Introduction
Energy cooperation between India and Bhutan forms the backbone of a deeply symbiotic bilateral relationship. With Bhutan’s abundant hydropower potential and India’s massive energy demand, this partnership serves as a model of mutually beneficial regional integration, economic development, and strategic regional energy security.
1. Legacy Hydropower Projects: Foundations of Cooperation
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Since the 1974 Chukha Hydroelectric Project, India has financed and built Chukha (336 MW), Kurichhu (60 MW), Tala (1,020 MW), and Mangdechhu (720 MW)—totaling 2,136 MW under four inter-governmental projects, delivering clean power to India and revenue to Bhutan Reuters+15indembthimphu.gov.in+15The Sentinel+15.
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These projects are financed through a 60% grant and 40% concessional loan model and have generated significant export revenue for Bhutan and energy for India mfa.gov.bt+1Wikipedia+1.
2. Ongoing Expansion: Punatsangchhu Projects & Energy Trade
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Under construction are Punatsangchhu-I (1,200 MW) and Punatsangchhu‑II (1,020 MW), with the latter’s first two units commissioned in December 2024 and the full project expected in 2025 The Sentinel+9indembthimphu.gov.in+9Wikipedia+9.
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India paved the way for electricity trade by allowing Bhutan’s Basochhu (64 MW) and Nikachhu plants to participate in Indian Energy Exchange (IEX) Day-Ahead and Real-Time markets, enabling dynamic cross-border trading for the first time REGlobal+6indembthimphu.gov.in+6India News Network+6.
3. Renewables & Private Sector Momentum
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In March 2024, the two governments released a Joint Vision Statement on India–Bhutan Energy Partnership, agreeing to expand collaboration into solar, green hydrogen, and e‑mobility, involving Indian strategic partners Outlook Business+4indembthimphu.gov.in+4indembthimphu.gov.in+4.
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Major Indian private players, including Tata, Reliance Group, and the Adani Group, are increasingly active in Bhutan:
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Reliance plans 500 MW solar and 770 MW hydro projects alongside DGPC Adani+1The Sentinel+1drukgreen.bt+5The Sentinel+5The Economic Times+5.
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Adani signed a MoU in May 2025 to jointly develop 5,000 MW of hydropower capacity (including pumped storage), building on the existing Wangchhu (570/900 MW) project Business Standard+15Adani+15The Economic Times+15.
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Additionally, Reliance Power signed a long-term PPA for 500 MW solar with Bhutan’s Green Digital Pvt. Ltd (DHI subsidiary), reflecting cross-border renewable commerce The Times of India.
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4. Strategic & Economic Significance
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Bhutan exports an estimated 70–75% of its electricity to India, generating substantial foreign exchange and contributing nearly 35% of its GDP and exports, while India benefits from clean, reliable hydropower Reddit+2REGlobal+2mfa.gov.bt+2.
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The India‑Bhutan hydropower protocol of 2006 and 2014 set broad goals—targeting 10 GW of projects by 2020, two of which remain under construction and others in JV pipelines for 2,120 MW under government-backed frameworks mfa.gov.bt.
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Despite high potential (~33,000 MW viable), only ~3,490 MW is developed as of mid‑2025. Bhutan’s National Energy Policy 2025 sets a goal of 25,000 MW by 2040, encouraging private investment and climate-resilient infrastructure The Sentinel.
5. Institutional Mechanisms & Policy Innovation
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Bilateral cooperation is managed through regular consultations—e.g. Energy Secretary-level meetings in early 2024—which review energy plans and implementation details indembthimphu.gov.in.
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A significant development was India amending procedures in late 2023 to grant Bhutanese power plants access to Indian Day-Ahead and Real-Time markets, enabling more flexible trading and efficient power integration Adani+9India News Network+9indembthimphu.gov.in+9.
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Tariff negotiations finalized higher rates, such as revising Chukha tariffs to ₹3/unit, ensuring fair compensation while defending India’s interest Hindustan Times.
6. Challenges & Forward Pathways
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Transmission constraints: The "Chicken’s Neck" corridor requires high-voltage DC infrastructure upgrades to handle increased Bhutanese power flows The Sentinel.
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Financial sustainability: Private sector projects must ensure viability amid rate negotiations, capital investments, and environmental safeguards.
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Bilateral coordination on regulation, tariffs, and cross-border transmission lines requires clearer institutional mechanisms for sustainable scaling.
🧭 Conclusion
India–Bhutan energy cooperation stands as a cornerstone of regional economic and strategic synergy. From legacy hydropower ventures to new solar and hydrogen initiatives, both nations are deepening collaboration for clean energy generation and trading. With incoming investment from Indian private firms and calibrated policy frameworks, this partnership signals not just power exchange but a shared vision for sustainable growth and energy security.
As cross-border projects scale, reinforcing transmission infrastructure, equitable pricing models, and cooperative regulatory frameworks will be key to ensuring a balanced, mutually beneficial energy transition for both countries.