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.

Bhutan builders

Jai Prakash and Gammon have been selected to construct the 1000MW Punatsangchhu – II hydropower project.

Gammon, Hindustan Construction, and Larsen and Turbo are building the 1200MW Punatsangchhu – I hydropower project.

Hindustan Construction, Larsen and Turbo, and Jai Prakash built the 1020 MW Tala Hydropower Project.

A select group of contractors, characterized by the complete absence of Bhutanese contractors, public or private, even after decades of experience in hydropower construction in our country.

River potential

alternate hydro power

National Geographic has rated rafting on the Drangme Chhu – from the Trashigang Bridge to the Royal Manas Park – as one of the 25 Best New Trips for 2010.

But it’s not just the Drangme Chhu. Every one of our major river systems provides some of the world’s best rafting experiences. Dave Allardice of Ultimate Descents says that our rivers are:

A gigantic staircase rising from the Indian border to the high Himalayas of Tibet, the soaring peaks of Bhutan are an untapped treasure house of whitewater. The rivers are powerful and challenging.

And the National Geographic calls them:

A spillway for Himalayan snow and ice that roils into turquoise Class IV and V rapids through sheer granite walls.

So impressed were the editors of National Geographic Traveler magazine that they also included the Drangme Chhu decent as one of the world’s top 50 Tours of a Lifetime.

All this is good news.

But the good news will not last long. In fact, it will barely last two years. By 2012, construction on the 1800 MW Kuri-Gongri hydropower project will begin at the confluence of the Kuri Chhu and the Drangme Chhu. And further upstream, on the Kholong Chuu, construction on a 486 MW project will also commence in 2012.

So if you want to experience what the National Geographic is raving about, head to the Drangme Chhu … before 2012.

Photo credit: Bio Bio Expeditions

Bhutanese power

water potential

I was happy to read about DHI’s plans to carry out major investments in power generation, power transmission, construction, information technology, aviation, mining, cement production and telecom in the next four years. These investments will add considerable value to the commercial interests of the Royal Government, while also leading and stimulating private sector growth.

Of these investments, which, in total, are estimated to cost DHI about Nu 53 billion, I am most excited about DGPC’s project to start a hydropower construction company.

Our country is blessed with perennial, fast flowing rivers perfectly suited to generate environmentally friendly run-of-the-river hydropower. Our rivers are capable of generating as much as 30,000 MW of hydropower, almost 80% of which has already been identified as technically feasible. And our people have been harnessing hydropower since 1967 when the 360 kW minihydel at Jungshina, Thimphu was constructed.

But virtually all the work, from that first minihydel to the 336 MW Chukha hydropower project (commissioned in 1986) and the 1020 MW Tala hydropower project (commissioned in 2006) were carried out by foreigners, mainly Indians. Similarly, almost all the work on the 1200 MW Punatsangchhu hydropower project is being done by foreigners.

So I welcome the news that the DGPC will soon start a hydropower construction company. That, coupled with the government’s power training institutes and DHI’s investment ambitions, could mean that we may eventually be able to become specialists in run-of-the-river hydropower schemes. And that could mean that we may some day become a recognized authority in planning, designing, constructing, operating, maintaining, financing and marketing clean, sustainable hydropower in Bhutan and beyond.

A matter of power

The Indian minister for power, Sushil Kumar Shinde, was in Bhutan from 4 to 7 December. His visit was busy: His Majesty the King granted an audience; he met the Prime Minister, and the MEA Minister, Secretary and DG; he visited the Tala dam site and Chukha power plant; he visited Dochula; and I called on him.

His visit was successful: a protocol agreement to develop 10,000 MW by 2020 is ready and will be formally signed later this month. An “empowered group” will then be formed to identify and accelerate the implementation of hydropower projects. Both governments are visibly optimistic, and Mr Shinde has even promised to complete the plan by 2019, that’s a year before schedule.

In all this exuberance, we’ve forgotten to involve one player – Druk Holdings and Investment. As far as I know, the government did not involve DHI at all during this very important delegation. They were not included in any of the discussions. And they did not even get to make a courtesy call on India’s Power Minister.

This is unfortunate. Practically all the knowledge and experience with regard to hydropower development in Bhutan resides with the Druk Green Power Corporation and Bhutan Power Corporation, both DHI subsidiaries. Ignoring this valuable store of national expertise does not make sense.

As a matter of fact, DHI should actually be fully involved. Their mandate, decreed by Royal Charter is “… to hold and manage the existing and future investments of the Royal Government of Bhutan for the long-term benefit of its shareholders, the people of Bhutan.” It goes without saying that the development of the 10,000 MW of hydropower would constitute “future investments of the Royal Government”.

The Royal Charter also declares that “DHI shall implement all future commercially oriented projects that are developed by the government”. All the power projects included in the 10,000 MW plan are obviously “commercially oriented” and DHI will, by law, be required to implement them.

If DHI is expected to eventually “hold and manage” these hydropower projects it is only good sense to involve them right from the beginning. If the negotiation, identification and construction of the projects are done by the government, and if the DHI is expected to take over the projects (including all loans) once they are operational, the incentives to work fast, cheap and well may not be strong.

True, DHI does not have the capacity to implement such large projects. But neither does the government. Hence, a few months ago, the talk of creating an entirely separate secretariat for energy under the Ministry of Economic Affairs. This would be wasteful, inefficient, and tantamount to hiding two ministries under one umbrella ministry.

Develop DHI instead – they have the mandate, experience and the right incentives.