Thursday, February 19, 2015

My New Year Wish

Here is wishing a Very Happy Lunar New Year to all my readers.

New year resolutions and wish lists are not my thing - resolutions get broken and by now I know that not every one may realize all that they wish. But there are always exceptions to the rule and this year I am making an exception: I am making a New Year Wish:

I WISH that the two governments of Bhutan and India would get together and take the only sensible decision they can - a decision to abandon the Punasangchu Hydropower Projects.

In his interview to the Kuensel of 21st September, 2013, Dasho Chhewang Rinzin of Druk Green Power Corporation has said that “indecision” in the case of Punasangchu Hydropower Project I should be avoided. I would like to go one step further and add that “correct decision” is even more important, than a hasty incorrect decision. And, in the face of what is increasingly becoming obvious that the geological surprises that are being thrown up in the Punasangchu I & II project areas are insurmountable, the only correct decision, in my view, is to cut our losses and scrap the projects entirely!

Is this a preposterous idea? Not if you consider that given all the “geological surprises” that are being “discovered” in the project areas, there is every likelihood that the Punasangchu Project I & II may eventually end up in the Bay of Bengal. What then? The gravity of the situation cannot escape any one - if one considers that the final cost of the two projects will be 3-4 times bigger than the country’s entire GDP. If these two projects fail, Bhutan can never recover from the ensuing debt!

Apparently, it is not just the Punasangchu I: Kuensel also reported in their April 16, 2014 issue that even Punasangchu II is faced with “geological surprises”! To add to all that, Kuensel on 5th February, 2015 reported that the projects are now running out of budget!

Even if the two governments do not agree to scrap the Punasangchu projects, they should accept that WAPCOS (consultants to all the hydropower projects in Bhutan) has proven to be anything but competent to undertake any further investigations in the case of these or future hydropower projects in Bhutan. Thus, while we must ensure that WAPCOS is barred from future involvement in our hydro power projects based on their terrible record so far, we should now look at engaging consultants from third countries to investigate if the geological make of the Punasangchu areas is suitable for large hydro power projects. Through the engagement of better-qualified consultants, we should ascertain whether it is wise to continue with the projects - or scrap it, to prevent further losses. If the government of India has the best interest of the projects at heart, they should agree to a second opinion from an independent consultant from a third country.

The Punasangchu Hydro Power Project I started with an initial cost estimate of Nu.35.00 billion, in 2006. By 2013, the cost had escalated to Nu.98.00 billion - almost three times the initial estimate.

The project was supposed to be completed by 2015. Latest date of project completion is now deferred to 2016. Regardless, if past records are anything to go by, we can be sure that the project will not be completed even by the end of 2018. And, in all likelihood, the cost will escalate to over Nu.120 billion.

In my view the project is no longer economically viable. No one can convince me that a project that has seen cost escalation almost four times its original projection - can still be considered feasible and profitable.

The famous cost+ pricing concept is no consolation at all. Have we considered the likelihood that the Indian state electricity boards that purchase our electricity may at some point turn around and tell us that the unit cost of our electricity is too high for them to purchase and redistribute to their consumers? This is most likely to happen - given that our cost of production has gone up so high. What then?

The Bhutanese people have long been mislead into believing that the hydropower projects will make all of us rich. So far, that has remained a pipedream. On the contrary, the Punasangchu I & II have already caused a number of our mining companies to go bankrupt with losses running into hundreds of millions. Another one is on the verge of heading the same way.

One simple question: If these hydropower projects are for the benefit of the people of Bhutan, how is it that even small ancillary services like quarrying for sand and stone for supply to the projects is being allowed to be monopolized by the Indian contractors? Why is this being allowed by the RGoB even while our laws are explicit that only Bhutanese people can engage in mining activities?

There is a need for Bhutan to take a serious look at where we are heading with our hydropower projects. If we don't, it will be the cause of our doom.

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