Agency: During his recent visit to Bhutan, Prime Minister Narendra Modi inaugurated the 1020 MW Punatsangchu II project which has been generating and exporting power, however, there was no announcement on the tariff rate.
This left some puzzled as the tariff rate was expected to be announced, as this is the longest delay in announcing the tariff rate for any bilateral hydro project.
However, a source said the issue is not tariff negotiations which is already over, with the starting tariff to be Nu 5.10 per unit and the levelized tariff (average tariff over 35 years) to be Nu 5.67 per unit.
The source said the delay is due to the fact that as part of the tariff negotiations it was decided that the loan repayment period be extended from the 15 years to 17 years, and so this additional two year extension needs to be cleared by the Indian Cabinet.
This takes time as a Cabinet note needs to be prepared and circulated.
The above means that the P II tariff will likely be announced soon once the cabinet approval is given in India.
P II commissioning was carried out in phases. Units 1 and 2 came online in December 2024, followed by Unit 3 in March 2025 and Unit 4 in May. Unit 5 began generating electricity on 17th July 2025 and the final Unit 6 joining the grid on 27th August 2025.
Bhutan could start exporting power to India from P II from 20th September 2025 onwards. The tariff of Nu 5.10 per unit will be applied to all power exported since 20th September.
The expected annual revenue from P II at full generation is expected to be around Nu 20 billion (bn) a year, of which the loan repayment is Nu 8 bn and Operation and Maintenance (O&M) costs are expected to be Nu 2 bn a year.
For this year, given that there was less generation since units had to come online one by one, the revenue expected is Nu 12 bn or less, and the O&M costs is expected to be Nu 800 million (mn).
