised that there were ample opportunities for the private sector in the hydropower value chain – automation parts, construction, supply of raw materials and employment. “The policy will ensure the involvement of Bhutanese contractors,” he said.

According to the director, the Bhutan Electricity Act 2001 needed a total revision as the Act was enacted at a time when there was only one agency, the Department of Power, which was the regulator, policy body, and the utility. “The present Bill delineates roles and responsibilities to concerned agencies,” he added. “The revised Act has addressed all the anomalies and contradicting provisions and show the way forward to safeguard the precious resource and capitalise on evolving market.”

The Constitution vests the rights to harness the resource of the State to ensure that the benefits are accrued to the people of Bhutan. Article 1.12 states that   “The Rights over mineral resources, rivers, lakes and forests shall vest in the State and are the properties of the State, which shall be regulated by law.”

In the Royal National Day address in 2013, His Majesty The King commanded that “hydropower is considered our nation’s most precious resource that belongs to all the people of Bhutan.” In 2019 His Majesty commanded that “…enlightened economic policies ensured that benefits from valuable national resources such as hydropower was neither captured by narrow economic elite nor influential foreign investors. Instead, it was judiciously developed by the state to strengthen our economy and benefit the nation and the people at large.”

Karma P Dorji explained that in 2006, the two governments of India and Bhutan embarked on an “umbrella agreement.”  “India committed to buy an excess power of 5,000MW in 2020 and that prompted our government to come up with a hydropower policy, which was endorsed in 2008 and it entails about how to develop hydropower in an accelerated manner,” he said.

The then government also mandated the ministry to enhance the target from 5,000MW to 10,000MW by this year (2020) and India government committed to assist and identified 10 projects, six to be implemented as inter-governmental mode and four as joint ventures. But major problems with the projects created larger public concerns on debt ballooning, cost escalation, and project status.

The director said, in 2008 and 2009, more than 50 international companies came forward to invest in hydropower but the government would have been obliged to give tax holidays and concessions to reduce final cost. “In the inter-government model, whatever returns we get fully goes to the government coffers which is distributed to all the people by funding socio-economic developments in the country besides meeting the recurring costs.”

Bhutanese experts working on the 21st century economic roadmap say that they saw hydropower as being a strategic and established sector, and an important source of revenue in the current situation.

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