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India Cabinet approves aid for Bhutan's 1,095-MW Punatsangchhu 1

India's Union Cabinet has approved India's intergovernmental agreement with Bhutan to implement the 1,095-MW Punatsangchhu 1 hydroelectric project on Bhutan's Punatsangchhu River.

In action July 20, the cabinet endorsed implementing the hydro project and 400-kilovolt double-circuit transmission lines from the project site to the Indo-Bhutan border. The project is expected to require seven years to complete.

India and Bhutan formally agreed in 2003 to cooperate in the preparation of a detailed project report on development of Punatsangchhu. The project is the fourth joint hydropower development by the two nations. The 336-MW Chukha and 60-MW Kurichu projects, already in operation, were joined by the 1,020-MW Tala project, which began operation in 2006. (HNN 6/25/07)

The cabinet approved 35.14 billion rupees (US$819.9 million) in funding for the project, in form of a 14.06 billion rupee (US$327.9 million) grant and a 21.09 billion rupee (US$491.9 million) loan. The loan is to have an interest rate of 10 percent per year, repayable in 12 annual installments, beginning one year after commercial operation.

The government also approved additional budgetary support, above the estimated 35.14 billion rupee estimated project cost, to cover additional outflow on account of service tax.

The cabinet agreed the project would be developed under the United Nations' Clean Development Mechanism program to generate carbon credits equivalent to the amount of carbon dioxide the project would displace from fossil-fueled generation.

Punatsangchhu is to provide surplus power to India and further integrate the economy of Bhutan with that of India.

India's Water and Power Consultancy Services performed the detailed project report on the run-of-river project. A feasibility study by Japan's Electric Power Development Co. outlined a 141-meter-tall diversion dam, two 7-kilometer-long headrace tunnels, and an underground powerhouse with a head of 310 meters, and two 350-meter-long tailrace tunnels.

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