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Upcoming Hydropower Plant Already Helping Families in Bhutan

Project Result / Case Study | 31 January 2014

Due to become operational in mid 2014, the Dagachhu Hydropower Plant in southwestern Bhutan is already boosting incomes and providing opportunities for communities in the area.

The Dagachhu Hydropower Plant isn't up and running just yet but ongoing work at the 126-megawatt plant on the Dagachhu River in southwestern Bhutan is already boosting incomes and providing opportunities for communities in the area. And once it is fully operational in mid 2014, the revenue from the electricity sales should benefit the whole country.

In Balaygang Village, 17 kilometers down a winding road from the dam project, 51-year-old Sangay Dema runs a small general store selling noodles, canned goods, and cold drinks. These days, business in her wooden, corrugated iron-roofed shop is better than it has ever been thanks to passing trade from truck drivers and the many workers at the plant. She says her fellow villagers also drop by more often than they used to because they too are earning more from selling foodstuffs to workers, leasing rooms in their homes, or from construction, driving and other jobs at the plant.

Sangay reckons she now earns about Nu1,500-2,000 ($24-$32) a day, far more than before work began on the plant in 2008.

"Well-being and happiness depends on how your daily work goes. Life is better now," she said.

She forecasts that the future for her four children - two boys and two girls all now in their 20s and all educated - and grandchildren will be much different to hers. Sangay herself didn't go to school and learned to read and write in a monastery, but she is happy that increased sales means she now has a little extra money to expand the product range in her store and to spend on small luxuries like a fridge and a television. "And I live in a bigger house now than I used to," she said.

In Bhutan, around 12% of the population still live below the national poverty line of Nu1,704.84 ($27.50) per month. Dagana District where the plant is located is among the poorest areas in Bhutan.

Connecting communities

In order to bring equipment and workers from Thimphu, India and even from Europe to build the $240 million hydropower plant, the owners, Dagachhu Hydro Power Corporation (DHPC), improved and extended the bumpy path from the hydropower plant through Balaygang Village and up to the main road that connects to the Bhutan capital and beyond.

"Before this project, this was one of the remotest districts in Bhutan. Now that is changing and people attribute it to the project," said Thinley Dorji, Chief Executive Officer of DHPC who lives at the plant with his wife, son and two nephews.

For Sangay, it means she can now travel to Thimphu to visit her children much more easily and frequently than before.

For her neighbors, living on the steep mountainsides and growing crops or rearing animals, the road has improved access to markets. Now, it takes a truck only around 7 hours to get to Thimphu, instead of the two days it used to take over muddy roads which often washed out during the rainy season.

"Some farmers now take their vegetables to market," said 39-year old local farmer, Rinchen Norbu. Rinchen resettled in the village in 2004 from Lhuentse District with his wife and three daughters as part of a government effort to provide landless families with farmland.

He now grows rice, vegetables, and maize on his five acres of fields, which he sells locally along with oranges from his small orchard, making around Nu15,000 ($242) per month. This income is enough to keep his 16-year-old daughter in boarding school in the city of Paro, around 8 hours away.

Ripple effects

Greater prosperity for individuals like Sangay benefits the wider community too.

With a little extra money in their pockets, villagers no longer struggle to pay household and land taxes. "Now, they can pay their land tax, which is kept locally, and this can be used for local improvements," said Tandin, a clerk with the local government, who only uses one name.

"Hydropower will allow us to develop our economy and to strengthen our economy."

- Tshering Tobgay, Prime Minister of Bhutan

In the longer run, the plant, built with $119 million in loans from the Asian Development Bank, will bring in key revenue for the central government. From June next year, the plant will export around 500 million units of electrical energy annually through a long-term sales agreement with India's Tata Power Trading Company, generating revenue of around Nu15 billion, or over $250 million, in income over the next 25 years for the government in the form of taxes, dividends, and energy royalties.

"Hydropower will allow us to develop our economy and to strengthen our economy," said Bhutan's new Prime Minister, Tshering Tobgay.

Hydropower is one of the main drivers of Bhutan's Nu93 billion ($1.5 billion) economy, accounting for a fifth of gross domestic product in 2012.

Opening up the economy

The country has four large plants now operating alongside around 20 smaller-sized ones. Including the Dagachhu plant, four large hydropower plants are under construction totaling over 3,000 megawatts. There are plans for developing many more as part of the Government of Bhutan's efforts to provide electricity to all its 720,000 citizens by the end of the current fiscal year and to provide neighboring India with 10,000 megawatts of power by 2020.

Until now, all plants have been developed by the Bhutanese government in close cooperation with the Government of India, or with multilateral sovereign support.

The Dagachhu plant, by contrast, is being developed in conjunction with a private sector partner. Tata Power, owns 26% of the project company, Dagachhu Hydro Power Corporation, alongside Bhutan's national utility, Druk Green Power Corporation which owns 59%. The National Pension and Provident Fund of Bhutan has the balance 15% shareholding.

The plant is expected to become the model for further private investment.

"This first public-private partnership in Bhutan's booming hydropower sector brought critical investment and expertise to Bhutan," said the Kaoru Ogino, Principal Energy Specialist at ADB. "ADB is already working to help Bhutan develop a second public-private hydropower plant on the Nikachhu River and it's likely that more public-private partnerships will be looking at this and other investments in the hydro sector."