India increases budget for Bhutan’s hydro projects

Punatshangtshu - 1 under contruction. Photo: Bhutan Observer
Punatshangtshu – 1 under contruction. Photo: Bhutan Observer

The Indian central government has approved the Revised Cost Estimate (RCE) of IRs 72.9B for the ongoing Hydroelectric Project (HEP) in Bhutan.

“The total cost escalation for the project, at this stage, is Rs 3,512.82 crore (IRs 3.5B),” said an official statement issued after the Cabinet meeting

“This is a sign of further strengthening of relations between India and Bhutan,” Indian Law and IT Minister Ravi Shankar Prasad told reporters after the meeting.

The project will provide surplus power to India and thus augment power availability in that country and would enable project works to proceed smoothly without interruption.

The bilateral agreement to execute the Punatsangchhu-II HEP was signed between Bhutan and India in April, 2010 at the approved cost of IRs 3.7B with funding by New Delhi as 30 per cent grant and 70 per cent loan at 10 per cent interest to be paid back in 30 equated semi-annual installments.

The factors behind cost escalation are due to inflation from March 2009 to March 2015, change in surface power house to underground power house, increase in capacity from 990 MW to 1020 MW, additional requirements due to Bhutan’s National Transmission Grid Master Plan and adverse geological condition encountered during the project, the release said.

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