From aid to trade

Mains Paper 4: Governance
Prelims level: Mangdechhu project
Mains level: India and its neighbourhood relations

Context

•  Prime Minister (Dr) Lotay Tshering in Bhutan has triggered speculation in New Delhi’s foreign policy and strategic circles.
•  PM Lotay and the DNT want to diversify Bhutan’s economy away from hydropower, and, hence India.
•  The new Bhutanese Prime Minister will have four main agendas in his first foreign state visit to India, and these, in order of priority, are:
•  A fair tariff for the 720 MW bilateral Mangdechhu project; seeking India’s support for Bhutan’s 12th Five Year Plan (FYP); starting the 2,560 MW Sunkosh Reservoir project and waiving off the Central GST for Bhutan.

Crucial highlights of the Bhutan’s economic future

•  These are critical for Bhutan’s economic future and commercial plans and all of them have to do with India.
•  He is concerned about the tariff rate because the largest chunk of Bhutan’s internal revenue in the 12th FYP will be coming from the project.
•  Indian negotiators are offering up to Rs 3.90 a unit. Bhutan wants something closer to Rs 4.40 a unit
•  Bhutan’s rate is below the average of Rs 6/unit, which is what new hydro projects in India are charging.
•  The construction of the 2,560 MW Sunkosh Reservoir project.
•  Bhutan, down the line, also wants to construct the 2,640 MW Kuri Gongri reservoir project along with India.
•  Both these projects are not only mentioned as priority projects in the DNT’s manifesto but also as one of its key economic priorities.

Way forward

•  This would be the first time that Bhutan is not seeking an increase in developmental assistance from India over the last plan period.
•  This would mean that while India funded 23 per cent of the 11th plan, it could potentially fund only around 14 per cent of a larger 12th FYP.
•  While hydro projects built with India will provide the bulk of the revenue for the government, the projects by themselves cannot generate many jobs for the Bhutanese youth.
•  The hydro projects, in the long run, will also not be enough to bridge the ever widening trade gap or current account deficit with India, which is the main weakness of the Bhutanese economy.
•  Bhutan will be asking for an exemption from India’s Central GST as the tax is
  affecting the export of Bhutanese goods to India, both in terms of price and procedures at the border.
•  Bhutan is India’s closest and most reliable friend and will remain so. It is now time to take this relationship to the next level.

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Prelims Questions:

Q.1) Consider the following statements about Mangdechhu project:
1. Mangdechhu Hydroelectric Project is a hydropower project in Bhutan.
2. 720MW run-of-river power plant was built on the Mangdechhu River in Trongsa Dzongkhag District of central Bhutan.
3. It was built by Bharat Heavy Electricals Limited (BHEL) with support from Government of India.
4. It is among the ten Hydroelectric Projects planned under the 10,000MW hydropower development by the year 2020 programme of the Royal Government of Bhutan.

Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) All the above
(d) 1, 2 and 3

Answer: C

Mains Questions:
Q.1) Why Mangdechhu project is so significant for India and Bhutan relations and also for economic cooperation too?