From Nu 31.34B in 2010-11 fiscal year

In the last six years, hydropower debt quadrupled to Nu 123.85B from Nu 31.45B.

This has happened despite the liquidation of Chukha and Kurichhu loans. The Nu 123.85B outstanding hydropower debt, as of June 2017, forms more than 76 percent of external debt liability and 83.30 percent of GDP, according to the Royal Monetary Authority’s (RMA) annual report.

When Kurichhu and Basochhu were commissioned, hydropower debt servicing obligation also escalated from Nu 127.93M in 1995-96 to Nu 548.84M in 2005-06. With the start of Tala hydropower project, debt servicing averaged to about 32.64 percent of total electricity export proceeds from 18 percent.

With the commissioning of Dagachhu in 2015, debt servicing increased slightly and dropped the following year with the liquidation of Kurichhu loan.

In the fiscal year 2016-17, hydropower debt service stood at Nu 3.07B.

As of June last year, outstanding loan for Basochhu is Nu 1.7B. A loan of about Nu 2B remains for Tala while Dagachhu has an outstanding loan of Nu 9.17B.

The completion date for the Punatshangchhu I project has been revised from July 2019 to July 2022, because of the geological surprises at the dam site. The revised completion cost is Nu 93.7B against the DPR cost of around Nu 35B at 2006 price level.

According to the progress report 82.9 percent of the works are completed as of June 2017. Fund disbursement of Nu more than Nu 72B has already been made in form of grant and loan towards the project.

A total amount Nu 49.54B (Nu 35.9B loan and Nu 13.5 grant) has been disbursed for Punatshangchhu II, until June 2017. While the DPR cost of the project at 2009 prices is Nu 37.7B, the revised cost at 2015 price level is Nu 72.9B. The completion date for the project has also extended from December 2017 to June 2019. The progress, as of June 2017 is about 72 percent of the total works and it has about Nu 35.9B loan outstanding.

Mangdechhu project has an outstanding loan of Nu 29.2B, as of June 2017. An amount of Nu 29.2 in loan and Nu 10.9B has already been disbursed for the project, taking the total disbursement to Nu 40.1B. While the DPR completion date was September 2017, it has been revised to June 2018. A year before the revised completion date, the project has already completed 90 percent of the works.

For the Nikachhu hydropower project, outstanding debt amounts to Nu 1.1B as it has already raised the loan component.

With high upfront capital cost, a large portion of expenditure in the hydropower sector is financed through loans.

“Despite high level of debt, the joint World Bank-IMF Debt Sustainability Analysis, 2016 has categorised Bhutan under moderate risk of debt distress based on the unique mitigating factors,” the report stated.

This is because a large share of external debt is linked to hydropower loans from GoI, covering both financial and construction risks. India also buys surplus electricity output at price reflecting cost plus a 15 percent net return.

“In addition, ongoing energy deficit, and strong political commitment in India for clean energy is expected to improve Bhutan’s external debt situation in the medium to long term,” the report states.

Tshering Dorji


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