Redefining India-Bhutan ties through hydropower and connectivity

Dr. Hriday Sarma

(An advocate at the Gauhati High Court)

 Dr. Debajit Palit

(Heading the Centre for Climate Change & Energy Transition at Chintan Research Foundation) 

When Bhutan’s King Jigme Khesar Namgyel Wangchuck visited Assam on April 19, 2025, it marked a significant milestone in India-Bhutan relations, particularly in hydropower and regional connectivity. His tour of Jogighopa’s new Inland Waterways Terminal and Multi-Modal Logistics Park signalled Bhutan’s interest in leveraging India’s logistics network to advance its economic and trade ambitions in the eastern Himalayan region.

The Jogighopa IWT, inaugurated in February 2025, stands as a strategic piece of infrastructure under India’s “Neighbourhood First” policy. For Bhutan, a landlocked country striving to access larger markets efficiently, the terminal isn’t just about shipping cargo; it’s about positioning itself within a broader trade and energy framework involving roads, rivers, and grids that run through Assam and beyond.

At the centre of this strong partnership lies hydropower—Bhutan’s single most important export and a cornerstone of Indo-Bhutanese cooperation. Bhutan’s hydropower potential is immense, with techno-economically viable potential estimated at 33,000 MW. Yet only a fraction of that, roughly 3,490 MW as of June 2025, has been harnessed. In fact, both nations have been exploring ways to scale this potential into actual generation capacity. Bhutan’s recently released National Energy Policy 2025 also outlines a roadmap to achieve 25,000 MW of installed energy capacity by 2040, emphasising strategic private investments and the development of resilient infrastructure to withstand climate impacts and ensure long-term energy security.

Several major projects mark the current phase of Indo-Bhutan energy cooperation. The proposed 540 MW Amochhu project, near the Indian border and intended to provide flood protection and support development in Phuentsholing, has attracted interest, including from major Indian private players. The 720 MW Mangdechhu project, funded by India on a 70:30 loan-grant basis, has been operational and was officially handed over to Bhutan’s Druk Green Power Corporation (DGPC) on 27 December 2022. Similarly, the 1,020 MW Punatsangchhu-II project, a joint venture under an intergovernmental agreement, is getting Indian support through a mix of grants and loans. These are not isolated ventures; they form part of a shared energy vision that spans decades but is now being reshaped by new actors and changing energy demands.

What’s particularly noteworthy is the increasing involvement of the Indian private sector in Bhutan’s hydropower space, responding to Bhutan’s urgent need to expand generation capacity. The peak power demand outpaced firm supply by over 125% in 2024. The first public-private partnership project, commissioned in 2015 by Tata Power and DGPC, is the 126 MW Dagachhu hydropower project. Based on this successful experience, the Tata and Adani Groups are setting up joint projects with DGPC, like the 600 MW Khorlochhu and 570 MW Wangchu projects, respectively. These projects are part of these two conglomerates’s plans to co-develop 5,000 MW each of clean energy projects with DGPC. Both the business groups have the advantage that they also have transmission companies, which can build dedicated transmission lines to evacuate power. This shift signals that the future of Bhutan’s hydropower sector may be co-authored not just by governments, but also by Indian companies bringing in technology, financing, and operational scale.

Yet, for all its potential, a major hurdle remains: transmission. Bhutan exports about 70% of its electricity to India, primarily through high-voltage alternating current (HVAC) lines. These systems, while effective to a point, are fast approaching their capacity limits. Bhutan’s current transmission infrastructure can handle roughly 2,000 MW of power exports to India via existing 400 kV, 220 kV, and 132 kV HVAC interconnections linked to major hydropower projects such as Tala, Chukha, Kurichhu, Mangdechhu, and the Punatsangchhu plants—barely sufficient, given that export to India is projected to reach approximately 12,000 MW by 2030.

This is where things get complex. The electricity cannot just be generated; it must be transmitted efficiently, particularly across challenging geography. Much of the energy passes through the Chicken’s Neck Corridor, a narrow stretch of land connecting Northeast India to the rest of the country. It’s a known chokepoint, and the transmission infrastructure needs upgrading.

That is why there is an increasing push for dedicated high-voltage direct current (HVDC) technology that can move up to 1000 MW. Unlike HVAC, dedicated HVDC systems can carry electricity over longer distances with significantly fewer losses. India is reportedly planning new HVDC corridors to ensure smooth delivery of power from Bhutan to demand centres, including those in Assam.

Meanwhile, tariff negotiations and regulatory frameworks are also in play. Cross-border electricity trade isn’t just a technical issue—it’s a policy one. Setting tariffs at levels that are both profitable for generators in Bhutan and affordable for Indian consumers is a delicate balancing act. Encouragingly, both governments appear committed to adjusting policies that would allow for smoother, predictable transactions—an essential step if private investors are to come in.

India’s growing need for clean and dispatchable electricity presents another opportunity for Bhutan. While solar and wind are clean, their variability limits their reliability. Bhutan can play a pivotal role by developing pumped hydro storage systems for use during peak hours or at night. This will not only support India’s grid but also allow Bhutan to earn premium tariffs beyond existing long-term power purchase agreements.

But the benefits of this partnership must extend beyond energy exports. Bhutan stands to gain more if local companies and communities are integrated into the supply chains of these infrastructure projects. Indian firms, too, can benefit from deeper engagement with Bhutanese counterparts, not only through joint ventures but also via knowledge transfer and long-term capacity-building.

In this unfolding story, Assam plays a pivotal role. Assam’s Chief Minister has expressed a strong intent to deepen engagement with Bhutan on energy cooperation and infrastructural connectivity. His visit to Bhutan in December 2024 underscored the state’s increasing power demands, an additional 300 MW annually by 2026 to 2028, and the pressing need to explore hydropower partnerships with Bhutan, as well as with Arunachal Pradesh and Sikkim. Bhutan’s water resources, including the potential diversion of the Sankosh River, were also discussed as strategic inputs for improving Assam’s irrigation systems and drinking water supply. As Bhutan advances its ambitious Gelephu Mindfulness City project, envisioned as a hub for tourism, wellness, and sustainable living, Assam is well-positioned to be a key enabler through clean energy integration and enhanced regional collaboration.

Infrastructure plans, including a six-lane highway connecting Bongaigaon with Gelephu, are on the drawing board. Once realised, this could become a vital artery—not only for moving goods and people but also for transmitting power and ideas across borders.

In sum, the India-Bhutan partnership is entering a new chapter, one that goes beyond bilateral diplomacy and enters the realm of regional integration. The planned projects are ambitious, the partnerships are expanding, and the stakes are high. For this momentum to last, both countries must address core issues—transmission capacity, policy clarity, and local participation.

The outlook is promising. If managed with foresight and commitment, this cooperation could become a template for regional energy security and sustainable development. It’s no longer just about generating electricity. It’s about generating shared prosperity.

(Views are personal.)