PHPA-II Tariff Set at INR 5.10: A Power Milestone

The recent finalization of the export tariff for the Punatsangchhu Hydropower Project-II (PHPA-II) marks a pivotal moment in Bhutan's energy sector. This significant development underscores the continuing partnership between Bhutan and India, with the tariff set at INR 5.10 per unit, the highest among Bhutan's hydropower ventures.

The Significance of the PHPA-II Tariff

The PHPA-II, with its 1,020 megawatt (MW) capacity, began exporting power to India in September 2025. The finalized tariff, agreed upon by both nations, reflects the project's scale and financial demands, yet remains competitive. This move is more than just a number; it's a testament to Bhutan's strategic energy planning and its role in sustainable energy export.

Key Features of the Tariff Agreement 📝

• Initial Export Tariff: Set at INR 5.10 per unit
• Revision Schedule: 7% increase every five years until loan repayment, followed by 5% every five years
• Loan Repayment Period: 17 years
• Annual Electricity Generation: Approximately 4,575 million units
• Projected Revenue: Around Nu 20 billion annually

The tariff not only accounts for the substantial project costs, including operation and maintenance, but also aligns with prevailing market conditions, ensuring fair economic returns for both countries.

Historical Context and Development 🌍

The PHPA-II project was jointly inaugurated by Bhutan's King and Indian Prime Minister Narendra Modi in November 2025. This event underscored the deep-rooted energy alliance between the two nations, enhancing regional energy security and cooperation. The project's journey, from its initial phases to full operation in 2025, demonstrates a robust partnership model in South Asia.

Growth of Hydropower in Bhutan ⚡

• Hydropower Contribution: Hydropower forms the backbone of Bhutan's economy, contributing significantly to GDP
• Energy Export: Bhutan's surplus energy is a critical export, primarily to India
• Sustainability Goals: Aligns with Bhutan's commitment to sustainable and renewable energy

Broader Implications for Energy Cooperation 🔄

The agreement also included a protocol for accounting reactive power exchange, effective from May 2026. This initiative is expected to bolster grid stability and enhance cross-border energy collaboration. Such measures are vital for ensuring efficient energy distribution and fostering transparency in power transactions.

Strategic Benefits for Bhutan and India 🤝

• Enhanced Grid Stability: Ensures reliable power supply and distribution
• Transparent Accounting: Facilitates clear energy trade and financial settlements
• Strengthened Cooperation: Reinforces the long-standing energy ties between Bhutan and India

Future Outlook: Energy and Economics 📈

Looking forward, the PHPA-II project is set to play a crucial role in Bhutan's economic landscape. With a consistent tariff revision plan and a solid financial foundation, it promises continued growth in revenue and energy exports. This aligns with Bhutan's broader economic goals, leveraging its natural resources for sustainable development.

Key Takeaways 🔍

• Robust Economic Impact: Significant revenue generation through energy exports
• Sustained Energy Collaboration: Strengthened Bhutan-India relations through continued energy partnerships
• Model for Future Projects: Sets a precedent for future hydropower initiatives in the region

In conclusion, the PHPA-II tariff sets a benchmark for future energy projects, highlighting Bhutan's strategic prowess in energy management and international cooperation. As Bhutan continues to harness its hydropower potential, the implications for regional energy security and economic prosperity remain profound.