Reckless power

The minister for economic affairs, Lyonpo Khandu Wangchuk, is in New Delhi. He’s meeting his counterparts in the Indian government to discuss the hydropower projects currently under construction. And he’s attending the empowered group meeting that will consider future hydropower projects, including those that will be developed as joint venture projects by public sector companies of the two governments.

I hope that Lyonpo Khandu will remember the question that I had submitted during the last session of the Parliament. I didn’t get to actually ask it due to time constraints. But, as required, I had submitted my question in advance, in writing, so he knows that the opposition party has serious concerns about the joint venture hydropower projects that the government is negotiating.

Here’s my question:

The Government has reportedly allowed Indian Public Sector Undertaking (PSU) companies to build and operate 4 big hydropower projects under a build, operate, own and transfer (BOOT) mode as joint venture partners with Druk Green Power Corporation.

Will the Hon’ble Minister please explain why the Government should go ahead with the joint venture projects when the demands of the PSUs violate the Government’s sustainable hydropower development policy and create excessively favorable conditions for themselves?

Hydropower is a valuable resource. It is the cornerstone of our economy. And it is its main driver. So we must develop it. But we must do so carefully. We must ensure that each and every hydropower project contributes meaningfully to our economy, benefits our people, and strengthens our sovereignty. We must be careful. We cannot be reckless.

But that’s exactly what the proposed joint venture projects are: reckless. The government seems to be willing to ignore and violate important provisions of the sustainable hydropower development policy for the Indian government PSUs. Those policies were carefully developed just 3 years ago, so undermining them basically amounts to recklessly compromising the interests of our country and people.

The government, for example, has allowed the Indian PSUs to own 51% of the joint venture projects although the policy explicitly states that, “For Public-Public partnership, the RGoB undertaking shall have a minimum of 51% shareholding.”

What that means is that Indian government PSUs will have managerial and decision-making control over the joint venture projects. That is not good. That is reckless.

But that’s not all. The government seems to be giving in to even more demands of the Indian PSUs. These demands would create even more favorable conditions for Indian PSUs by simply ignoring even more of the government’s hydropower policy.

For instance the PSUs have demanded that the joint venture projects be exempted from paying royalty power to the government. Hydropower is a natural resource that belongs to the State. So royalty must be collected for exploiting that resource. That’s why the hydropower policy requires that, “A minimum of twelve percent (12%) of electricity generated shall be made available free of cost to the RGoB as Royalty Energy during the first 12 yeas of commercial operation of the project and a minimum of eighteen (18%) thereafter …”

The PSUs have also demanded that they enjoy ownership of the joint venture projects for 35 years. That also violates the hydropower policy according to which “The project shall be allotted to a Developer for a concession period of thirty (30) years, excluding the construction period.”

And the PSUs have demanded payment of “fair market value” of the projects when they are handed back to the government at the end of the “concession period”. What does the hydropower policy say? “At the end of the concession period, the entire project shall be transferred and vested in the RGoB at no cost and in good running condition.”

If joint ventures with Indian PSUs make sense, go for it, develop our hydropower resource, strengthen our economic base, and reinforce the strong ties of friendship that we enjoy with India.

But if the joint ventures don’t make sense, if they aren’t attractive enough, if they compromise our own policies, if better partnerships are available, then take a step back, pause, review the situation, and do what’s best for our country and our people.

There’s no need to be in a hurry. And there’s certainly no need to be reckless.

 

Facebook Comments:

Comments

  1. i can tell says:

    Excellency OL,
    These seems to be the most dangerous mistake that is going to take place.
    Informing your readers in this blog is wonderful gesture from your end but dont you personally think that every bhutanese has the right to know everything you have mentioned. We are ordinary citizen and if facts are known to us, we can bring no changes as an individual soul. Only the readers in your blog shall be aware after going through this.
    I personally beleive that you should use media for sharing atleast this reckless move.

    we dont know where our decision makers are heading la. All that we know now is that they really are GNH leaders,.

    Wish and pray tht we dont make the same mistake as did in 2008.

  2. If it is really true , I will never forgive this government. It is like giving our food away. Sounds like we are getting into deep shit to me.

    I heard Nepal gets more tariff rate than what we are getting at present too.

  3. Nepal gets more tariff coz they invest themselves but we grant as well as loan at cheaper rate…
    As of partnership with PSUs, it would not be acceptable if moe removes royalty energy…as far as 51% ownership is concern, it won’t matter much as some countries even give 75% …it should be give n take when two friendly countries do business..it won’t go our way all the time…

  4. The concerns raised by the Opposition Leader are very serious and have very long-term implications for Bhutan.
    In particular, the demand that Bhutan pays full market value for a project at the end of the BOOT period is totally unreasonable and not normal in a BOOT agreement. It could land Bhutan with very large liabilities which it might not be able to pay – what then happens to the project – would it then pass into the ownership of India?
    And surely Bhutan should always have a majority shareholding, i.e. 51% in a power project. It’s Bhutan’s possession.
    Ignoring of provisions of the Energy Policy is dangerous, and needs to be fully justified to the nation. There are serious long-term implications for Bhutan both economically and politically. I agree that this issue needs to be widely debated in the National Assembly, National Council and in the nation. For that, the nation needs to be better informed.
    Dengpo’s comment is naive in the extreme!!! When two friendly countries do business, they do business – friendship doesn’t come into the equation. Bhutan has several times in the past suffered from this naive attitude, which I feel arises because in the past Bhutan has really only done ‘business’ with aid agencies of one form or another whose basic motivations are to help Bhutan. Remember the kid’s tale about the wolf in sheep’s clothing!!
    Is India the ONLY country Bhutan could enter into partnership with to build Hydroplants – and remember, it’s India that wants and needs Bhutan’s hydropower, so Bhutan should really have the negotiating upper hand – it’s a seller’s market. And if you’re playing cards with friends for money, you don’t show them your cards just because they are friends!!!

  5. Mj..
    Instead of being too conservative and nationalist, let us be practical, broad, realistic and liberal when it comes to “business” as u ve said. When country doesn’t ve enough capital to fund the projects, ur argument that we should ve ” negotiating upper hand” is just a simple dream that even I too wish but not realistic. It will be ” seller’s market”, only when we r able to stand on our own foot, and make our own production without depending other countries/companies for upfront capital investment. I think gov hasn’t given in to all PSUs demand and that is why it is being discussed and negotiated. If one wants to be rigid, then no point of negotiation, and the only option is to scrap the project and move backward.

    As of entering partnership with other countries, it is constraint by our geographical locations. It is possible only if India is willing to buy power from those projects or at least provide transmission corridor to export power to third country like Bangladesh. Hope u understand the geopolitical situation of the region.

    So, for me, as long as there is royalty energy, it makes evonomin sense to go ahead even if it is at the cost of giving in for 51 % share to PSUs. Other issues like project life, handing-taking etc should be negotiated and sorted out.

    Having said that, even I too would be very happy if all goes the way we want as stated by OL and others. But we should not be too rigid (unless it affects our national security) and jeopardize the entire projects.

  6. WE HAVE TO BE CAREFUL; OTHERWISE THIS MAY TURN OUT TO BE ANOTHER BHUTAN LOTTERY EXPERIMENT.

    This is a very serious issue and has critical long-term implications. I respect Dengpo’s right to express his opinion, but it’s sad that he should post such irresponsible comments (for whatever reason).

    Here are some quick questions that we need to ask as concerned citizens:

    1. Why 4 joint venture (JV) projects? As this is our first experiment with BOOT model, won’t it be wise to be a little cautious and start with one project first? If it doesn’t work out, it will be a very, very, very expensive mistake–a mistake that our can never afford.

    2. Is the decisions for 4 JV projects political—meaning did our leaders make this decision in order to fulfill their commitment to generate 10K MW power by 2020? If so, is it worth the risk? I personally think we shouldn’t be too greedy and reckless. For a small country like ours, it will be good even if we can achieve 5000 MW by 2020. We have to be careful as there are many hidden costs (environmental, human, debt, and others). We may also be putting all our eggs in one basket.

    3. In the long run, will it be worth violating our own policies and rules? Our government should lead by example. I keep hearing that building a strong foundation for democracy is our nation’s first priority. But if that’s the case, we cannot compromise with the rule of law—can we?

    4. Allowing 51% ownership and giving away control over the projects will be a big mistake. We have to learn from our past mistakes. Who knows, some of these Indian PSUs may take full advantage of our “easy-going and half-hearted (if I personally don’t suffer a loss, why I should care)” nature to exploit earnings from these mega projects. We also don’t have technical and financial experts and professionals who can really read, understand and analyze complex financial and technical reports and ask tough questions to Indian PSUs, consultants, contractors and multinational corporations. I suspect we’ll end up accepting whatever reports are submitted and whatever incomes are declared by the Indian PSUs. Even if we suspect unethical practices, we’ll just keep quiet because “we are doing business between two friendly countries.”

    I would like to thank OL for bringing this important issue and many others to people’s notice. It must be a lot of hard work gathering information (as it’s very difficult to get any information from government); and then to analyze and post in such an easy-to-understand format for the benefit of all readers.

    As MJ mentioned, this issue need to be widely debated. But based on the government’s (ruling party) past actions (CDG, Rupee Crisis, etc.) and the fact that the National Assembly didn’t have time to even have a Q & A on this issue (let alone debate) shows that there will be no NA, NC or public debate on this.

    As a concerned citizen and like many others who have expressed their concern, I am WORRIED. I beg our government to reconsider/rethink and be careful. I also beg that, on such important issues, our government communicate with “We the People” and give us the reason why we shouldn’t worry.

    I repeat:
    WE HAVE TO BE CAREFUL; OTHERWISE THIS MAY TURN OUT TO BE ANOTHER BHUTAN LOTTERY EXPERIMENT.

  7. Yes, certainly we should be careful but flexible and rational as well. It should be debated at all levels, note important points and if possible incorporate those points in MoUs to avoid complication in future. Different opinions and perspectives should be taken in positively instead of terming other views as irresponsible comments!

    Let us not just be too cautious, pessimistic and cynical while doing business. There are countries of our size who ve implemented this kind of business model and it has worked and working successfully. The best example is Laos. It is very similar to our country in terms of size, population, terrain and they r also into hydro power business n most of their power generated r exported to Thailand. There are many projects invested by companies from Thailand, china and european countries and In some cases their shareholding is as high as 95%…..some are implemented in BOOT model and in some they ve invested in IPPs. So, it has worked in other countries there is possibilty that it may work here as well…we ve added advantage of learning from them and incorporate it if there are any loopholes…just my thought!

  8. Kelpazangla says:

    This is very serious. It is proving everyday that old set of Ministers need a change.

  9. Today’s news cleared many things.

  10. Domchosertong says:

    Your Excellency OL, Thank you for the information sharing on blog, but as said by “I can tell” I think it should be share in media.The DPT government is giving everything in free which our wise monarch have saved till now. Instead of emphasizing on Hydro-power negotiation, the government should make a talk with Chinese about the northern border issues, its alarming to see in the google earth that China is claiming much of our land. Sorry for not relating with the discussion. BUt as a common citizen of Druk Yul, I fell government should do something. If any thing wrong please forgive me….am just a beginner with the system..

Leave a Reply