New Delhi: Prime Minister Narendra Modi is all set to visit Thimphu this month, to formally inaugurate the 1,020-megawatt Punatsangchhu II hydropower project and take part in the 70th birthday celebrations of His Majesty The Fourth King of Bhutan, the father of the current monarch. This will be Modi’s fourth time to the neighbouring country since 2014.
The Punatsangchhu II hydropower project is a joint venture between India and Bhutan. It was fully commissioned in August and is entirely funded by India, through a grant (30 percent of the project cost) and a loan (remaining 70 percent). It is aimed at increasing Bhutan’s power capacity by 40 percent and strengthening regional energy security.
Ahead of Modi’s visit, Bhutanese PM Tshering Tobgay announced Tuesday that the ongoing Global Peace Prayer Festival, a royal initiative led by His Majesty King Jigme Khesar Namgyel Wangchuck, is also being organised with support from the Government of India.
India, on its part, has sent one of Buddha’s sacred relics from India to Bhutan for public worship during the festival.
Bhutan is key to India’s Neighbourhood First policy and is also the largest beneficiary of India’s foreign aid programme. In India’s 2025 budget, Bhutan received Rs 2,150 crore to fund hydropower projects, digital connectivity and cross-border trade initiatives.
Bhutan is also strategically important because of its proximity to Doklam, a disputed region between India and China that was the site of a standoff in 2017. China and Bhutan have border disputes in the northern and western sectors, including the Doklam area.
The 2017 Doklam standoff erupted after China constructed a road on territory claimed by Bhutan, eventually leading to Indian intervention based on a security agreement with Bhutan. After the Doklam standoff, the Bhutanese PM visited New Delhi in 2024 and sought Rs 10,000 crore in financial assistance for Bhutan’s Fifth Year Plan. This included collaborations in hydropower and skill development programmes.
Hydropower is essential for Bhutan as it accounts for 40 percent of its national revenue, with India being its largest importer. The Punatsangchhu II project is one of a series of joint ventures between India and Bhutan, which includes other hydroelectric power projects such as Tala, Chukha, Kurichhu and Mangdechhu. Together, the projects have a total capacity of over 2,000 megawatts, with Tala being the largest at 1,020 megawatts.
India and Bhutan’s current collaboration in hydropower is based on a 2006 bilateral agreement and a 2009 protocol, which aimed for a capacity of up to 10,000 megawatts by 2020. The Punatsangchhu II project was jointly commissioned by Bhutan PM Tobgay and India’s Ambassador, Sudhakar Dalela, in August this year.
India and Bhutan signed the Agreement on Cooperation in the Field of Hydroelectric Power (HEP) in July 2006, and in 2009 signed the Protocol to the 2006 Agreement of Cooperation in the Field of Hydroelectric Power, which aims to increase the scale of power projects from 5,000 MW to 10,000 MW by 2020. Apart from this, India and Bhutan have also collaborated on the 600-megawatt Kholongchhu project, a joint venture between India’s Tata Power and Bhutan’s Druk Green Power Corporation, which was initially assigned in 2020.
Beyond this, India and Bhutan also have active collaborations in border roads, trade and digital infrastructure. India has invested in the expansion of UPI payments in Bhutan, with Bhutan becoming the first country in the neighbourhood to adopt the BHIM app in 2021.
The collaboration extends to defence partnerships as well. In July, India’s Army Chief, Gen Upendra Dwivedi, made a four-day visit to Bhutan, where he discussed military coordination with Bhutan’s King Jigme Khesar Namgyel Wangchuck and the Royal Bhutan Army’s top brass.
(Edited by Sugita Katyal)
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