Power tariff revision quells fears of an exorbitant raise

Posted by phuntsho WANGDI | 14 August 2010

Ordinary consumers and power intensive industries alike sighed relief when the newly subsidized and approved power tariff was announced on Thursday.

Earlier in April, Business Bhutan exposed that profit making companies, the Druk Green Power Corporation (DGPC) and the Bhutan Power Corporation (BPC), had proposed tariff hikes that would more than double the existing rates prompting a public outcry.

The increases have come. But they are nominal and more bearable for the common man.

The high voltages (HV) consumers which mainly comprise power intensive industries including steel, ferro and iron industries will benefit from the subsidized tariff of Nu 1.51 a unit for one more year until mid 2011. After that, keeping in line with the economic development policy (EDP), they will pay actual cost of supply, which is Nu 1.54 a unit for the next two years. Demand charges will increase from Nu 85 a kW to Nu 105 a kW from July 2011 at the rate of 23% a year.

“It (the revision) is highly favorable and it should promote our industries,” said Letho, secretary general of Association of Bhutanese Industries. He applauded the government decision saying it will help the private sector to grow.

For the medium voltage users, which consist generally cottage and micro industries, the rates has been increased from the existing Nu 1.55 a unit to Nu 1.71 in second year and Nu 1.79 a unit by the third year at the annual increase rate of 7.8%. The demand charge will increase from Nu 85 a kW to Nu 95 and at the third year will reach up to Nu 115 a kW.

“The government has looked into the ground realties of the private sector and subsidized the power tariff,” said Tshering Dorji, an entrepreneur in the cottage industry.

“The government has subsidized the tariff keeping in mind the socio-economic development of the country and to make electricity affordable and promote micro and cottage industries,” said the economic affairs minister, Lyonpo Khandu Wangchuk.

For Block I or low voltage lifeline consumers, the energy block has been increased from 0-80 kWh to 100 kWh but the per unit cost has been increased from 75 chetrums to 85 chetrums a unit.

The Block II consumers (101-300 kWh) which cover all the household consumers and offices, the rates have increased from Nu 1.47 a unit to Nu 1.62 a unit over the next three years.

For block III and bulk LV users, it goes up from Nu 1.85 a unit to Nu 2.14 unit by June 2013.

However, the cabinet has reduced the rate of increase in electricity rates for the low voltage and medium voltage consumers.

Earlier, the automatic rate of increase per year was 10% which has now been reduced to five percent for the low voltage and 7.8% for the medium voltage consumers. This means that if your electricity bill was increasing by Nu 10 per year it will only increase by Nu 5 per year.

According to the chief executive officer of BEA, Karma Tshering, the tariff is determined, based on the cost plus basis, which means recovering the full cost of supply, and allowing a certain return on net assets to the distribution and generating companies.

DGPC contributes 15% to the government as royalty energy. The royalty energy volume for next three years which is 1,028 GWh (giga watt hours), amounting to Nu 3.2bn will subsidize the expenses and cost of Bhutan Power Corporation (BPC).

“The government has been understanding and the postive response is appreciated,”said the BCCI president, Topgyal Dorji.

Insured with Indian Firms

Indian companies may have violated national laws in insuring with Indian companies

Punatsangchu Project 7 August, 2010 - Contractors and businessmen have frequently complained about the government’s double standard when it came to implementation of laws.

By that they meant, while the government went hard on the locals when it came to enforcing laws, they slackened when some foreign companies violated the same laws.

The royal insurance corporation of Bhutan limited is awaiting government’s response to their complaint against the Indian companies - Larsen and Toubro, Hindustan construction company and Gammon India, which have insured the Punatsangchu project with Indian insurance companies, rather than with Bhutanese.

The company’s chief executive officer, Namgyal Lhendup, said this flouted one of the provisions of the company’s charter, which gives it the “exclusive privilege of carrying on life and general insurance business emanating from Bhutan”.

“Nowhere in the world is this allowed,” he said. “A business springing within the country should be insured with financial companies within the country.”

Royal monetary authority’s financial regulation and supervision department director, Eden Dema, emphasised that a business originating within the country should insure with a company licensed by the authority for the purpose of providing insurance services within the country.

She was interpreting article 2 of the financial institution act, 1992, based on which, she said, they issued a notification to the government and the Indian companies, and through the local news channels in July 2009.

“No one,” the notification read, “shall engage in providing insurance services within the territory of Bhutan, except by those companies, which are licensed to provide insurance service by the RMA of Bhutan.”

She also pointed out that, while the country’s first insurance company had grown its appetite over the years, a second private insurance firm had recently begun business.

“They can always begin co-insuring such big projects as the Punatsangchu,” she said. “The Bhutanese financial growth is lost, if the insurance business continues to go out.”

Many financial institution officials, Kuensel interviewed, felt this was a “daylight robbery”, which the government, despite being aware of, failed to act against.

Royal monetary officials said, although the Indian companies undertaking the projects at Punatsangchu, should be penalised, they were uncertain at what policy level the issue extended.

The monetary authority’s managing director, Daw Tenzin, said that, though they would follow up on the issue, the penalty aspect should be taken care of by the trade and industry officials.

“These foreign companies will have to follow the country’s business law,” Daw Tenzin said, adding that, since the asset was within the country, even if the foreign companies wanted to reinsure outside, it had to be routed through the country.

Bhutan insurance limited chief executive officer, Tshering Gyaltshen, felt it was unfair that, while the risk lay inside the country, the insurance business was taken outside.

“We have licenced insurance companies within the country paying tax to the government,” he said, adding that, when such businesses were lost to foreign companies, besides local insurance companies losing business and the government its revenue, the entire country lost substantial revenue that could be pumped into speeding its economic development.

The Punatsangchu project managing director, Rajinder Nath Khazanchi, who claimed not to have received the royal monetary authority’s notification, explained the project was being carried out, based on a bilateral agreement between the two countries.

He added the question then was whether the government should begin implementing the project or look into the niceties of providing income to local companies?

With regard to their preference for Indian insurance companies, he said they were taking the best offer of whoever offered the least premiums.

“We would have chosen to insure with a Bhutanese company if they offered the same premium,” Khazanchi said. “RICB never made any efforts on their part.”

Namgyal Lhendup argued they were never asked to compete, in quoting the insurance premium for the project.

He said Bhutanese insurance companies should be entitled to at least 50 percent of the business.

Larsen and Toubro was awarded the dam construction work, worth Nu 12.4B, Hindustan construction company for powerhouse, worth about Nu 7B, and Gammon India for the headrace tunnel, worth about Nu 4B.

Namgyal Lhendup said they had quoted against some Indian insurance companies in the past for the Dagachu project and won the bid.

“We had assured Nu 3.8B for the Dagachu project, for which we received Nu 28M premium,” Namgyal Lhendup said, adding the country could have retained a significant sum, if a certain percent of the Punatsangchu project was insured with the local insurance companies.

“We’ll have to settle the matter in a court of law should things not look up,” Namgyal Lhendup said.

Meanwhile, economic affairs ministry officials asked for more time to understand the issue before commenting.

By Samten Wangchuk

Stepping up Support

An estimated amount of USD 58.4M for the rest of the 10th plan period

ADB president Haruhiko Kuroda

Asian Development Bank 2 August, 2010 - The Asian development bank (ADB) is looking at scaling up assistance to Bhutan by almost 60 percent, over the next two years, to support the remaining period of the 10th five year socio economic development plan.

Indicative spending for Bhutan under ADB’s concessional Asian development fund for 2011-12 is estimated at about USD 58.4M, which is around Nu 2.7B.

Over the next four years, ADB’s investment programme includes a renewable energy project to support the government’s rural electrification programme, urban infrastructure, rural roads, domestic airport improvements and capacity building for government agencies.

ADB is also one of the sources of finance for the Bhutan Green Power development project, which aims to promote cross border power trade and electricity access within the country. The 114 MW Dagachu project, for which ADB is providing assistance of USD 80M, is one component of the project. Renewable energy, like solar for rural areas, is another component.

At the conclusion of a three-day visit to Bhutan, the ADB president, Haruhiko Kuroda, told the Bhutanese media on July 31 that he was very satisfied with the implementation of ADB projects in the country.

“I’m happy to say that, over the years, Bhutan has made substantial progress in reducing poverty and improving the lives of the people,” he said, adding that the poverty rate declined from over 36 percent in 2000 to just over 23 percent in 2007.

Still, Bhutan faced significant challenges in high rural poverty, unemployment, lack of skilled labour for key industries, gaps in infrastructure development and an underdeveloped private sector that must be addressed in the medium to longer term. “Given that rural poverty remains much higher than urban poverty, efforts must continue to ensure that economic growth is made inclusive and brings benefits to all citizens,” said Mr Kuroda.

Since 2006, considering Bhutan’s debt burden and other indicators, all assistance to Bhutan has been in the form of grants, except for the Bhutan Green Power development project.

On the borrowings to harness hydropower potential, the president said that excessive borrowing could hamper smooth growth and, if such a thing happened, ADB would advise the government to reduce the tempo. “But at this point the government is making prudent investment decisions, because there is huge hydropower potential that could benefit the economy, people and the government,” said Mr Kuroda.

The president also said improving connectivity and communication through road and air transport was one way to further open the economy to global markets and diversify the local economy, which is highly dependent on sale of electricity to India.

Improving connectivity could also help overcome the challenges of being a landlocked country with a narrow economic base and a population of under a million, said Mr Kuroda. “The good point is that Bhutan is next to India, which is one of the fastest growing economies in the world,” he said. “But, in order to get its fullest benefit, you have to improve connectivity and communication.”

Bhutan joined ADB in 1982 and has since availed 24 concessional loans, of a cumulative value of about USD 284M, of which USD 147.24M was outstanding on March 31. ADB has also been providing technical assistance (TA) grants, which had a cumulative value of USD 44M, as of December last year.

Despite considerable progress and being on track to achieve the millennium development goals, Bhutan remains a poor country, according to the 2009 ADB fact sheet on Bhutan. Inequality is high, with the top quintile consuming eight times more than the lowest quintile. Hydropower accounts for some 12 percent of GDP and 45 percent of national revenues.

By Phuntsho Wangdi

DHI companies sign compact for 2010

31 July 2010

With Druk Green Power Corporation signing its per­formance compact with Druk Holding and Investments (DHI) this week, DHI has com­pleted signing performance compacts with its six compa­nies for 2010.

All the companies have committed to improve work­ing conditions, customer satisfaction, and exploring and establishing more areas of business.

However, three compa­nies have not predicted good financial performance.

Druk Green Power Corpora­tion (DGPC)

DGPC is committed to com­pleting the feasibility study of the diversion scheme of Toktogomchu, complete 30 percent of the feasibility report of Nikachu, and com­plete study on the renovation, modernisation, automation and up-rating of Chukha Hy­dropower Plant.

The corporation projected a minimal increase in revenue. It is attributed to anticipated increase in domestic power demand by 218.82 million units due to which there will be an opportunity loss of Nu 112.92 million.

Further, there is an expense of Nu 133.71 million for com­prehensive insurance cover­age of all power plants.

Natural Resources Develop­ment Corporation (NRDCL)

This year, NRDCL commit­ted itself to identify 10 stone quarries, complete feasibility study and get clearances for them. It plans to complete financial feasibility for six crushing plants by September end and assessment of inven­tory of boulders in the south for export.

The corporation has also committed to constructing 25 km of forest road, produce 1.87 million cft of timber and supply about 10 percent of it to rural people at subsidised rates. It will carry out 55.38 hectres of plantation and pro­duce 186,000 seedlings.

NRDCL will also produce and market 50,000 truckloads of sand, 27,000 truckloads of stone, and 500,000 kg of briquettes in addition to fire­wood supplied from the forest residues.

Bank of Bhutan (BoB)

BoB plans to install Central Banking System (CBS) in all the 20 dzongkhags. Internet banking is expected to expand with about 10,000 users and Nu 20 million fund transfers in a month.

The bank hopes to open a new domestic branch, install more ATMs, and reduce the waiting time to maximum of 30 minutes for counter services.

BoB will apply for VISA and Master Card membership and launch credit cards issuing and acquiring capability this year.

It hopes to make BoB ATM cards usable in ATM machines of other banks and vice versa on a chargeable basis.

BoB will also introduce prepaid cards in India.

However, the revenue and profit for the year is expected to decline with competition from the two new banks.

Bhutan Telecom (BTL)

BTL is committed to improv­ing mobile customer satisfac­tion, increase the customer base to 230,000 by the end of the year, expand broadband connectivity from 27 to 37 lo­cations, and upgrade internet backbone from 110 Mbps to 310 Mbps.

BTL will also sign a contract with IPCL circuit provider to diversify fibre connectivity gateways out of Bhutan. The rural GSM project will be completed and con­nectivity will be provided to 27 of the 28 gewogs under the project.

It plans to replace or re­furbish the Thimphu satellite earth station, which is over 20 years old, create Wi-Fi hotspots for internet access at two sites, launch convergent billing, and reach ICT facili­ties to six remote schools and provide free internet access.

Bhutan Power Corporation (BPC)

BPC is committed to electrify­ing at least 9,000 rural house­holds under the JICA and ADB funded rural electrification projects and about 967 house­holds under the fill-in rural electrification programme.

The corporation will ensure that there will be no facilities for its employees while working on the trans­mission and distribution network. It hopes to achieve a customer satisfaction index of 92 percent.

BPC will complete the replacement of ground wire with OPGW on the Phuentsh­oling-Thimphu 220 kV line.

BPC has set a lower target of return on equity on account of increasing its equity injec­tion on capital investment. However, the sale of power in the domestic market will increase.

Drukair Corporation

Drukair has committed to launching domestic air services subject to regularity clearance from the govern­ment and shareholders, and increase the number of Indian tourists by five percent.

To initiate plans to con­struct a new corporate office, Drukair will complete proce­dures with the dzongkhag and National Land Commission to get thram. The catering unit will be delinked as a different profit unit.

More focus will be given on improving customer service and obtain at least 80 percent customer satisfaction.

The airline will complete study on routes to Singapore and Hong Kong, build in-house capacity to conduct recurrent training by 2011, develop pricing strategy for financial sustenance and complete feasibility study for landing lights or beacons.

Financial performance projection

Cabinet sits on Decision

No cushion for high voltage users for much longer

Subsidy Level 31 July, 2010 - The government has not yet decided anything on the level of subsidy and power tariff for local consumers and industries recommended by Bhutan electricity authority (BEA).

Economic affairs minister, Lyonpo Khandu Wangchuk, said that BEA has completed its work, but the government is yet to decide. He said that subsidy for medium voltage users will continue up to year 2020; while for the low voltage, the subsidy might continue beyond that. “But, in terms of high voltage, the subsidy will be provided up to mid 2011,” he said.

As of now, the average tariff rate is Nu 1.54 per unit for households or low voltage users, and about Nu 1.72 per unit for medium and high voltage using industries.

Lyonpo said that the economic development policy clearly spelt out that subsidy for high voltage consumers will be phased out while subsidy for medium and low voltage consumers will continue. “We have a large number of high voltage consumers today; and industries, which are power intensive and provide revenue as well as employment to our people,” he said, adding that in terms of actual power, the costliest power is low voltage, second the medium and third the high voltage. “Tariff is always based on cost plus and we have to meet the cost of generation and distribution.”

Works and human settlement minister, Lyonpo Yeshey Zimba, said that rural electrification has the biggest subsidy component. “To take one unit of power to a house in a village, it costs more than Nu 4 per unit; but we are charging only 80 to 85 ch per unit,” he said. “The subsidy component for high voltage level is far less than low voltage.”

He said that, although business houses have been receiving a high subsidy, they are creating thousands of jobs, and also adding value to products going out of Bhutan. “So, when you look at the total picture, there is overall net benefit to the country,” Lyonpo Yeshey Zimba said.

BEA had conducted public hearing on the proposed tariff, where DGPC, the generating company and BPC, the distributor of energy both justified their demand for increases and hike for tariff as the current tariff was way below the actual cost of supply. The proposals were submitted in March.

“Production of power is very costly in Bhutan and, in terms of promoting use of electricity, industrialisation and generating jobs, one main resource we have is the reliable and reasonable tariff based power supply,” Lyonpo Khandu Wangchuk said, adding that the subsidy level would be carefully worked out to set the tariff.

By Phuntsho Choden

1 out of 3 Dagaps to be affected

However, the 4,060 MW project has more positives than negatives, as per report

The Sankosh Multipurpose Project dam site near Kerabari, that would generate 4060 MW of power by 2020

Sankosh Project 28 July, 2010 - When work starts on the country’s biggest hydropower project on the banks of the Sankosh river, one-third of Dagana’s population (9,356 people out of about 25,070) living in eight gewogs will be affected, says a study on the impact of the project by the Indian council of forestry research and education (ICFRE).

The eight gewogs are Tashiding, Tsendagang, Sankosh Town, Deorali, Lhamoizingkha, Nichula, Barsong and Rangthaling.

The 4,060 MW multipurpose project would acquire 7,304.90 hectares of land, of which 6,999 hectares would be submerged, says the study. Of the total land that would be submerged, 5,900.70 hectares is forest and 1098.30 hectares private land.

It was also found that vegetation of the submergence zone contains 250 species of plants and trees, including 58 species of medicinal plants and four rare species of plants.

Fourteen species of mammals, such as Assamese macaque and evidence of Asian elephants, sambar, sloth bear and golden langur, 86 species of butterflies, and 21 species of fish were also found during the study. “Due to the reservoir, the change of agriculture and forest land to water body is permanent,” says the study.

The findings were shared yesterday during a meeting between officials from the Tehri hydro development corp (THDC), the ICFRE, the department of energy (DoE), the Druk Green power corporation (DGPC), national environment commission (NEC) and the department of roads (DoR).

But it also has huge benefits, they said. The project would develop the area, create employment opportunities, create infrastructure facilities, development of roads will increase easy access, networking and promote business, increased accessibility and project activity would contribute in improving the livelihood of local people and further uplift the local economy. It would also bring in additional facilities, such as schools, hospital and drinking water.

“The project affected people may be provided training and financial help for entrepreneurship development,” states the study. “Preferential employment in semi-skilled and skilled categories will enhance the socio-economic status of the project affected families.”

The project, said the director general, department of energy (DoE), Yeshey Wangdi, is the largest project undertaken to achieve the target of generating 10,000 MW by 2020. “It alone contributes 40 percent of the 10,000 MW target,” he said.

With the detailed project report (DPR) to be completed by March 2011, Yeshey Wangdi asked the THDC to minimise private land acquisition. “We’d suggest to see and accommodate on the left bank of the river, where there is government land available” he said.

Explaining the features of the dam, THDCL’s additional general manager, RK Vishnoi explained that there would be two dams built, a main dam that would generate 4,000 MW of electricity, and the lift dam 13 km downstream that would generate 60 MW of energy. The power house would be built on the left bank near the main dam.

The dam, which would be built near Kerabari in Bhutan, would stand 265 m high, with the reservoir running 52 km upstream from the dam site. “It would generate 4,000 MW of energy at peak hours, when the flow of water is high,” he said. “But the flow of the river would be regulated so that there is 4,000 MW of power generated throughout the year.”

The reservoir’s full capacity of water level is 390 m, which can store 6,325 cu m of water, said RK Vishnoi. According to their seismological studies, they expect 7.5 magnitude earthquakes in the project site.

Participants pointed out that the studies have not taken into account the glacial lake outbursts floods, to which RK Vishnoi said that the dam is designed for 17,455 cu m per second water flow. “If the project is hit by a flood of this magnitude, it would safely manage the flood,” he said, adding that the project is not very vulnerable to GLOFs.

The finance aspect, such as costs involved, was also not clear, said participants.

The last flood in that region, they said, was in 1994. However it is the landslides, they said, which would be responsible for the deposition of sediments in the project area. High rate of sediments in the dam would mean a decrease in the volume of water the dam could store, explained officials.

However, the study for the feasibility of building a concrete dam instead of a rock-fill dam is still on. It would be done by September this year. Concrete dam is usually the preferred choice for constructing dams, said engineers, especially for places in high seismic zones; since a rock fill dam, although cheaper, requires lots of processing, such as blending of gravels.

Although studies are still underway at the project site, TDHC officials said that incessant rain lately has made it difficult and risky to work. “Another issue that needs to be taken up immediately is to improve the access to the project site,” said RK Vishnoi. “It needs nine bridges and a 16 km road and, for a huge project like this, it could take up to two years,” he said.

The project that would take about eight years to complete would channel the water downstream to India for irrigation.

Meanwhile, the Bunakha project along the Wangchu for which a DPR is still underway, would affect 3,248 people in Chapcha, 1,856 in Geling, 232 in Bunakha and 150 in Chaina chia under Chukha district.

By Sonam Pelden

Pvt. Sector Gives Thumbs up to DGPC's Hydropower Construction Company Plan

Contractor say that Dgpc should focus only on Hydropower and lead the way for smaller bhutanese companies, DGPc says it will.

Private sector construction companies are welcoming the idea of Druk Green Power Corporation (DGPC) starting a hydropower construction company by 2012 as long as it sticks to only hydropower. Both sides also feel they can get together to compete with Indian construction companies that have so far monopolized hydropower construction in Bhutan.

The private construction companies say that DGPC could lead the way for them in hydropower construction and also give them opportunities and capacity building in the process.

“I think it is a good initiative from the DGPC and they can spearhead Bhutanese companies in the mega project,” said Aum Phub Zam of Yarkay Construction.  He said that the hydropower company should welcome private sector for partnership and the company must float its shares to the public.

“We will set up a Construction Company if no private sector is able to meet the capacity and ability to take up mega project,” said DGPC managing director Dasho Chhewang Rinzin. He said that by 2012 Dagachu project will be completed and DGPC will have enough engineers and technical ability to go for tunnel construction.

The MD said that DGPC would want the private sector to participate in the big projects and develop its capacity so that in-house projects will be given to local contractors, not to foreign companies. The DGPC construction company will be taking in local contractors as partners and will eventually hand the company to them once their capacity is built.

The hydro construction company will be floating shares to the public with a majority 51% of shares for private participants and remaining 49% with the company.

”We encourage this sort of leadership from our bigger corporation, to compete with outside firms and create a path for smaller firms to follow,” said President of Construction Association of Bhutan (CAB) Ugen Tshechup Dorji. He mentioned that construction industry will support DGPC.

He said that construction industries are not opposed to the corporations leading the way and taking part in the bigger contracts. “This will enhance the local capacity and capability and allow our own people to take part in future mega projects,” said the CAB president.

The DGPC plan is to set up the construction company by 2012 with Nu 500mn as initial investment. DGPC’s will look at opportunities in the 10,000 MW projects in which at least the tunnel construction is done by the local company.

The hydropower construction company with its initial Nu 500mn capital will look to purchase jumbo drillers that can drill through mountains, short creting that spray cement to harden the tunnels walls, cranes, batching plants and others like excavators, drilling machines and trucks.

However, a few local contractors feel that the private sector also has the capability to go for big projects themselves provided the government builds their financial and technical capacity. “We are never given preference for big projects by the government and hence we lack experience,” said Naki of Nima construction. She said that local contractors should be given a platform whereby they can partner with big construction companies which will eventually enable local contractors to build capacity to take up mega projects.

In spite of the support there is suspicion among some contractors that DGPC might compete with the local contractors in other construction businesses after obtaining the construction license. “We don’t have intentions of getting into other construction business other than hydropower,” said the DGPC MD clearing the air. “We have not applied for the construction license with construction development board and we are not interested till 2012,” he added.

Posted by phuntsho WANGDI | 24 July 2010

Kurichu - Favourite whipping boy

PERSPECTIVES 24 July, 2010 - Every summer, especially during the monsoon, flooding due to incessant rain throwing normal life out of gear provides a rich seam of subject matter for newspapers across the border. They flash stories of the monsoon spell wreaking havoc, with lives lost and homes washed away. Nothing wrong with that. Such accounts indeed help people understand and come to terms with the two-month long spell. But how, amidst all this, do some baseless allegations help, especially when an innocuous hydropower plant easily becomes a plump target for putting the blame on for nature’s fury?

It is certainly bad news, not just for the people of Assam, but for the people of Bhutan too. It is bad news for the people of Assam, as they have been hit by yet again another flood; and it is bad news for Bhutan, since the cause of the damages is being imputed to her. And, as we clear our own backyard, we have fellow feeling and sympathy for our friends across the border during this difficult time.

Kuensel reports allegations, yet again from a pocket of the Indian media camp, pointing fingers at Bhutan, putting the blame for the recent flood-related damages in Assam squarely on the Kurichu hydropower plant (KHP), which also supplies power to India. That is nothing unusual though, given the deluge of allegations shot at us in the recent past, as far as back as 2004.

What is baffling though is the manner in which these news agencies, who had cobbled together the news articles, get so definitive about an esoteric issue, such as the operation of a hydroelectric plant in Bhutan they know nothing of. The journalists could have done justice to their roles as true journalists, if they had got their moral compass right, and done good research before putting into print such baseless allegations. They have failed in their job and it will only go to reflect poorly on themselves and the news agency they represent. They seem to be good at hurling near-scurrilous allegations and peddling distorted facts; but are tired and emotional on journalistic ethics.

The allegations have raised many indignant heads, and quite naturally so. There is not a semblance of truth to the stories. The stories are high on specious accounts, formed by something less than a careful study of facts, and miserably short on accurate, objective reporting. Such reports give us a sense of obscurantism that these media organisations are apparently engaging in. One can only wonder whether such tacit disregard to the sentiments of the people of a nation can even be used as fillers.

These accusations are emerging from local news-hungry agencies who, without proper analysis and due diligence to the underlying facts, publish whatever opinions come their way. The media do not have the patience to sort out all the facts. And so the public may not know the difference between truth and falsehood that has been spun.

They seem to have grown quite a bit of cheek, running such baseless stories ad infinitum. The government of India exonerated Bhutan on an earlier occasion when same allegations were hurled at it. This should have been automatically absorbed as a lesson for them. Such lessons have the good potential to identify drawbacks in their own system and improve upon.

However, oddly enough, these media agencies seem to have their head buried in the sand. It will not be surprising to find the media shunt aside even this article as a threadbare argument. At least for now, it seems it will be quite hard to convince the obdurate media pockets to do the right thing.

Like someone said: “Accuracy is to a newspaper what virtue is to a lady.” Such miscarriage of responsible journalism could do great damage. This leaves almost no margin for error in this area of journalism. The media therefore needs to be careful in reporting on such subjects. It plays a crucial role in shaping public opinion, and therefore the distorted facts and baseless allegations have the dangerous potential to warp the opinion of masses by prejudice. Student bodies, acting on the false media news feeds, are one such fallout from such media reports. It is only through a sound media that we can make the world a better place to live in. Unless media take its share of the responsibility, all efforts at peace and harmony will run into the sand.

There is another risk arising out of such media trends. More often than not, this kind of trend breeds opportunism. It then provides undue advantage to people in authority ways to put away the blames of their own deficiencies on others, or on anything that is external to their jurisdiction. Such opportunism is not uncommon and anybody would immediately jump in to see how they could ride the situation to meet their ends. In the process, those people and their supporters develop predisposed views, which become so fixed that they have a problem seeing the obvious.

Damage has been done by the recent blame game launched by certain pockets of the Indian media, and scars have been left. The scars will remain irrespective of any retraction or reparation that might ensue. Moreover, this kind of trend bodes ill for the already teetering, if not diminishing, goodwill between the people of Assam and Bhutan in the wake of the recent past.

It is therefore the responsibility of the Bhutanese authorities and citizens to correct the facts and educate those who have fallen easy targets to the false media news feeds, and to win back the goodwill of the people of Assam. To reflect the exemplary relationship India and Bhutan share, it is important that people-to-people contact is nurtured, based on mutual understanding and trust. However, the “trumped-up” media allegations blaming KHP are the flies in the ointment.

The important thing is that, as long as we are in a tenable position with truth on our side, we can look right through these allegations, and safely put them aside in a manner as flippantly as the Indian new agencies handled the situation in the first place. KHP’s operation has never done them any harm, but their allegations have.

Contributed by Dorji Tshering

No Truth in Telegraph Report: KHPC

Kurichu Hydro Power Corporation

22 July, 2010 - Kurichu hydro power corporation (KHPC) officials say that the power plant is not responsible for the floods in the neighbouring Indian state of Assam, as reported by some Indian media.

The Telegraph newspaper, which is published from Kolkata, on July 19 had reported that a sudden release of water from Kurichu dam has flooded many areas in downstream Bodo belt in Assam, particularly under Baksa district.

According to the report, a portion of the 1560 Narayanguri Azad LP school was also washed away after the floodwater eroded many areas of Narayanguri in the district. Over 21 families in Pachim Narayanguri, 65 in Nonke Kagrabari and 300 in Alengamari, Bispani, Rogobil, Sunbari and Kagrabari were affected. Parts of Manas national park were also flooded, the report said.

The KHPC superintending engineer, Yeshi Tenzin, said that, except for the log flushing (the removal of logs using the power of the water) work, which is normal, there wasn’t any sudden release of water from the dam.

The project carried out log flushing on July 17. Yeshi Tenzin said that the Assam based Indian central water commission (CWC) had also been informed regarding the log flushing. “Each time we carry out the operation, we inform the hydromet services division under department of energy, which in turn relays the message to CWC,” he said.

“Because of the continuous rainfall, the streams in the catchment areas swelled and transported lots of driftwood, which required flushing. “These logs block the water ways to the turbines and hamper the generation of power,” he said.

He said the project could not schedule the time to carry out the flushing operation, neither could it be done manually, as it involved lot of difficulties.

However, the discharge of water was done carefully in a controlled manner, which would not cause any damage to the downstream settlements.

“There was similar complain in the past, which were totally baseless,” he said. The dam receives about 1300-1400 cu m3 of water these days due to continuous rainfall, which is more than the dam capacity.

The project, which was commissioned a decade back, was designed with the reservoir capacity of 15M m3. But the officials have observed that the reservoir capacity has drastically reduced to half over the years due to sedimentation.

According to the superintending engineer, a dam scouring (flushing of silt deposit) is done twice a year as recommended by the central water commission of India: once in the beginning of the monsoon and other one is some time before the end of the monsoon.

By Tshering Namgyal

Higher electricity tariff

PERSPECTIVES 17 July, 2010 - I appreciate the concerns raised with regard to the increase of electric tariff. However, contrary to the weird negative impact contemplated by some, I am hopeful that it won’t lead to a disastrous economy. My intentions are to provide an insight into the economics of energy usage and pricing; and the comparison of electricity to other energy fuels. Comparing affordability of one kind of energy to another one should not be viewed in that way. Affordable for the end users and sustainable for the utility should be viewed side by side, within the framework of reducing the financial assistance rendered by the royal government of Bhutan (RGoB). Differentiating the affordability of electricity to that of firewood, kerosene and LPG does not make economic sense, given that all these fuels are also heavily subsidised. All of us have the option to choose the type of fuel (energy) we want to use to meet our demand. Depending on one’s income, the cost of the energy using device and the cost of the fuel, one can either use all the available fuels or stick on to few types of fuels.

Because the demand for any energy is derived, one just cannot compare various energy types, by looking at the energy price alone. Life cycle cost analysis and comparison based on service level obtained from each type of energy commodity are crucial. On an equivalent energy unit basis, the price of revised electricity is: Ch 24/MJ at life line block and Ch 52/MJ at next blocks (simple average of tariff at Block II and III); for kerosene and LPG, the prices are: Ch 36/MJ and Ch 58/MJ respectively. Understanding the energy ladder and realising the service levels that can be obtained from each energy type, the figures above are self explanatory whether electricity is affordable or not. Compared to these energy types, firewood is the lowest priced fuel (around Ch 7/MJ). However, we should remember that devices using firewood are the least efficient; and firewood is the most inconvenient fuel.

I, as a concerned citizen, also know the impacts of tariff increase on the energy expenses of individuals, and to the revenue of RGoB. There is no doubt that the increase in electric tariff will increase our energy expenditure, but increase in revenue from higher tariff will certainly provide our government to allocate more budget in the public infrastructure development, providing more schools, hospitals, roads and bridges. Who benefits! - the entire economy. With the increase in tariff, it is most likely that consumers will be judicious in the use of electricity, which indirectly leads to increase in electricity export, thereby further increasing the revenue from electricity export. The existing progressive electric tariff reveals that the affordability of the poor population is taken into consideration. It is cheaper to electrify a clustered village than a scattered village. The cost of delivering electricity increases with distance from the source, and a majority the poor people resides in far flung remote rural areas, highlighting the fact that the current tariff at the lifeline block is heavily subsidised. Tariff increase is not just for BPC, it is a gradual process to reflect the true economic cost of electricity delivered to the end users. This in turn shall benefit the entire economy, by generating higher revenue for RGoB. Economists agree that by reflecting true economic cost, efficient resource allocation can be achieved. And efficient resource allocation does not tell that an economy should use a single energy type for all its energy services. If the use of LPG and firewood is cheaper than electricity for cooking and heating, then let it be. What is the issue here? Considering this assumption, and then improving the efficiency of the devices using these two fuels, the economy will be benefited further. I am sure that electrified households seldom use kerosene for lighting. Making energy affordable does not mean that we use that energy for all kinds of end use.

One should understand that the progressive tariff structure tries to fulfill some of the basic objectives of energy pricing policy: viz: social equity, financial viability of the utility and economic efficiency. The reason for lifeline block is to provide affordable electricity to the poor people to meet their basic energy needs. And I don’t understand the justification for 200 kWh. With increase in income, there is a tendency that people will buy more and more consumer durables for comfortable life and luxurious life. Comfort and Luxury are far beyond necessity. Price elasticity of demand for necessity is inelastic, hence a fixed tariff (heavily subsidised for the case here) for life line block invariably protects the low income people. No other energy fuels in Bhutan have this kind of tariff structure; does any one of us bother?

Contributed by Dorji Yangka Thimphu

Possible impact of higher electricity tariff

PERSPECTIVES 11 July, 2010

 We know that a major component of the annual budget is spent in developmental activities. The government’s intention of meeting the deficit in the annual budget by enhancing tax base is probably the immediate solution. The increased imposition of sales and import tax augurs well, looking at the financing deficits in the government’s exchequer. However, the impacts of such decisions need to be reviewed and analysed; for, sometimes, good intentions will not necessarily mean good returns. I would like to share my views on the likely impact of the electricity tariff, should it be increased. One pertinent issue is ‘affordability’ as stipulated in the regulation. To me the tariff is not affordable even today, without the increase. If it was affordable, why are we using kerosene, firewood or LPG as other forms of energy? All of us should be using electricity to cook if it was affordable. We talk of rupee crunch and we spend so much to buy kerosene and LPG. With the increase in tariff, there is every chance that more than 70 percent of our population will continue to resort to wood, kerosene and LPG for cooking and heating. Even with the recent cost hike of the petroleum products, it would still more economical to use kerosene and LPG, instead of electricity. As a result of the tariff increase, deforestation could certainly increase. Mud/landslides will increase due to deforestation. Rainfall may be scanty and precipitation will decrease, resulting in reduction in the river flows. The impact will probably be reduced power generation. There will be health and hygiene problems and performance of students is likely to go down, as the population resorts to austerity measures to control their finances, to make their ends meet by adopting reduced electricity usage. There could be possible compromise on the health and hygiene. Service sector industries may also suffer due to increase in tariff. Some of the questions raised during the public hearing, as well as amongst participants, were: With BPC making huge profits, even by supplying electricity below the cost of supply, why increase electricity tariff? Should some factories shut down due to the increase in the tariff, what would be the impact to the Bhutanese economy? Why should the export tariff be less than the domestic tariff? Is there a necessity to increase tariff for the royalty energy, when DGPC is providing substantial tax and dividends to the government? Will per unit cost of royalty energy decrease with the increase of generation capacity? I feel that a comprehensive study by the concerned agency(s) is a must to review the overall impacts the tariff increase is likely to have in the country. Should we sacrifice huge negative impacts just to enhance the domestic tariff, where the consumption is around 20 percent of the combined average annual generation of all the power plants? In-country consumption in 2009 (as per BPC) was 1,372 million units (MU), and the export was 5,404.816 MU. This implies that in country consumption constitutes around 20.24 percent. Out of 1,372 MU domestic consumption, 1,097.6 MU, i.e. 80 percent of domestic consumption, accounts for industrial consumption and only 219.52 MU is consumed by the rural/urban household consumers. So, enhancing the electricity tariff for rural/urban household consumers will have devastating impacts on the environment, health and hygiene of the people and many other unquantifiable impacts, though it is meagre in terms of revenue. Therefore, an increase of, say, Nu 0.25 per kwh for domestic tariff; and, on the other hand, an increase of, say, Nu 0.05 per kwh for export would have the same impact, as far as additional revenue is concerned. However, as mentioned earlier, any domestic tariff increase, especially for the rural and urban household consumers (excluding industries) will call for enormous negative impacts. Instead, it would be prudent on our part to go in for export tariff enhancement on a timely basis within the framework of the bilateral agreements. Therefore, going by the impacts the tariff increase is likely to cause, it is better to increase the lifeline slab units to 200 kwh, instead of 120 kw as proposed by BPC, and retain the same tariff as before; or better if it is reduced. This is likely to help us live by the declaration of our prime minister to remain a carbon sink country for all times to come.

RICB bonds over-subscribed, plans to invest nu 500mn in loans

Posted by phuntsho WANGDI | 10 July 2010

The corporate bonds worth Nu 500mn floated by the Royal Insurance Corporation of Bhutan (RICB) beginning May 13 has been oversubscribed to Nu 1.564bn which is the highest debt investment ever in the capital market.

“The overwhelming response from the investors from the market is an indication of the successful creation of a debt market in Bhutanese capital market,” said finance general manager of the company, Sonam Dorji. He said it is also a beginning of a process of mobilizing capital (through bonds) for prospective entrepreneurs which also helps in creating alternative investment avenues for investors.

The Chief Executive Officer of Royal Securities Exchange of Bhutan, Dorji Phuntsho, said “It is very positive response from the market.” He said it is cheaper to raise money from the capital market then financial market.  The bond will be listed with the stock exchange for secondary transactions only for institution holders.

Each bond is worth Nu 1,000 and it has 500,000 scripts in offer with the right to retain over subscription up to Nu 1,000mn. The annual interest rate (called the coupon rate) is 6.70% from the date of allotment. The bonds will mature after five years.

This is the second time the corporation is floating corporate bonds. This time, the highest subscribers included the Druk Green Power Corporation (DGPC) and the National Pension Provident Fund (NPPF) with Nu 500mn each, the Bhutan Power Corporation with Nu 300mn, Druk Air Nu 115mn, Penden Cement Nu 50mn, Youth Development Fund Nu47mn, and the Bhutan Trust Fund with Nu 47m.

The DGPC and NPPF were allocated with Nu 468mn each and the remaining were allocated the amount they subscribed for. A total of 23 clients bought the RICBL bonds.

Corporate investors saw the RICB bonds as an ideal investment avenue.

The finance general manager of Druk Air, Rinzin Dorji, said, “Our money was lying idle in the banks and RICB is providing better interest rates. So, we thought we will make some money by investing it.”

“Bhutan lacks investment culture and debt market to deepen the market and earning possibilities,” said Sonam Dorji.

The RICB plans to invest the Nu 500mn generated from the bonds in various expansion plans mainly by providing more loans under its existing loan portfolios.

The Chief Executive Officer of RICB, Namgyal Lhendup, said RICB will come up with new dimension of schemes to mobilize the funds and optimize the ability to provide effective financial services.

Most of the money from the bonds will be invested in loans under seven different portfolios of housing, industrial, transport, consumer/personal, contractor revolving credit scheme, card loan, and business loan. Sonam Dorji however said that there will be no changes in the interest rates.

Of the Nu 500mn, Nu 100mn each will be invested in industrial loan and business loans. Nu 75mn each will be invested in transport and card loans while Nu 50mn will be invested for industrial loan. Nu 25mn each will be invested for housing loan and the contractor revolving credit scheme. The remaining Nu 50mn will be put in the company’s reserves as part of the it’s liquidity ratio.

Hydroelectric Projects foundation stone laid

The construction of the 990 Megawatt (MW) Punatsangchhu II Project is expected to cost over Nu. 37 billion. Construction will begin from 2011 and is expected to be complete by 2016. For the 720 MW Mangdechhu Hydroelectric Project, construction is expected to cost over Nu. 28 billion and is also expected to take off from 2011 and complete by 2016. The Government of India has committed over Nu. 20 billion as grant for the projects. The remaining will be taken as loan. The project implementation agreements of the two projects were finalized during the 7th Authoritative meeting of Punatsangchhu-l Hydropower project in New Delhi earlier this Paro.

Pre-construction to kick of soon

Punatsangchu II and Mangdechu Hydropower Projects 24 March, 2010-

Pre-construction work on the 990 MW Punatsangchu II and 720 MW Mangdechu hydroelectric projects is to start immediately, with Bhutan’s department of energy signing agreements with two government of India public sector undertakings in New Delhi yesterday. The pre-construction work has been awarded to the Water and Power consultancy services (WAPCOS) Ltd., and the National hydropower corporation (NHPC) ltd. Pre-construction work includes basic infrastructure like approach road, bridges, site development, construction of power lines, and temporary structures, such as site office and labour camps. The main task of WAPCOS, according to Tashi Dorji, executive engineer of the department of energy, is to build a four kilometre highway diversion between Rurichu and Basochu along the Wangdue-Tsirang highway, of which 1.8 km will be a road tunnel, to divert the main traffic for the construction of the Punatshangchu II. NHPC will carry out the pre-construction work of the Mangdechu hydroelectric project in Trongsa. NHPC officials informed Bhutanese delegates that it would take about a month to mobilise their equipment and workers to the site before pre-construction work starts. The preconstruction cost for Punatsangchu II is estimated to be Nu 500 mn and Nu 150 mn for Mangdechu. “The execution of the two projects will be finalised and signed by the prime ministers of the two countries during the SAARC summit in April,” said economic affairs minister Lyonpo Khandu Wangchuk, who led the Bhutanese delegation to the talks in New Delhi. Bhutan also signed an implementation agreement for updating the detailed project report (DPR) for 4,060 MW Sunkosh reservoir hydroelectric project with THDC ltd. Updating of DPR is expected to be completed in September this year, according to Tashi Dorji. The construction of Sunkosh project, estimated to cost Nu 162 bn, is expected to begin in 2011. All three agreements were signed in presence of Lyonpo Khandu Wangchuk and the power minister of India, Sushil Kumar Shinde. “It has been agreed that the construction of Punatsangchu I and Punatshangchu II will be under one management,” said Lyonpo Khandu Wangchuk. Both the Punatshangchu-II and Mangdechhu projects will be built under the intergovernmental model, with a 70 percent loan and 30 percent grant from India. Punatshangchu-II is estimated to cost more than Nu 37 bn, while Mangdechu will cost about Nu 28 bn. The 1,200 MW Punatshangchu-I project is being implemented with 60 percent loan and 40 percent grant from India. Three projects - Chukha, Kurichu and Tala - were constructed with 40 percent loan and 60 percent grant from India. Both governments also agreed to expedite the implementation of 10 hydropower projects under 10,000 MW programme, whose DPRs were approved by the two governments during the third meeting of the empowered joint group (EJP) held on March 22. EJP was formed in early 2009 to fast track the implementation of the 10,000 MW hydropower projects. Of the 10 hydropower projects, three are to be built on the intergovernmental model, four on joint venture model and three are yet to be discussed. “By the end of 2011, at least, four projects with a capacity of 6,970 MW will be under construction and the DPR of the remaining projects will begin by 2012,” said Tashi Dorji. Cooperation in the hydropower between Bhutan and India dates back to 1961, when the first Indo-Bhutan agreement was signed on the implementation of the 27 MW Jaldhaka hydroelectric project. In 1967, first mini hydroelectric plant of 360 KW installed capacity was built and commissioned to provide electricity to the capital, Thimphu, under development assistance from government of India.

By Rinzin Wangchuk

Hydropower construction company by 2012

8 February, 2010 - Druk Green Power corporation’s (DGPC) planned hydropower construction company, once formed, will bid for a slice of the Nu 525 bn construction pie of the 10,000 MW projects.

The DGPC plan is to set up the construction company by 2012 with Nu 500 mn investments.

“As a first preference, we’d want private partners to take part and they could inject in equity in the form of cash or construction equipment. If there are no investors, we’ll manage it ourselves,” said DGPC managing director Dasho Chhewang Rinzin.

The hydro construction company would initially be set up as subsidiary of DGPC, which would be holding a majority 51 percent of shares, in case of private participation, and also provide technical expertise like engineers, management, etc. to set up the company.

“To prepare for the company, 25 DGPC engineers are getting hand on experience in the construction of the Dagachu project,” said Dasho Chhewang Rinzin. Some consultants are helping the engineers with the design, engineering, and approval process of plans of the Dagachu project. Hindustan construction company is helping engineers get experience in the construction process of the dam, tunnel and powerhouse. DGPC also has an understanding with an Austrian company installing the electro magnetic equipment in the powerhouse that it would use 75 percent Bhutanese workers to give them experience.

“The construction company would be made up of these engineers and an independent management, which would bid for some mega projects and also carry out DGPC’s own hydro projects like the 208 MW Nikachu project starting by 2012 or the 100 MW Gamri project,” said the MD. He said that the company would be proficient in all aspects of hydropower design and construction.

The company with its initial Nu 500 mn capital will look to purchase jumbo drillers that drill through mountains, short creting that spray cement to harden the tunnels walls, cranes, batching plants and others like excavators, drilling machines and trucks.

After a few years of functioning, DGPC plans to divest its shares to an efficient private sector partner to manage the company.

“We would divest because DGPC’s mandate is not construction but to develop the human resources needed for it and the private sector would be better at running a construction company,” he said.

“Even 36 years after hydropower construction began, Bhutan still does not have a hydropower construction company. We feel this company could lead the way in good and reliable hydropower construction, where private sector can take part,” said the MD.

Bhutan has been getting many inquiries in the last two years from foreign agencies asking for help in their projects on the presumption that Bhutan has its own hydropower design and construction expertise. He emphasised that all hydropower construction will be done by the company that would not allow sub contracting to its members or other construction companies.

“Ideally we’d prefer private companies in hydropower construction, but realistically speaking they don’t have the capacity,” said Dasho Chhewang Rinzin.

He said that after 10,000 MW, the construction company would still have another 13,000 MW project to look forward too.

By Tenzing Lamsang

Agreement signed, 28th December, 2009.

The agreement for the supply of four new runners for Tala HydroPower Plant (THP) was signed between THP, DGPC and ANDRITZ HYDRO Private Limited, India on 28th December 2009 at DGPC Conference Hall, Thimphu. The agreement was signed by Mr. Thinley Dorji, ED, THP on behalf of DGPC and Mr. Devashish Sarmacharjee, DGM, Marketing & Sales, ANDRITZ HYDRO Private Limited, India. Dasho Chhewang Rinzin, Managing Director, DGPC and Mr. Dorji P. Phuntshok, Director (Projects), DGPC witnessed the signing of the agreement.

Power compensation for displaced families.

Punatsanchu Project Update 18 December, 2009 - Landowners affected by the 1200 MW Punatsangchu dam project will be given 10,000 units of free power annually for every acre of land lost to the project for as long as the hydropower plant runs.

This works out to about Nu 20,000 in free power an acre annually.

The economic affairs minister, Lyonpo Khandu Wangchuk, announced this yesterday at a public meeting in Hasothangkha, Wangduephodrang.

The villagers can either take the free power or money, equivalent to the free power they are entitled to, said the minister. Project officials said 10,000 units can light up 70 rural households in a year.

However, that was the only good news for the 90 families, who would be displaced by the project. Their other requests like the development of substitute land, realignment of the highway and compensation for structures built on wetland would be submitted for consideration they were told.

Lyonpo Khandu Wangchuk said that providing compensation to structures built on wet land and developing substitute land would be submitted to the government for consideration, the realignment of highway may not be possible.

“Highways are built with the shortest alignment possible for the benefit of the people,” said the minister. “As such it may not be possible to consider this request in view of its long term implications.”

The 90 families from Tshogom, Thedtsho and Rubesa gewogs, are the largest number of people ever to be displaced under such circumstances.

According to villagers, this was the fourth time that such a meeting was held.

The Gasaytshogom gup, Tshewang Tandin, said that they had requested realignment because a majority of the displaced families, about 60 of them, live above the planned highway, which is about seven kilometres away from the Wangdue bridge.

According to project officials, about seven families have built houses on wet land, which by law is not allowed and not entitled for compensation.

Villagers are worried about giving up their ancestral properties. “I’ve been paying tax and everything that’s required of a house owner but now they say that I won’t get anything because my house falls on government land,” said Sonam Zangpo, 61, from Masipoto village, who has been living there for 39 years. “The only option I now have is to appeal to the king.”

Another villager, Chador, 58, hopes that equal compensation would be given to all the displaced families, irrespective of the land’s location.

The district’s land record officer, Sonam Yonten, said that compensation for houses and orchards have been worked out and the land commission’s order is awaited. “It’s only for about 20 families that own a house or an orchard,” he said.

The project so far has acquired about ten acres of private land, for which about Nu 12 million has been paid, said the managing director (MD) of PHPA, R N Khazanchi. The project has also acquired about 30 acres on lease.

“The most important is the building of the reservoirs,” said the project’s MD. “For the coffer dam, we’ll have to take over the land by March 11 and for the main dam, we need the land by September 14.”

The acquired lands would be allowed to be used by the people until its required by the project, said Lyonpo Khandu Wangchuk. People would also be allowed to build temporary structures on the land acquired by the project. “The only condition is that there won’t be any compensation from the project for these structures,” he said. The project would also provide employment to one member of the each family displaced or adversely affected until completion of the project in 2015.

By Sonam Pelden

Misgivings on inter-govt. model

10,000 MW Hydro Projects 10 November, 2009 - According to a Times of India (ToI) news story, India’s investment in Bhutan’s 10,000 MW hydro projects could have an adverse impact on their annual budgetary provisions if it is in the ‘inter-government model,’ according to records of a recent meeting called by the Indian power sector officials.

The record, according to ToI, says that India, under the inter-government arrangement, is committed to building projects of 10,000 MW by 2020. For this to happen, India will have to take up many projects at one go on a fast-track, requiring an investment of Rs 500 billion at Rs 45 billion per year till 2020.

The ‘inter-government model’ referred to is how hydro projects have been done within Bhutan in partnership with the Indian government.

For example, the Punatsangchu project, where 40 percent of the money is grant and 60 percent is loan money given by India, and on completion the project is completely owned by Bhutan.

The other option is the joint venture model, where an Indian public sector undertaking (PSU) together with the Bhutanese government invest in a hydro project, where the PSU will get up to 49 percent ownership of the project for 30 years.

When Kuensel contacted the Indian power secretary, Harishankar Brahma, in Delhi, he said, “The government of India is committed to 10,000 MW by 2020 and isn’t going back on that. There are no funding problems and we’ll build the project no matter what the cost.”

Harishankar Brahma said that, so far, it was agreed that three to four projects would be on an inter-governmental model and the remaining seven would be discussed. He further told Kuensel that the issue would be further discussed between the Indian ministry of external affairs and the Bhutanese government.

In March 2009, when Lyonpo Khandu Wangchuk visited Delhi, Bhutan and India had agreed to 10 hydro projects, where six projects with a total power of 9,340 MW would be carried out on the ‘inter governmental model’. The remaining four with 2,236 MW would be on the joint venture model.

This came to a total of 11,576 MW, whereby a cushion of 1,576 MW was added just in case some projects were unfeasible, or there were other problems.

Even in July 2009, during the prime minister Lyonchhoen Jigmi Y Thinley’s visit to Delhi, the Indian prime minister Dr Manmohan Singh recommitted that 10,000 MW would be done in time.

According to the ToI report, the records suggests that, if the present inter-government arrangement is changed to a joint venture model, India may have to pay a higher rate for power it buys from such projects in Bhutan, since India gets power at a much cheaper rate from Bhutan due to the financial aid it extends to these projects.

“I wouldn’t be overly worried as GoI is committed and these must be part of normal discussions among themselves on how to meet the commitments,” said the managing director of the Druk Green power corporation. “As far as possible, the inter-governmental model will be best for Bhutan, as the government will have 100 percent ownership of the project and financing will be assured.”

According to sources in Bhutan, Bhutan and India have already recently agreed to the intergovernmental model on Sunkosh, Punatsangchu 1, Punatsangchu 2 and Mangdechu, coming to around 6700 MW, with others under discussion.

Currently, Bhutan supplies electricity to India at Nu 1.80 per unit from the 1,020 MW Tala and 64 MW Kurichu and at Nu 2 per unit from the 336 MW Chukha project.

Bhutan pays more then Nu 3 billion in repayments to India annually on loans taken to build hydropower plants. Bhutan earns around Nu 6 billion in dividends and taxes.

India’s annual budget (2009-10) is Rs 10,000.208 billion.

By Tenzing Lamsang

Tala HydroPower Project was officially handed over to the commercial management of Druk Holding and investments(DHI) and Druk Green Power Corporation on April 8.

Tala project handover,13 April, 2009-The Tala hydropower project, dubbed a symbol of Indo-Bhutan relations, was officially handed over to the commercial management of Druk holding and investment (DHI) and Druk green power corporation (DGPC) on April 8.

The chairperson of the Tala hydropower authority (THPA), economic affairs minister, Lyonpo Khandu Wangchuk, and THPA managing director, R N Khazanchi, handed over the project to the representative and CEO of DHI, Karma Yonten.

Amidst the sound of two running turbines in the tunnel, Lyonpo Khandu Wangchuk thanked the government of India and the management team under R N Khazanchi for completing the project without hitches and on time.

“This was one of the biggest and an exemplary project. We’d like to thank those involved in the project for completing the project on time, at a lower cost and without any corruption,” said the minister.

He also commended the workers, including those who lost their lives building the project, for their hard work and dedication. “The project had been a difficult task. The people of Bhutan will remember them for their benevolent contribution towards the completion of this project,” he said.

The chairperson of DHI, Lyonpo Om Pradhan, in a message to be read out at the handing-taking-over ceremony, said that the additional 1020 MW to Bhutan’s total power output would not only enable Bhutan to supply additional power to India, but also increase revenue for Bhutan, open doors for the growth of the private sector and expand employment opportunities.

“As the revenues from the Tala will form a large percentage of the contribution to the treasury, it will be imperative to ensure the smooth running of the plant,” read the message.

Together with Tala, the revenue from DGPC is expected to contribute over 50 percent of direct revenue to the royal government of Bhutan.

Work on the Tala project began in 1997. The power station with six units was fully commissioned in 2007, with the first unit commissioned in July 2006. The project was completed at the cost of over Nu 40, 000 million. Meanwhile, the THPA hospital was handed over to the Chukha dzongkhang administration.

By Samten Yeshi
s_yeshi@kuensel.com.bt

Bhutan to export 10,000 megawatt of power to India by 2020,March 24 -

A team of officials led by the Minister of Economic Affairs was in the Indian capital of New Delhi recently. During the visit the two governments signed the protocol to the 2006 agreement in the field of hydropower generation.
At a press conference today, the Minister of Economic Affairs said the major outcome of the visit is the formation of the empowered joint group.
Lyonpo Khandu Wangchuk is the chairperson of the group consisting of seven members, four from Bhutan and three from India.

The group is responsible for fast tracking the approval of the implementation modalities. It will also monitor progress of activities related to the construction of selected hydropower projects.

The group at its first meeting selected ten hydropower projects to be undertaken within 2020. These are Punatsangchu I & II, Wangchu, Mangdechu, Chamkharchu, Kholongchu, Kurigangri, Sunkosh, Amochu and Bunakha. The projects will be finalized after carrying out the Detailed Project Report.

The Economic Affairs Minister said the group also decided the modalities of implementation. Of the ten hydropower projects, six will be
intergovernmental undertakings. The remaining four projects will be taken up as joint ventures between Government Corporations of the two countries.

Lyonpo also said the Punatshangchu I will start in a month or two’s time and the rest will start between 2012 and 2014. Lyonpo said ample employment opportunities will be created for the Bhutanese youth once the projects start. The Minister also said it will open opportunities for the private sector.The Minister added that the Tala Hydroelectric Power Authority will be formally handed over to the Royal Government on the 31st of March. This was agreed at the 27th board meeting of the Tala Hydropower authority.
Meanwhile, civil works for the construction of dam, headrace tunnel and powerhouse of Punatsangchu I have been awarded to the contractors. The 1200 megawatt Punatsangchu 1 is expected to be completed by 2015.

BBS

Tapping the Punatsangchu, 31 May, 2009

 Stirred up by an endless train of battered trucks that haul rock, soil, equipment and workers, a perpetual mist of dust hangs over the dirt road leading into the gorge.

A truck breaks rank and abruptly halts, sending up an explosion of dirt that momentarily hides it. From within the cloud emerge workers in hardhats and bright orange reflective vests armed with pickaxes, shovels and drills.

Undaunted by a blistering midday sun, they form into single file and make their way up a slope, eventually setting up on a tiny flat tract carved into the steep side of the mountain. One man climbs into a caterpillar excavator parked close to the edge of the plain. It rumbles alive, exhaling thick smoke and then the digging begins.

The men dig to expose the mountain’s inner core of stable rock. Rock that eventually will form part of the foundation of Bhutan’s next dam, the 1200 MW Punatsangchhu I.

All across this gorge created by the Punatsangchhu, groups of men and machines toiling in the sweltering Wangdue weather labour to harness the power of this untamed river.

According to engineers at the site, progress on the dam is on the verge of moving into phase two and they are on schedule to complete it by 2015. That is, if there are no natural calamities.

“We’re keeping our fingers crossed,” says J S Barjwa, as he gazes down at a solitary worker walking besides the fast flowing emerald river. Barjwa, the superintendent engineer for the project, says that sensors are being deployed up river to warn of any rise in the river’s level. Although this would save lives, Barjwa worries that any construction near the river could still be in danger of being damaged or washed away.

Barjwa’s cell phone rings for the umpteenth time. He is wanted on the opposite bank. “It’s a 24/7 day job,” he says, while briskly walking towards a group of Indian engineers waiting for him at the end of a bailey bridge. The sun gleams off their white hard hats and dark glasses as they watch him approach.

A sizable boulder is in the path of a road being etched into the mountain they tell him. It needs to go. Explosives will be used. They assure him that the force of the explosion will keep the boulder from tumbling onto the bridge they stand on. Barjwa, his arms crossed over his chest, nods in approval.

“Yes, of course,” Barjwa says when asked if he enjoyed the task of building this mega dam, “It’s professional fun and a great learning experience.” Although Barjwa has built dams before, there is one man whom he reverently refers to as a “father figure,” whose experience is even more valuable than Barjwa’s.

That man is Rajinder Nath Khazanchi, the project’s managing director. With over four decades of dam building experience, including constructing all of Bhutan’s dams, he says, “Those dams were far simpler.”

A firm rock base is required for the dam to be built upon. “As the depth of this base increases, the difficulty become terrific,” he says, and with Punatsangchu’s rock foundation 55 m below the riverbed, excavation and completing the dam will pose, perhaps, his biggest challenge to date.

Unlike the procedure for wider rivers, the gorge at the dam site is too narrow for the river to be partly diverted on the surface during excavation. As a result, the engineers decided to divert the river by tunneling a path for it through one side of the gorge. But, because of the depth of the firm rock base, excavation could not have been completed in one winter season, when the river’s level is at its minimum. One more tunnel would have to be drilled alongside the first to compensate for the next monsoon and any possible floods. With both tunnels 10 m wide and 1 km in length, “this will be a real challenge,” says Kazanchi. “God forbid, no natural calamities happen in the next two years.”

Across the river, Indian workers are assembled in front of a massive rock face. In their centre sits a Hindu Brahmin clad in a faded yellow dhoti chanting mantras. They wait for the necessary divinities to be appeased before starting up their excavators and drilling equipment. The roar of the mighty Punatsangchhu is drowned out as man and machine cut into the mountain, seemingly oblivious of the mighty challenge ahead.