The new Prime Minister of Bhutan wants to reduce the nation's reliance on hydropower — and that could be a problem for India

• Earlier this month, Bhutan elected a new Prime Minister, Dr Lotay Tshering, after his DNT party won 30 out of 47 seats in the national assembly.
  
• The result was likely a disappointment for India as the DNT party has advocated a slowdown in new hydropower projects in order to keep a tight lid on the country’s increasing debts.
  
• As the largest buyer of Bhutanese hydropower, India has a significant degree of investments in the sector - with 80% of projects currently under construction being financed by Indian entities.
  

Earlier this month, Bhutan elected a new Prime Minister, Dr Lotay Tshering, in what was the mountain kingdom’s third democratic election to date. Tshering’s Druk Nyamrup Tshogpa (DNT) secured 30 out of 47 seats in the National Assembly, while the remaining seats went to Druk Phuensum Tshogpa (DPT).

Despite Narendra Modi’s extension of congratulations to Tshering, the result was a disappointment to India. The losing DPT party was in favour of adding a lot more hydropower capacity by building more plants with India’s cooperation.

This was in stark contrast to the DNT, which advocated a slowdown in new power projects in order to keep a tight lid on the country’s increasing debts and redirect some of the spending in the sector to healthcare and the alleviation of the unemployment situation. That the hydropower sector only employs 2% of Bhutan’s workforce doesn’t do it any favours in the DNT’s eyes either.

Given that its situated between India and China, Bhutan is strategically important to both countries, and like Nepal, is one of the small countries in the region where they’re jostling against each other for influence.

India has a significant degree of investments in Bhutan’s hydroelectricity sector - with 80% of projects currently under construction being financed by Indian entities.

While hydropower exports to India have been a prime growth driver for the Bhutanese economy, ties with India have come under strain in recent years owing to the debt that the mountain nation is taking on for these projects. As of May 2018, Bhutan’s hydropower debt was pegged at 133 billion ngultrums ($1.8 billion).

The hydropower sector is a crucial component of the country’s plan to achieve self-sufficiency in terms of energy. However, delays in projects and cost overruns have led authorities to question the feasibility of additional projects. The DNT has campaigned for the diversification of Bhutan’s energy sources, singling out biogas as an important investment.

If ties with Bhutan and India continue to deteriorate — a plausible outcome as the debate over hydropower reaches fever pitch — China will look to step in and fill the void. Bhutan is in need of development and financial support for its economy, and knows it can take advantage of the competition between India and China when it comes to securing a beneficial relationship with a large regional neighbour.