Bhutan's Power Industry Catapults 17% GDP Growth

---

Researched by Industrial Info Resources (Sugar Land, Texas)--According to the Asian Development Bank - ADB (Manila, Philippines), Bhutan's gross domestic product (GDP) growth rate in the financial year 2007 (ending on 30 June 2007) was a high 17%, a dramatic rise from 7.8% in 2006. This sharp rise was largely due to public investment in infrastructure and private investment in the housing sector. The most significant development has been the commissioning of the Tala Hydroelectric Project in 2006. This has been the main driver of Bhutan's economic expansion.

The 1,020 MW Tala project is located in western Bhutan and is a run-of-river project. The Tala Hydroelectric Project Authority (THPA) managed this joint project between Bhutan and India. The project was completed with an investment of about $750 million by India in a 60:40/grant: loan basis. India's state-run companies Power Grid Corporation of India (New Delhi), PTC India Limited (New Delhi), and National Hydro Power Corporation (NHPC) (Faridabad, Haryana) were involved in the development of the project. With the commissioning of the Tala project, Bhutan's total power export has gone up by 77%. India imports all the power generated by Tala.

The Indian Prime Minister recently laid the foundation stone of the 1,095 MW Punatsangchhu I project. Construction of this run-of-river project will start later this year and it is expected to come on-stream by 2014. So far, this is the largest hydroelectric project being built in Bhutan and is expected to generate about 75 MW more than its set target. The Punatsangchhu Hydroelectric Project Authority (PHPA) is implementing this project, with an investment of about US $880 million.

India has already announced plans to develop two new hydropower projects in Bhutan - the 670 MW Mangdechu project and the 990 MW Punatsangchhu II project. Both will be built within the 2009-2016 period. Prior to the Tala project, India and Bhutan had come together in two other joint projects - the 336 MW Chukha Hydroelectric Project commissioned in 1988, and the 60 MW Kurichu Hydroelectric Project commissioned in 2002. Surplus power from both projects is exported to India.

The Sunkosh Multipurpose Project in southern Bhutan, with a proposed capacity of 4060 MW, is the biggest hydropower project that has been identified so far. India has already prepared the detailed project reports (DPRs), though the project has currently been left for future development. Two other projects, for which India has prepared the DPRs, are the 900 MW Wangchu project and the 180 MW Bunakha project. The pre-feasibility report of the 2800 MW Manas Multipurpose Project has also been prepared.

India intends to import 5000 MW of power from Bhutan by 2020 while Bhutan plans to target power generation capacity of about 10000 MW of power during the same period. To achieve this target, India will prepare DPRs for four new hydroelectric projects in addition to the projects already underway.

Bhutan is a landlocked nation in South Asia. It is bordered by India on three sides and by China to the north. It is one of the least developed and most isolated countries of the world. Agriculture is the mainstay of about 70% of the population and the industry contributes about 33% to the GDP. Forestry, tourism, construction, and generation of hydroelectric power are the other industries in the country. Construction, which had declined in recent years, is gradually picking up steam again with the rising investment in infrastructure and housing. Although the current industrial development is more along the lines of cottage industries, the government is encouraging the growth of larger industries such as cement, steel and ferroalloy.

The lack of a local labor pool for development projects is a problem that Bhutan has to contend with. It depends on India for all its contract labor. The rugged terrain of the nation has made construction of roads and other infrastructure very difficult and costly. The absence of a railway system and lack of access to the sea has made it very difficult for Bhutan to export its products.

The commissioning of the Tala Hydroelectric Project has single-handedly catapulted Bhutan's GDP to double digits. Sale of hydropower is the main source of Bhutan's revenue today. The nation sells all its surplus power to India. India is Bhutan's biggest trading and economic partner.

View Project Report - 98810002 98810003 98810005

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.