India to step up support for Bhutan’s five-year plan, work for expediting rail link project

Prime Minister Narendra Modi met with Bhutan King Jigme Khesar Namgyel Wangchuck here for a “warm and productive meeting,” with India deciding to increase its support for Bhutan’s upcoming 13th Five Year Plan, agreeing to an upward revision of the tariff of the Chhukha hydro-electric project, and working on an additional standby credit facility for the neighboring country.

The two countries also agreed on several other efforts, such as improving connectivity, with India seeking to expedite the proposed Kokrajhar-Gelephu train link project, which will be the first rail link between the two countries. India would endeavor to establish long-term, sustainable agreements for the export of agricultural commodities from Bhutan, as well as to broaden energy cooperation beyond hydropower projects.

In a tweet, Prime Minister Modi stated that India valued its close connection with Bhutan.
“Pleased to receive His Majesty the King of Bhutan, Jigme Khesar Namgyel Wangchuck. We had a warm and productive meeting. Deeply value our close friendship and the vision of successive Druk Gyalpos in guiding India-Bhutan relations to new heights,” PM Modi said.

Foreign Secretary Vinay Mohan Kwatra told reporters following a meeting between PM Modi and Bhutan King that the two nations are also looking into and discussing establishing the first Integrated Check Point (ICP) along the India-Bhutan border.

According to him, King Jigme Khesar Namgyel Wangchuck informed PM Modi of Bhutan’s important transformation and reform project, which is now underway.

The Prime Minister reaffirmed India’s continuing and unwavering support for Bhutan’s socioeconomic growth, based on the Royal Government’s goals and the transformation measures and reform process outlined in its vision.

The visit of Bhutan’s King, according to Kwatra, continues the long-standing history of regular high-level exchanges between the two countries.

He stated that the visit of Bhutan’s King afforded exceptional possibilities for the two countries to not only evaluate the full range of bilateral engagement but also create a roadmap for the next steps “that we would take to continue to develop multifaceted cooperation and relationship.”

“In terms of specific outcomes, which we would be following up on based on the discussions, it was agreed that India would step up its support to Bhutan’s upcoming 13th Five Year Plan. The specifics of the support, and its distribution into different projects that is something that is to be worked out between the two systems going forward. At Bhutan’s request, India would work to extend an additional standby credit facility. This would be over and above the two existing standby credit facilities operating between the two countries,” Kwatra said.

“We would work to shape long-term sustainable arrangements for the export of agricultural commodities from Bhutan. Also work to develop long-term bilateral arrangements for assured supply of critical commodities to Bhutan, which would include petroleum, fertilizers, and coal,” he added.

He stated that the ICP would be established at the India-Bhutan border near Jaigaon.

“We are also examining and considering setting up the first Integrated Check Post (ICP) along the India-Bhutan border, which would be somewhere near Jaigaon. The exact specific location of the ICP is yet to be determined, but the broad location point is known,” Kwatra said.

“We will also try and expedite the proposed Kokrajhar-Gelephu rail link project through Government of India support in consultation of course with the Bhutanese side. This in some ways will be historical because this would be the first-ever rail link between India and Bhutan. And naturally links up well to the rest of the regional connectivity infrastructure in South Asia,” he added.

According to the Foreign Secretary, India will favorably evaluate Bhutan’s proposal to sell power from the Basochhu hydropower project.

“In the field of hydro-power specifically, which has been the cornerstone of our economic relationship, we have agreed to an upward revision of the tariff of the Chhukha hydro-electric project. This is the oldest hydroelectric project in Bhutan and is of great significance. Two, in the space of hydro-power itself, we will consider positively Bhutan’s request to sell power from Basochhu hydro-electric project. This would be perhaps done through the energy exchange mechanism of the market. The details are yet to be worked out but the discussion is that it could be done through the market exchange mechanism,” he said.

Kwatra stated that India would give Bhutan’s proposal for power trade and access to financing for new and forthcoming hydropower projects favorable attention.

“The specifics of this would vary from project to project and would naturally be in sync with our CBT guidelines. And also expand our energy partnership to include non-hydro-renewables, particularly in the field of solar, and also maybe see how the core bilateral cooperation between our two countries in the field of e-mobility could be expanded,” he said.

“Besides the existing range of hydropower projects and also exploring the non-hydro-renewable space, we would also try and expedite the finalization of modalities for new hydroelectric projects, hydropower projects, including the Sankosh hydroelectric project,” he added.

According to the Foreign Secretary, the two leaders’ discussions covered the entire scope of India-Bhutan cooperation, as well as topics of mutual and national importance.

He stated that there were five major difficulties.

“First was on economic and development partnership. This covered many elements which included cooperation for Bhutan’s 13th Five Year Plan, which processes beginning from next year onwards. Support, including relevant financial support for the reform process in Bhutan. Support also for the institutional capacity building in Bhutan and project-based development partnership which is one of the key pillars of our development cooperation with Bhutan,” he said.

The Foreign Secretary stated that the second bucket of issues concerning trade, connectivity, and investment cooperation, included discussions on infrastructure connectivity, including integrated checkpoints, rail connectivity, air connectivity, digital connectivity, people-to-people links, and inland waterways.

The third connected factor concerned long-term and sustainable trade facilitation measures that India and Bhutan may implement, which would link to both economies’ economic growth and prosperity.

“Four, as part of new paradigms on energy cooperation, which would strengthen the existing frame and specifics of hydropower cooperation, but also carry forward our cooperation in this domain into non-hydro-renewable space.”

As part of the bilateral partnership, he stated that the final sub-segment relates to new areas such as space, startups, and collaboration in the field of STEM education.

“In this context, the recent launch of the India-Bhutan satellite, which was jointly developed by the space engineers from both countries was particularly appreciated,” he said.

Bhutan’s delegation includes the country’s Minister of Foreign Affairs and External Trade, as well as other senior Royal Government officials. According to Kwatra, India, and Bhutan have an excellent relationship marked by trust, goodwill, and mutual understanding.

“It’s a time-tested nature of our friendship which was reflected in the support that we provided to Bhutan during the COVID pandemic, including the Vaccine Maitri program, as also in the expansion of our partnership into some of the newly emerging areas and domains of economic cooperation, which includes digital domain, space, financial connectivity and increasing interoperability. Hydropower, again, strong element of our cooperation, which most recently has included handing over of the 720 megawatts Mangdechhu Hydroelectric Power Project to the Government of Bhutan,” he said.

On Monday, Bhutan’s King came to Delhi. On Monday, Foreign Affairs Minister S Jaishankar visited him and arranged a dinner that “included good conversations and interaction” with major CEOs of some Indian enterprises.

India has historically been Bhutan’s top trading partner and is the country’s largest source of investment. In November 2021, the Indian government formally announced the opening of seven new trade routes for Bhutan’s bilateral and transit trade with India, as well as new market access for the formal export of 12 agri-products from Bhutan to India, as well as various special exceptions and quotas for export.

Since the early 1960s, when Bhutan established its Five Year Plans, India has provided economic aid to Bhutan’s socioeconomic growth. For the 12th Five-Year Plan, India provided Rs 4500 crore to Bhutan for different multi-sectoral project-related assistance, small development initiatives, direct budgetary support, and so on.

The core of bilateral economic cooperation is mutually beneficial hydropower collaboration with Bhutan. Hydropower Cooperation offers India clean energy while also providing Bhutan with a reliable stream of money that has seen positive growth even during the pandemic.