Lack of access to basic information relating to the agreements deprive the public from knowing the potential impacts

Energy: Bhutan’s diplomatic relations with India and the consequent implementation of hydropower projects are considered “politically sensitive” and could potentially prevent critical information from reaching the people, a study of the Bhutan-India energy cooperation and implementation says.

The independent study that was conducted by Vasudha foundation, an Indian non-profit organisation and centre for environment and development, was launched in Bhutan on August 22.

To ascertain that both the countries and their citizens benefit equally within the framework of friendship, the study states that it is necessary to critically review the modalities of friendship, translated into various agreements.

This, according to the study, immediately revealed a conspicuous lack of access to basic information relating to the agreements upon which hydropower projects are implemented in the country.

First, the agreements are not in the public domain and there is minimal disclosure on hydropower projects implemented under bilateral agreements. Aggravating the situation, it was also highlighted that components like feasibility studies, detailed project reports (DPR), environment impact assessments (EIA) and compliance reports, among others, are not made public.

A comparison with projects implemented from other sources like Dagachhu and Nikachhu for instance, revealed that all documents including the project administration memorandum, loan document, resettlement plan, EIA and monitoring report are publicly available. “Similar information is not available for even a single project implemented with assistance from India,” the report states.

Not only did Bhutanese counterparts refuse to reveal these information, right to information applications made to Indian authorities also yielded no fruit, the study states.

Dagachhu was built with assistance from Austria, Japan and the Asian Development Bank (ADB) and Nikachhu, which is to be commissioned in 2020 is being built with ADB assistance.

“Political sensitivity,” the report states, is allowing for leeway to implement the hydropower projects without adequate assessment of impacts and mitigation plans.

The modalities of the agreements, it states, is not in favour of Bhutan and rather is skewed in favour of India. For instance, hydropower projects implemented with Indian assistance have Indian nationals in decision-making positions. All major construction and supply contracts are handled by Indian agencies and it is Indian companies which prepare feasibility studies, DPRs, engineering design specifications and carry out impact assessments.

While it is often reiterated that Bhutan does not have the local capacity to independently carry out large-scale hydropower projects, the report states that projects implemented from ADB and Austrian assistance have employed Bhutanese agencies and companies to carry out different kinds of work including the EIA and civil construction works.



With a cost escalation of 170 percent from the initial estimate of Nu 39 billion and delay in commissioning, the Punatshangchhu-I has already forgone a profit of Nu 39 billion.

While the Indian government has approved the new cost of Nu 97 billion the report states that 60 percent of the cost is the loan component. “It is Bhutan that will have to bear the brunt of the major share of losses and repay a higher amount of interest on loans,” the report states.

At this rate of escalation, the report also ascertained the cost per unit of electricity generated from Punatsangchhu-I has already touched Nu 4/unit.

Another cause of concern, as per the study is that Indian Rupee denominated grants and loans for hydropower projects from India are disbursed from the Indian external affairs ministry to project authorities, bypassing the national budget. The financing agreements stipulate that the Royal Government is the beneficiary.

In 2014 alone, actual interest payment on rupee denominated hydropower loans amounted to INR 1.4 billion and accrued interest on three on-going projects of Punatshangchhu-I and II, and Mangdechhu was almost INR 3.6 billion.

The loan and grant portion of Indian assistance was also found reversing with increasing interest rates on the loans, from five percent in case of Chukha to 10.75 percent for Kurichhu and 10 percent for the two Punatshangchhu projects and Mangdechhu.

“The interest rate on loans provided by the Indian government is higher than those provided by Austrian government and ADB,” the report states.

The study also found cost escalation of projects implemented under Indian assistance to be substantially higher than those funded from other sources, wherein final cost is either kept to the original estimates or seen smaller escalation.

“This poses a serious challenge to the competence and proficiency of project authorities in managing projects implemented under the India-Bhutan energy cooperation agreements.”

Tshering Dorji


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