MEA wants Bhutan squeezed on development,hydel projects

The downturn in sentiment towards the traditionally friendly neighbour comes as Bhutan holds national assembly elections this month,the second democratic exercise in its history.

One note sent by the MEAs Northern Division dated June 16 to its senior officials says the ministry has been repeatedly conveying our concerns regarding the lack of transparency and openness on part of the Royal Government of Bhutan RGOB. It advocates that New Delhi should demonstrate our seriousness through some concrete expression of displeasure.

The note says India,continues to be presented with a fait accompli by the Bhutanese who seem to have acquired a habit of doing things keeping us in the dark and taking decisions unilaterally even on issues having a bearing on our common security. They seem to take the Indian government for granted,regardless of what they do.

The note also lists steps that could be taken to show a concrete expression of displeasure. It says India should hold the next SDP meeting but not approve the fourth list of projects which were taken up by the RGOB with the approval of India.

New Delhi,it says,should now focus on a critical review of projects underway in the 10th plan period but not give any indication of support for the 11th plan.

The MEA drafted a second,lengthy note on June 17 focusing exclusively on hydroelectric power cooperation and again advocated a hardline strategy. India has so far constructed three hydroelectric projects in the Himalayan kingdom and seven more are in different stages of construction/planning for which the total funding requirement from India would be above Rs 40,000 crore.

But the MEA is now indicating that it wants the terms of engagement to change. It wants all grants for construction of HEPs converted into loans to reduce the burden on India and to make it more balanced and equitable and in tune with Bhutans emerging economic power.

Besides withdrawing grant components or making them as low as 5-10 per cent,the MEA has suggested the Indian government should insist on commercial terms to reflect the costs at which India also borrows. Also that India should insist on fixing tariffs over a longer term instead of the practice of revision/increase every three years as proposed by the Bhutanese. India should also benefit from the fall in the cost of hydropower generation,it says.

The MEA has listed several grouses it has,beginning with huge cost overruns in hydel projects.

The ministry has been repeatedly urging the project authorities to make a realistic assessment of their minimum funding requirements. However,the project authorities continue to adopt somewhat casual attitude and make inflated projections without doing due diligence and meticulous financial management. For instance,for the Punatsangchhu-I project,the revised cost has gone up to Rs 9,396 crore compared to the sanctioned cost of Rs 3,514 crore in 2006.

The ministry has also sought to explain how the Bhutanese appear to be indulging in construction of overcapacity/over-designed infrastructure and other facilities for welfare and employing more number of manpower than essential. It has now asked the power ministry to assess whether expenditure on construction of residential quarters as well as welfare and environmental protection for the hydel projects would have long term implications on the power tariff India will have to pay Bhutan.

The MEA has also proposed that in the future,hydel projects should be operated jointly instead of India handing them over to Bhutan after construction.