India’s contribution to Bhutan’s socio-economic development began in 1961 with India funding Bhutan’s entire first (1961-1966) and second (1967-1972) Five Year Plans. India is Bhutan’s largest development partner and the highest recipient of India’s overseas aid. Bhutan received from India a total of $ 4.7 billion in grants between 2000 and 2017.


  • The hydropower projects are an example of win-win cooperation between India and Bhutan. These projects while generating export revenue for Bhutan are also cementing the economic integration between the two sides.
  • As of now, the estimated target capacity of hydropower projects to be developed jointly by the two countries by 2020 is 10,000 MW.
  • Cooperation in the hydro-power sector, begun in 1988, with the commissioning of the first project, the 336 MW Chukha hydropower plant. It had proved to be the backbone of the Bhutanese economy and had contributed more than 35 percent of Bhutan’s revenues
  • During the period 1998 to 2007, two projects were commissioned. The 1,020 MW Tala Project and 60 MW Kuricchu plant both built by India.
  • In April 2014, the two countries signed an Inter-governmental Agreement on four hydropower projects totaling a capacity of 2120 MW.
  • The four projects to be taken up under the joint venture model were
      • 600 MW Kholongchu,
      • 180 MW Bunakha,
      • 570 MW Wangchhu and
      • 770 MW Chamkharchhu-I.
  • India has so far constructed four Hydroelectric Projects in Bhutan including the 60 MW Kurichhu HEP; 1020 MW Tala HEP; the 336 MW Chukha HEP; and the 720 MW Mangdechhu HEP.
  • Also, three Hydroelectric projects which are under construction include the 1200 MW Punatsangchhu-I, the 1020 MW Punatsangchhu-II and the 600 MW Kholongchhu.
  • Prime Minister Narendra Modi’s maiden visit to Bhutan as the Indian Prime Minister in June 2014 laid the foundation stone for the 600 MW Kholongchu project.
  • Generation capacity by India in Bhutan has crossed 2000 MW.
  • The Mangdechhu Hydroelectric project is a success story of India Bhutan cooperation in the Hydropower sector has recently won the prestigious Brunel Medal-2020.

80% of the Country’s external public debt stems from loans for hydropower projects, mostly financed by India. New Delhi is also the largest buyer of Bhutanese hydropower. The sector makes up 14% of GDP in Bhutan and 27% of the Government’s revenue. The Government now wants to diversify the economy and reduce its reliance on hydroelectricity.



  • Moreover, despite the doubling of capacity for development by the two countries, the decade following democratic transition saw no new addition in installed hydropower capacity harnessed.
  • The hydro installed capacity in Bhutan with Indian technical and financial assistance up to 31stMarch 2018 was 1416 MW from 3 projects commissioned before change in regime in Bhutan.

UK based Institute of Civil Engineers has conferred the medal which is in recognition of achievement in civil engineering as well as acknowledgement of service and excellence.

Inaugurated in August 2019, the 720MW project is a success story of India Bhutan cooperation in the Hydropower sector.

The Indo-Bhutan joint project which is merely one year old has earned more revenue than the projected target.

At the time of construction, the focus was also on the community development and social and environment based projects were started to help the local community.

These included the construction of a Basic Health Unit, aforestation activity, infrastructure for school, etc in the Trongsa District of Bhutan.

This is a river project and is located in the Trongsa district of Bhutan, the construction was completed in a record time of seven years.

India has funded through a 70 per cent loan and a 30 per cent grant to Bhutan.

Constituted by the Indian and the Bhutanese Governments, this project has been developed by the Mangdechhu Hydroelectric Project Authority.

The electricity generated by the Project after meeting the energy requirements of Bhutan, the surplus is exported to India.

  • Kholongchu is the first Joint Venture model project between Bhutan and India
  • The only Hydroelectric project in the easternmost tip of Bhutan,
  • The Concessional Agreement for this project was signed on 29 July 2020.
  • India has committed Rs. 4500 crore for the implementation of development projects and 400 crores for the transitional Trade Support Facility during Bhutan’s 12th Five Year Plan (2018 – 2023).
  • 77 large and intermediate projects and 524 Small Development Projects (SDPs)/ High Impact Community Development Projects (HICDPs) are at various stages of implementation under the 12th Five Year Plan of Bhutan.
  • India’s role in the socio-economic transformation of Bhutan and also highlighted the impact of HICDPs at the grassroots level.
  • The annual development cooperation talks are an important bilateral mechanism to review the entire gamut of India’s development partnership with Bhutan.