India and Bhutan Deepen Energy Partnership with New Power Trade and Hydropower Agreements

India and Bhutan have taken another step in strengthening their long-standing energy partnership, with Union Power Minister Manohar Lal beginning a four-day visit to Bhutan and holding talks focused on clean energy, hydropower cooperation and sustainable development. The visit underlined the strategic importance of the India-Bhutan relationship, particularly in the power sector, where both sides continue to expand collaboration beyond traditional hydropower into newer areas of energy coordination.

During the visit, Manohar Lal met Bhutanese Prime Minister Tshering Tobgay, and the two sides reaffirmed their shared commitment to advancing cooperation in clean energy and sustainable development. In a separate meeting with Bhutan’s Energy and Natural Resources Minister, Lyonpo Gem Tshering, discussions centred on strengthening ongoing hydropower ties while also exploring future opportunities in renewable energy and regional electricity trade.

A major outcome of the visit was the signing of two important power-sector agreements. The first was the Tariff Protocol for the Punatsangchhu-II Hydroelectric Project, a key milestone in India-Bhutan hydropower cooperation. The second was the methodology for reactive energy accounting in reactive power exchange, a technical framework meant to improve grid stability, raise efficiency in cross-border electricity exchange and streamline bilateral power trade between the two countries.

The Punatsangchhu-II project, with a capacity of 1,020 MW, was jointly inaugurated on November 11, 2025, by Prime Minister Narendra Modi and Bhutan’s King Jigme Khesar Namgyel Wangchuck. According to the release, the project had already begun exporting surplus power to India from September 19, 2025, at a mutually agreed starting tariff, making the tariff protocol an important commercial and operational step in formalising the arrangement.

The two countries have also established an enhanced bilateral institutional framework mechanism for the power sector. This expanded mechanism is expected to enable more regular review and coordination of existing and future initiatives across areas such as non-hydro energy, cross-border transmission, project financing, capacity building and institutional partnerships. Together, these developments signal that India-Bhutan energy ties are moving toward a broader and more integrated model of regional cooperation.

Reference:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2250426&reg=3&lang=1