The Hindu Business Line : Power sales to India to fuel Bhutan's growth

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New Delhi Jan. 26 Bhutan's economy is projected to power to a 12 per cent GDP growth in 2007, almost entirely on account of increased electricity sales to India with the new Tala hydroelectric project going on-stream.

Economy

The economy of the Himalayan kingdom, which is estimated to have grown by a robust 10 per cent in the year 2006, is slated to witness a 12 per cent growth in 2007 as the 1020-mega watt (MW) Tala project reaches full production by around May this year, according to the Asian Development Bank estimates.

In fact, even prior to the Tala hydroelectric project getting commissioned, Bhutan's economy relied heavily on hydropower revenues from India, which accounted for some 12 per cent of the country's GDP and 45 per cent of national revenues in 2005-06.

Revenues

The pre-Tala hydropower revenues were mainly from electricity supplies from the 336 MW Chukha hydro project and the 60 MW Kurichhu Hydro Project to India.

The Tala hydroelectric project is, by far, the largest hydro project in Bhutan. The phased commissioning of six 170-MW generating units of the Rs 4,124-crore project (from August 2006 through to May 2007) is expected to double Bhutan's annual power exports, generating about $1 million a day, according to the ADB.

GDP growth

GDP growth has been consistently growing from about 8 per cent in 2005 by about 2 percentage points each of the two subsequent years.

In fact, during the full year, Tala's operations could raise the share of hydropower dividend revenues to total budget revenues from the current 45 per cent to 60 per cent.

With substantially larger exports, the current account deficit should decline to about 9 per cent in 2006 and then move into surplus in 2007, according to the ADB projections.

The Bhutanese Government plans to use its revenues from Tala for expanding the social services network.

Besides the Tala project, Bhutan and India are jointly taking up three more projects totalling 2,532 MW in Bhutan.

While the Tala project is expected to move to the top of Bhutan's revenue sources from this year on, so far Chukha Hydro Power Corporation Ltd (which runs the Chukha project) has been the foremost source of revenue for the exchequer.

Chukha ranks even above the Royal Monetary Authority of Bhutan, the top bank of the kingdom, in terms of revenue inflows.

Interestingly, Bhutan's Department of Lottery is among the top ten revenue contributors, accounting for over 2 per cent of the total national revenue.