Hydropower Development in Bhutan

(Courtesy: Bijaya Man Serchan)

(Readers are advised that this write-up was originally published in July of 2000. Some of the facts have changed since. The objective in re-posting this write-up is to provide further context for the on-going debate on water resources)

Development aspects of the Himalayan Kingdom of Bhutan known locally as Druk Yul (The Land of the Thunder Dragon) are strongly guided by philosophies of Buddhism which have played and continue to play a fundamental role in the development of Bhutan and its people. Preservation, being one of the guiding philosophies of Buddhism has led Bhutan to refrain from reckless and haphazard over-exploitation of its natural resources. As a result of this philosophy, Bhutan has today a forest cover of 72.5 %, 700 species of vascular plants, 1770 species of birds and 250 species of mammals and stands out as one of the best preserved ecologies in the world and has been declared as one of the ten diversity hotspots in the world.

Bhutan also stands out as a land of ancient culture, where the codes of dual secular and religious governance promulgated by Shabdrung Ngawang Nangyal in the 17th century still forms the basic tenet of governance, way of life and worship even in modern Bhutan.

The guiding principle of development in present day Bhutan is the principle of the “Middle Path” which stresses economic development together with environmental and cultural preservation and spiritual enhancement of the people. King Jigme Singe Wangchuk has also given a new definition to development in Bhutan by declaring that progress should be judged not by GNP (gross national product) but by “gross national happiness”.

While being reluctant to rapid changes, the Royal Government of Bhutan (RGOB) is keen to provide benefits of modern development to its people. To this end, 19 out of 20 districts of Bhutan are already connected by a network of 3200 kilometers of roads to provide access of development benefits to its people. Great stress is laid on health service which in completely free and on education which is free for the primary and tertiary levels. Consumer cost of electricity is probably the cheapest in the world with the urban consumer paying Nu 0.70 (N.Rs. 1.12) per unit (Ngultrum, Nu, is the local currency of Bhutan and equivalent to the Indian Rupees in value) and rural consumers Nu 0.50 (N.Rs. 0.80). By education and family planning RGOB has targeted reducing the population growth rate from the current 3.1% per annum to 1.3% by 2012.

The philosophies of preservation naturally limit the areas from where Bhutan can generate revenues for its overall national development. Although the country has a vast land under forest cover, timber export is banned and logging is undertaken under strict environmental control and only by governement agencies.Although Bhutan is known to be rich in minerals mineral quarrying is strictly regulated for environmental reasons . Bhutan views tourism with reservation and as a possible threat to its culture and environment-if uncontrolled. As such Bhutan has a policy of reglulating tourism by its pricing mechanism, whereby a tourist pays around US$ 200 per day while in Bhutan. Although agriculture is the predominant occupation of 85% of the rural population, land suitable for agriculture is limited to the southern terai and isolated pockets the central valleys and 7.8% of Bhutan is under cultivation. Bhutan is not self-sufficient in food grain production but has developed horticulture and apples grown in the temperate north and mandarins grown in the sub tropical south are exported in limited quantities.

Bhutan has, therefore, adopted a long-term strategy to exploit its hydropower resources to foot its development bills. Bhutan, like Nepal, is blessed by abundant hydropower resources . The 20 year Power System Master Plan (PSPM) developed with World Bank assistance estimates that Bhutan has a potential of economic generation of around 20,000 MW of hydroelectricity from the four major rivers – Ammochu, Wangchu, Punatsangchu and Manaschu all draining south into the Brahmaputra in India.

Currently Bhutan generates 357 MW of electricity. Chukha Hydel project with a capacity of 336 MW is the biggest power plant currently in operation in Bhutan.

Three hydropower projects are already under construction in Bhutan currently and are to be completed soon. The first stage of the Basochu HPP (60.8 MW) capacity is to be completed in June 2001, Kurichu HPP (60 MW) in September 2001 and Tala HPP (1020 MW) in the year 2004. The Kurichu HEP will generate 322 GWh of energy and will feed electricity to 7 eastern Dzonkags (districts) and the Dugsum cement plant Nanglam. The Basochu HEP will generate 291 GWh of energy and reinforce power supply to 10 Dzonkags in western Bhutan.

The Bunakha Reservoir Scheme (180 MW) is likewise ready for implementation and is to be completed during, the 9th FYP ending 2007. It will generate 688 GWh electricity annually and contribute, 101 GWh of additions energy to the existing Chukha project and further cascade effect on the Tala project.

On completion of these 4 projects the power generation of Bhutan will increase to over 1678 MW.

In addition to the hydropower projects mentioned above which are already under construction or in a preliminary stage of implementation, Bhutan has prepared DPR’s and detailed feasibility studies of a number of mega projects.

The DPR of the 4060 MW Sankosh project is already completed but its implementation delayed due to environmental concerns. Detailed feasibility studies are being conducted with Japanese Government assistance for generating 1410 MW from Wanduephodrang river in two stages : Stage I of 760 MW and Stage II of 650 MW .Feasibility study of the 265 MW Mangdechu Hydropower Project near Kunga Rabten is being undertaken under Nordic assistance.

Besides India, foreign governments such as Japan, Austria, Norway, Netherlands, World Bank, Asian Development Bank and UNDP have generously contribution to the energy sector development in Bhutan. The Austrian Government is providing AST 350 million for the Basochu Scheme with 51% grant and 49% interest free loan. The Japanese government is funding the development of the Wangduephodrang scheme and Norway funding the Mangdochu scheme

But by for the most stable and important partner of Bhutan for developing its overall economy and hydropower has been India. A watershed in the history of cooperation between Bhutan and India was the commissioning of the 336 MW Chukha Hydropower Project in 1987. To implement the Chukha Hydropower project, India and Bhutan signed an agreement to be valid for 99 years whereby India would finance hydropower development in Bhutan with a package of 40% loan and 60% grant financing with guaranteed energy buy back provision by India.

This agreement has been beneficial both for power-deficit India and a developing nation like Bhutan striving towards self-reliant development. The commissioning of the Chukha project in 1987 resulted in the doubling of national revenues in Bhutan between 1985/86 and 1987/88. By 1998/99 Chukha HPP alone accounted for 35% of revenue generation in Bhutan. While Bhutan was initially paid a paltry electrical tariff of Nu 0.50 per unit, India has shown substantial understanding and the tariff was increased to Nu 1.00 in April 1997 and further increased to Nu 1.50 in July 1999.

One striking aspect of Bhutan’s power generation is also the very low construction cost per kilowatt. The author and the delegates of DDC Mustang had an opportunity of visiting the 1.5 MW Chumey Hydropower project in Bumthang District constructed at the cost of Nu 43.33 million. The 1020 MW Tala HEP is being constructed with a revised estimated budget of NU 31300 million. And the 60.8 MW Basochu HEP being constructed with a budget of NU 1923 million. All of these projects have been or are being constructed at approximately US$ 700 per KW whereas the construction costs of hydropower projects in Nepal are estimated to vary between US$ 2000 – 2500 per KW.

The facts detailed above indicate without any doubt that Bhutan has adopted a very successful policy for hydropower development. And it is evident that hydropower will definitely propel the little Himalayan kingdom to economic prosperity and self-sustenance not before long.

The success story of Bhutan on the other hand, is bound to draw a myriad questions in Nepal. Some questions that will be naturally asked are: Does Nepal have a viable reason to justify its failure in hydropower development when a smaller Bhutan has succeeded so well ? Is there any viable justification for the high construction and generation costs of hydropower projects in Nepal ? Is it at all probable, that as long as cheap power is available from Bhutan, India will ever look to Nepal for its hydropower needs ? Is Nepal doomed to limit electric generation only to meet domestic consumption and dispense it to the Nepalese consumer at tariffs 5 – 6 times higher than in Bhutan ? And if the answers to the above questions are “No”, is it not high time that the nation’s politicians, planners, bureaucrats and power pundits started a soul-searching to provide a viable explanation to the Nepalese people ?

Related Posts:

HYDROPOWER DEVELOPMENT IN NEPAL - THE DEVELOPERS' DILEMMA
http://nepaliperspectives.blogspot.com/2008/08/hydropower-development-in-nepal.html

Basics of Nepali Hydro-Diplomacy
http://nepaliperspectives.blogspot.com/2008/08/basics-of-nepali-hydro-diplomacy.html

Nepal Just Lost Rs. 80 Billion
http://nepaliperspectives.blogspot.com/2008/08/nepal-just-lost-rs-80-billion.html

Nepal's Hydropower - Deconstructing a Few Myths
http://nepaliperspectives.blogspot.com/2008/08/nepals-hydropower-deconstructing-few.html