India, Bhutan draft JV agreement

The Empowered Joint Group has reached a consensus on sharing of benefits or the provision of saleable power from the respective JV projects, between the goverments of India and Bhuitan.

A minimum of 70% of the generated power will be sold under the long term PPA route, with Bhutan having the .  first right of refusal on saleable power from the project.

EJG has necessitated that the financing of the Bhutan equity by the Government of India would not be linked to the royalty energy provisioned by the Indian hydropower projects.

Further, it has directed that the cost/benefit sharing mechanism for the Bunakha hydroelectric project with the downstream power plants and projects, as agreed amongst relevant parties, be considered for incorporation within the relevant JV agreement.

Although the EJG has provided suitable directives pertaining to some of the fundamental aspects of the agreement, the finalization of the draft JV may take a considerable amount of time as the group is yet to announce its decision on pending provisions.

There has been no common ground for resolution of awarding free power or royalty power from the projects. According to the Indian CPSUs, neither of the two governments should be given the opportunity to draw free power as the tariff may not remain competitive under these circumstances.