Thursday, July 16, 2015

Self-liquidating Geological Surprises

On 14th July, 2015, our national broadcaster - BBS makes the following extremely alarming announcement:

Bhutan heading towards a debt crisis?

The news report carries the following graphics:

Quoting some source based in the UK, the BBS report makes one thing clear - that our external debt is more than our entire GDP and that we are listed among 14 other countries headed towards a debt crisis. We share the dais with the likes of Greece!

But Parliamentarian Karma Tenzin, a member of the Public Accounts Committee of the NA is unimpressed with the report. He is confident that Bhutan would not enter a debt crisis. He told the BBS that:

“……….. most of the government borrowings were concentrated on hydropower, which are self-liquidating.

Bhutan is blessed that Karma Tenzin is a Parliamentarian and not an accountant.

The self-liquidating hydropower projects such as Punasangchhu I & II are suffused with “geological surprises” after “geological surprises”.

The project’s original cost estimate of Rs.35.00 billion has seen close to 300% escalation - to somewhere in the region of Rs.97.00 billion, currently. It is my belief that the project, if it ever gets completed, will cost somewhere in the region of Rs.120.00 billion - nearly 400% cost increase. Strangely, the government is quite content on blaming the delay and cost escalation to - “geological surprises”. The project authority does one better - it says the cost escalation is attributed to “inflation”. Inflation of 300 - 400%??? Preposterous!!!!

Progress on the dam of Punasangchhu I has been AT A STANDSTILL EXACTLY TWO YEARS. In the meantime, interest on the borrowed debt of now close to Rs.97.00 billion Rupees is mounting. Irrespective of all that, no decision is yet made as to what happens to the resumption of the dam construction.

And now listen to this: one knowledgeable person in affairs of hydropower projects tells me: “it is simply impossible - the dam at its current location CANNOT BE BUILT. If they do, both the Punasangchhu I & II are doomed!”.

Cost escalation is not unique to Punasangchhu I & II - all our other projects suffer from it - by the billions. Inflation is blamed for it. Tell me, when estimates are prepared, isn’t inflation factored in? Isn’t that a standard norm - to provide for inflation - particularly where construction of long durations are involved?

This is the state of our self-liquidating hydropower projects. But obviously this is no reason for alarm - we can always pray to God for a miracle!

Koencho Sum Khenno!

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