The government is waiting response from the Government of India (GoI) on the issues of two hydropower projects under construction, Punatsangchu-I Hydroelectric Project and Kholongchu Hydropower Project which have been delayed.
The National Council (NC) recommended the government expedite a decision on the problems faced by these projects to avoid any further delays and cost escalation so that the hydropower projects can benefit the people and the nation.
The NC stated that over the past few years there has been growing concern on the repeated delays and inordinate cost escalation in the construction and completion of hydropower projects.
For example, PHPA-I began construction in 2008 and was expected to complete in 2016. The initial estimated cost was Nu 35.148 billion (B) which has now escalated almost three-fold to Nu 93.756B.
Likewise, Kholongchhu Hydropower Project commenced in 2015 and was scheduled to complete in 2020. The initial cost projected was Nu 33.05B and estimates of cost on completion have increased to Nu 54.818B.
The recommendations came with the Budget Appropriation Bill 2022-2023 that National Council forwarded after review and deliberation to National Assembly.
During the re-deliberation on the Budget Appropriation Bill for the financial year 2022-23 at the National Assembly (NA), Prime Minister Dr Lotay Tshering said that the detailed project report on the feasibility of construction of a barrage at PHPA-I is submitted to GoI and that the government was waiting a response.
Economic Affairs Minister Loknath Sharma said that discussion on hydropower projects issue is going on with the two counterparts.
“It has been a long time since the two authorities could not meet and have decided to meet in July to talk about the issue,” Lyonpo said.
Lyonpo said that PHPA-I is almost completed and left with a few touch-up in the powerhouse. The rationalisation of employees at the project is also going on since most of the work is completed.
He said that the government is anticipating a decision on the construction of barrage within two months.
The dam construction at PHPA-I cost Nu 24B from 2013 to 2019, in total it has cost around Nu 45 to Nu 50B incurring interest during construction.
On the delay in the construction of Kholongchhu project, Lyonchhen said that the agreement between joint ventures mentioned that the 20 percent of capital work would be awarded to a Bhutanese contractor.
He said that from the Indian agency side, they want to execute 100 percent of capital works and award 20 percent in the construction of roads, bridges and buildings at the site. However, from the Bhutan side, they requested 20 percent of capital work for the construction of tunnels.
“The two agencies could not come to a consensus on the capital work award,” Lyonchhen said.
There are four members each from the companies in the committee and the chairperson has no voting right according to the agreement if they come to voting.
Kholongchu is the first joint venture company formed between Druk Green Power Corporation (DGPC) and India’s Satluj Jal Vidyut Nigam Limited (SJVNL).
Lyonchhen also mentioned that DGPC withdrew from the project and requested the Cabinet for intervention since it will have issues in the future.
“We felt that DGPC can execute the tunnel construction and their requests are valid,” Lyonchhen said.
Lyonchhen said that the government has directed the economic affairs and foreign affairs ministries to discuss with GoI the award of 20 percent capital work to Bhutanese firm.
However, Lyonchhen said that the major issue with the project is after completing the project it has not mentioned clearly the export tariff rates and the rate is comparatively less. “Government of Bhutan is requesting a slightly higher export tariff rate.”
Lyonpo Loknath Sharma also said that the price escalates in every project before it completes.
He said that the Kholongchu being the first joint venture and with less expertise during the signing of the MoU, the agreement drawn contradicts the Constitution and hydropower project policy.
Lyonpo said that discussions are being held to resolve the issues.
The NC stated that delays and cost escalation in these projects not only lead to loss of potential revenues leading to budget deficits and accumulation of debt that is transferred to future generations.
It stated that delays in the Kholongchu project have also created uncertainties for house owners and transporters as they are not able to service their loans. Similarly, many local contractors have not been paid and are facing numerous financial problems.
NA supported the recommendations from the NC through the show of hands.
Similarly, NC recommended government to provide a definitive timeline for the implementation of the Sunkosh hydropower project so that the people can benefit from planned infrastructure development.
During the public consultations, the NC stated, the people have been informed that the project will start soon. Most of the development works like roads, bridges and other infrastructure works under Lhamoidzingkha drungkhag has been delayed waiting for the project to commence.
Members also mention this delay has also caused a major impact on the use of alternative routes to connect the Drungkhag to other interior Dzongkhangs as many bridges are yet to be built. The people are also hesitant to plant cash crops in case of change in the land use due to the Project.
However, Lyonpo Loknath Sharma said that the government cannot give a timeline for the project commencement.
The Sunkosh project is estimated cost about Nu 200B.
Lyonpo said that with solar and hydrogen energy evolving, there is less demand for electricity. “The government of India has also said that they have secure energy.”
Lyonpo said that the government has also already informed the people that it is not possible to start the project immediately and not to wait for the project.
“Government has also directed the dzongkhag administration not to stop any activities. It is difficult to come in five or six years,” Lyonpo said.
The NA did not support the NC recommendation.
Meanwhile, NC also recommended the government allocate an adequate budget for Jyenkana-Sangbaykha, Haa-Samtse SNH as it is a spillover activity that will be executed by the Thimphu DOR region office and to consider the possibilities of extending the education loan term up to 15 years, excluding gestation period, in consultation with the Royal Monetary Authority.