Policy Update
Elenore Tu’u
Background:
Why this matters? hydropower has been the cornerstone for Bhutan’s bilateral economy for decades between both nations. According to Chukha, Tala, Kurichhu, Mangdechhu, India has financed and built a number of large projects according to long-standing cooperation frameworks.Recently both countries reconfirmed a JVoIBEP( joint Vision on India-Bhutan Energy Partnership) in March 22 2024 to strengthen cooperation across hydropower,new green energy and grid integration. It’s evident that Bhutan sees hydropower as its primary export earner, for India,Bhutanese hydropower contributes to renewable energy targets and grid stability. Hydropower uses natural water flow,and international recognition. Thus!India-Bhutan energy partnership has been a positive contribution to India’s renewable energy targets. Moreover, strenthening sustainability and regional cooperation. Additionally, a firm power to support seasonal and decarbonisation goals.
Functioning – How trade and arrangements work:
Recent relations of bilateral trade operate through a mixed arrangement of long-term PPA (Power Purchase Agreements), and developer arrangements which is a State to State and increasing private participation – recently seen operations via electricity market access in India (Day-Ahead/Real Time markets). In support of this is India’s occasional support financing transmission links and off take guarantees while Bhutan’s Druk Green Power Corporation (DGPC) handles and monitors generation and exports. Early developments include bringing Basochhu and Nikachhu capacities into Indian power markets and new PSA (New Power sale Agreements) to cover a clean lean season of imports and exports – These are examples of recent developments market linked hydropower integration between both countries.
Performance & impacts economic, energy security, climate:
1. Developmental impact for Bhutan:Hydropower revenues have funded social and infrastructure spending in Bhutan and remain a central development pillar; diversification into solar/green hydrogen was jointly encouraged in 2024 vision talks.
2.Energy & trade volumes;Past years have shown significant electricity exports from Bhutan to India (several TWh annually from commissioned projects), supporting India’s renewable targets and Bhutan’s public revenues. Bhutan’s newer large projects (e.g., Mangdechhu, Punatsangchhu series) are expected to raise export capacity substantially.
3. Strategic/energy security for India:Bhutan hydro supplies baseload/seasonal flexibility to India’s grid and helps manage variable renewables, reducing dependence on fossil-fuel peakers and lowering emissions footprints.
Emerging issues and Challenges:
1.Environmental and social concerns: New large dams raise social and ecological concerns in Bhutan (and neighbouring basins); public perceptions and domestic politics in Bhutan require sensitive, transparent processes. Past debates underline the need for inclusive consultations.
2.Seasonal variability & lean season pressures:Bhutan’s hydro is strongly seasonal (monsoon-biased inflows). Bhutan has in some years needed to import power (or sign lean-season arrangements), and India-Bhutan market linkages need careful operational coordination for lean periods.
3.Finance & private sector entry: Increasing private investment (e.g., recent MoUs with Indian private groups) brings capital but raises questions on contract terms, sovereign guarantees, and benefit-sharing arrangements with local communities. Recent large MoUs indicate rapid scaling of private participation.
4.Transmission & regional grid constraints:Sufficient cross-border transmission and integration into Indian market platforms are prerequisites for reliable trade at scale. Institutional alignment between system operators and market rules must be timely.
Way forward:
- Formalise a seasonal balancing framework:Provide a framework that stands for seasonal or lean period of equipping protocol with transparent pricing and contingency mechanism – to reduce shocks.
- Standardise PPA and environmental & social safeguards for private deals: The scale up of private players participation calls for a standardized model of PPAs and frameworks around environmental safety (Suggestions for grievance redress)- this reduces renegotiation risks
- Invest in cross-border transmission and market integration: Co-finance and coordinate market rules – enabling Bhutanese generation to participate in India’s Day-Ahead market.
- Support diversification & energy value chain in Bhutan: Use the Joint Vision to pilot solar and pumped storage hybrid projects, green hydrogen pilot(s), and value-added capacity (local O&M, component manufacturing) to broaden Bhutan’s economic base beyond raw power exports.
- Transparent, people-centred project processes: Institutionalise public consultations, rigorous cumulative environmental impact assessments and benefit-sharing mechanisms to build social licence for future large projects. Independent monitoring and open project dashboards will increase legitimacy.
Conclusion:
India–Bhutan hydro trade remains a high-value, mutually reinforcing partnership for energy security and development. Despite public discourse around recent agreements between the Druk Green Power Corporation (DGPC) and PTC India , public concern about the environmental impact of large hydropower infrastructure and allowing foreign capital and labour in a small country that is heavily dependent on hydropower revenues further highlighting India’s shift to engage with relevant stakeholder rather than diplomatic channels which only complements its efforts which involves non-state actors like NGO’s, citizen groups and private sectors to quell apprehension with regard to Bhutan’s bilateral relations.
However, the policy momentum of Joint Vision, market access steps and private sector interest thus open an access to scale trade going forward. Despite critics, success depends on careful seasonal risk management, strengthened transmission and market integration. also, enforceable safeguards for private investment, inclusive project governance allows for clear coordination and cooperation between both states.
If implemented , the recommended package will allow both countries to maximise climate-friendly energy gains while safeguarding Bhutan’s development priorities and public consent.
References:
- Embassy of India, Thimphu. (2024, October 28). Joint Press Release on India-Bhutan Renewable Energy Roundtable. Embassy of India, Royal Government of Bhutan. https://www.indembthimphu.gov.in/public_files/assets/pdf/PR_28_October_2024.pdf
- Indian News Network. (2024, May 21). Expanding horizons: The India-Bhutan energy partnership. Indian News Network. https://www.indianewsnetwork.com/en/20240521/expanding-horizons-the-india-bhutan-energy-partnership
- Ministry of External Affairs, Government of India. (2024, March 22). Joint Vision Statement on India-Bhutan Energy Partnership. Government of India. https://www.mea.gov.in/bilateral-documents.htm?dtl/37739/Joint_Vision_Statement_on_India__Bhutan_Energy_Partnership
- Ministry of Foreign Affairs, Royal Government of Bhutan. (2023, April 5). Press Release 588: India-Bhutan energy cooperation and emerging modalities. Royal Government of Bhutan. https://www.mfa.gov.bt/press-release-588/
- Press Information Bureau, Government of India. (2024, March 22). Bharat and Bhutan: Together for Progress and Development [Press Release]. Government of India. https://pib.gov.in/PressReleasePage.aspx?PRID=2016196
- The Economic Times. (2025, May 8). Adani Group signs MoU with Druk Green Power to develop 5,000 MW of hydropower projects in Bhutan. The Economic Times. https://economictimes.indiatimes.com/industry/renewables/adani-group-signs-mou-with-druk-green-power-to-develop-5000-mw-of-hydropower-projects-in-bhutan/articleshow/121001145.cms
- LiveMint. (2025, September 6). Adani Power, Druk Green sign deal for 570 MW Wangchhu hydro project in Bhutan worth ₹6,000 crore. LiveMint. https://www.livemint.com/companies/news/adani-power-druk-green-deal-bhutan-570-mw-wangchhu-hydro-project-rs-6-000-crore-boot-model-construction-2026-see-details-11757177031606.html
- Water Power Magazine. (2025, May 9). Bhutan signs MoU with Adani Group for 5,000 MW hydropower projects. Water Power Magazine. https://www.waterpowermagazine.com/news/bhutan-signs-mou-with-adani-group-for-5000mw-hydropower-projects/
About the contributor:
Elenora Tu’u is an undergraduate student specializing in Politics and Public Policy. This article is published as part of her course work with the IMPRI Impact and Policy Research Institute.
Acknowledgement:
The author sincerely thanks Ms. Aasthaba Jadeja and the IMPRI team for their valuable support.
Disclaimer:
All views expressed in the article belong solely to the author and not necessarily to the organization.
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