Punatsangchhu-II Hydroelectric Project

Punatsangchhu-II Hydroelectric Project: A Landmark in India-Bhutan Energy Partnership

The Punatsangchhu-II Hydroelectric Project represents a major milestone in the dynamic energy partnership between India and Bhutan. This 1,020 MW run-of-the-river hydroelectric facility, recently inaugurated by Prime Minister Narendra Modi and Bhutan’s King Jigme Khesar Namgyel Wangchuck on November 11, 2025, showcases the deep commitment of both nations to clean energy development and regional cooperation.​

Project Overview and Location

Situated on the Punatsangchhu River (also known as the Sankosh River) in the Wangdue Phodrang district of Western Bhutan, the Punatsangchhu-II project operates as a run-of-the-river facility, which minimizes environmental disruption compared to traditional reservoir-based hydropower plants. The project comprises six vertical Francis turbines, each with a capacity of 170 MW, operating at a rated head of 241 meters—the highest for any Francis-type turbine in Bhutan.​

Construction and Development

Development of the Punatsangchhu-II project began in 2010 and took approximately 15 years to complete. The project faced significant challenges during construction, including geological issues such as sinkholes and unstable foundations in the sensitive Himalayan terrain. However, through advanced engineering solutions developed collaboratively by Indian and Bhutanese teams, these obstacles were successfully overcome. The lead developers included India’s National Hydroelectric Power Corporation (NHPC) and Bhutan’s Druk Green Power Corporation (DGPC), with support from engineering consultancies and technical experts.​

The project was executed sequentially, with Unit 1 and Unit 2 commissioned in December 2024, followed by Units 3, 4, and 5 between January and July 2025. The final unit, Unit 6 (170 MW), was synchronized with Bhutan’s national power grid on August 27, 2025, completing the project ahead of its official inauguration.​

Financing and Cost

Approved at a total cost of Rs 37,778 million, the Punatsangchhu-II project was entirely funded by the Government of India, with 30 percent provided as a grant and the remaining 70 percent as a concessional loan at an annual interest rate of 10 percent, repayable in 30 equated semi-annual installments commencing one year after the mean date of operation. This financing structure underscores India’s commitment to supporting Bhutan’s energy infrastructure development.​

Impact on Power Generation

The completion of Punatsangchhu-II represents a transformative development for Bhutan’s energy sector. The project increases Bhutan’s total installed power generation capacity by approximately 40 percent, bringing it from about 2,500 MW to over 3,500 MW. With all six units operational, the project is expected to generate approximately 4,357 gigawatt-hours (GWh) of electricity annually.​

Since commissioning, the project has already supplied more than 1.3 billion units of electricity to Bhutan’s national grid, generating around Nu 4.9 billion in revenue. The electricity generated serves Bhutan’s domestic demand, with surplus power exported to India under existing bilateral agreements.​

Economic and Strategic Significance

The Punatsangchhu-II project holds profound economic importance for Bhutan. As a clean energy facility, it aligns with both nations’ goals of climate resilience and sustainable development. India’s Ambassador to Bhutan noted that Bhutan possesses an estimated hydropower potential of 35,000 MW, making hydropower a cornerstone of the nation’s economic development strategy.​

The project demonstrates excellent synergy between the two countries, particularly given that Bhutan’s glacial rivers experience peak discharge during summer months—precisely when India experiences high electricity demand. This natural alignment strengthens the bilateral energy partnership and contributes to India’s growing renewable energy needs.​

Future Outlook

Following the successful completion of Punatsangchhu-II, both countries are intensifying their collaboration. During the November 2025 inauguration, India announced an additional concessional line of credit of INR 40 billion to fund future energy projects in Bhutan. Both leaders also welcomed the resumption of work on the 1,200 MW Punatsangchhu-I hydroelectric project, which will become the largest hydroelectric project jointly developed by the two nations once completed.​

The Punatsangchhu-II Hydroelectric Project exemplifies the power of regional cooperation, blending economic development with environmental sustainability while strengthening the enduring partnership between India and Bhutanan.

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