The signing of Concession Agreement between India and Bhutan this week for the 600 MW Kholongchu hydro-power Project is yet another important milestone in our unique and time tested bilateral relations. The run-of-the-river project is located on the lower course of the Kholongchu River in Eastern Bhutan. It will be implemented by Kholongchu Hydro Energy Limited (KHEL) a Joint Venture company formed between Druk Green Power Corporation of Bhutan and Satluj Jal Vidyut Nigam Limited of India. The project is expected to be completed in the second half of 2025. The Concession Agreement was signed in Bhutan’s capital Thimphu in the presence of India’s External Affairs Minister, Dr. S. Jaishankar and Foreign Minister of Bhutan Dr. Tandi Dorji, through video conferencing.
Bhutan is relatively a small Himalayan kingdom; with a little over 38,300 square kilometres area, bordering China in the North and India on its South, West and East. The country has a rich cultural heritage and is blessed with a variety of flora and fauna. The total population of the country is about eight lakh. Nearly sixty thousand Indians are settled there as traders and working for different projects, mainly hydro-power projects, set up by India. Bhutan has vast potential; estimated at 30,000 MW of hydro-power which is its main source of income. Hydro-power contributes over 27 percent to country’s revenues and has 14 percent share in that country’s GDP.
With the inauguration of 720 MW Mangdechu project in August last year when Prime Minister Narendra Modi visited Thimpu for the second time, Bhutan’s hydro-power generation capacity had gone up to 2,100 Megawatts. Prime Minister Modi’s first visit to Bhutan was in June 2014, it was the Indian Prime Minister’s first ever visit to a foreign country after taking over as Prime Minister. It signified the importance India attaches to its ‘Neighbourhood First’ policy and to Bhutan in particular.
Three other major Hydro power projects have been set up with Indian assistance. These are the 336 MW Chukha, 60 MW Kurichu and 1020 MW Tala project. The three projects are successfully running in Bhutan contributing to country’s foreign earnings. More than 75 percent of power generated in these plants are sold to India after meeting Bhutan’s domestic requirements. A power purchase agreement between India and Bhutan was also signed during Mr. Modi’s visit to Bhutan in August 2019. Bhutan is an important member of regional groupings such as South Asian Association of Regional Cooperation (SAARC) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
Significantly, Bhutan did not join the 2017 and 2019 Summits of the Belt and Roads Initiative (BRI) of China as India also boycotted those over sovereignty issues. Other South Asian nations Nepal, Bangladesh, Sri Lanka, Maldives and Pakistan joined this Initiative which is apparently designed by China for economic dominance in the region.
India is Bhutan’s largest trading partner. In 2018, bilateral trade between the two countries stood at Rs. 9227 crore. India exports to Bhutan automobiles, electrical and machinery equipment, petrol, diesel, chemicals, hydraulic turbines and spare parts among others. Major items of import from Bhutan are electricity from Hydro-power Plants, dolomite, silicon, cement clinkers, timber, wood and a range of agricultural products.
A large number of Bhutanese students are studying in various professional courses like business and law in Indian Universities, many of them are provided scholarships by the Government of India. Cultural exchanges also regularly takes place between the two countries. A large number of Bhutanese pilgrims travel to Buddhists holy shrines in India every year.
Of late, China has been trying to make inroads into Bhutan with offerings of projects in various fields, including hydro-power generation. Chinese exports to Bhutan have increased manifold over the last few years. The 2017 Doklam standoff at the tri-junction of India, Bhutan and China; however, has made Thimphu wary of Beijing’s designs. Bhutan has become more cautious about accepting Chinese offers.
Script: Rattan Saldi, Political Commentator