Strategy for gross national happiness (sgnh) Annexures to the Main Document

Particulars	Existing (Km2)	Future Requirement (Km2)
Rural Electrification	28.22	25.45
Transmission	18.16	23.10
Submergence	0.74	69.82
Total	47.12	118.37

11.2.4. However, even if changes in forest cover, due to accelerated hydropower development seem insignificant, the implication on area due to infrastructure development in the other sectors (as per SGNH) such as roads, urban development, etc. needs to be considered to provide an overall picture.

11.3.1. The transmission lines for power evacuation from Punatsangchhu II and Mangdechhu (and later - Chamkharchhu I and II) which is proposed through Jigme Singye Wangchuck National Park and Royal Manas National Park to India through Gelephu is very crucial for these projects. Hence RoWs and corridors for these lines should be incorporated within the zoning group.

11.4.1. Water is a crucial element for development in general and hydropower development in particular. Therefore, conservation, development, utilization and management of this important resource will have to be guided by national goals. Effective watershed management is imperative for water resources conservation and sustainable utilization. Due to rapid pace of socio-economic development, there is increased pressure on watersheds. Although harvesting of forest produce is based on sustainable management plans, increasing demand for timber, firewood and non wood forest produce is starting to have negative impacts on watersheds. Further, forestland encroachment and forest fires pose serious challenges for watershed conservation. Therefore, the management of watersheds as a reservoir of water and other natural resources must be addressed collectively in the interest of all resource users.

2. 
   Most of the hydropower projects today are mainly run-of-the-river schemes. As such they do not pose serious environmental and social threats as in other countries. However, the cumulative impacts of multiple projects could be a concern.
   
3. 
   During construction phase of the projects, it is a requirement, as per law, to have an environment management plan (including environment mitigation) drawn up for the project. Drawing from the experiences from the neighbouring countries, a budget of 0.5 – 1% of the total project should be earmarked for environment management and mitigation. This will take care of environmental concerns during the construction stage.
   
4. 
   The above proposal will only take care of environmental concerns during the construction stage. Therefore, to ensure steady supply and flow of water, it is important that efforts on watershed conservation are pursued on a continuous basis. This will call for plough-back of funds for the above purpose. One way of doing this could be through channeling funds for conservation directly. Alternatively, a small-scale or a medium-scale HP plant could be dedicated to conservation of the watersheds and catchments.
   

11.5. Water Resources Management and Coordination

11.5.1. Water allocation is not an issue as of now. However, in the longer term, there could be potential problem in this area. With rapid socio-economic development and population increase, the need for water in other sectors will rise. This may pose potential conflicts in the use of the resource. In addition, the value of water is often misunderstood as a free resource. This may not hold true, especially when IPPs and private sector participation becomes more prominent in the future. Water resource should be priced (in an equitable and affordable manner) to make the users understand the value of the resource. A surcharge could be imposed on the project developers/water users for the use of the resource.

11.5.2. The institutional capacity building efforts in the energy sector should also be accompanied by subsequent capacity building in other sectors – such as Environment, Forestry, Immigration, Customs, etc. Since 2002, the NEC has been appointed as the Focal Agency for water resources coordination and regulation. However, additional resources and manpower have not been allocated to pursue the mandates in the water resources sector.

11.5.3. The need for an integrated approach is crucial for effective management of water resources for fulfilling our diverse national objectives. An enabling environment has to be created for active participation of all stakeholders and for an integrated water resources management. A common framework for water resources assessment is crucial for informed decision-making. The inventory of water resources both in terms of quality and quantity needs to be developed. The development of the HP sector has to take into consideration the water needs and use of other sectors.

11.5.4. There is a need for coordinated efforts on all water resources development in the country. It is also pertinent that an institutional base be created to ensure an integrated approach in the management of water resources and its sustainable utilization. Efforts under accelerated hydropower development must consider the needs and development of the other related sectors. While hydropower development is crucial for Bhutan’s economic development, it should not compromise the needs and requirement of other sectors.

11.5.5. With accelerated development of HP sector, the role of NEC will increase substantially (Clearance procedures, monitoring, strategic environment assessment, coordination, etc). In addition and as the apex body on water resources coordination and regulation, the NEC is expected to execute the following functions:

• 
  Planning of water resources at national level,
  
• 
  Formulation of water policy and required legislation,
  
• 
  Monitoring and evaluation,
  
• 
  Setting water quality standards and guidelines,
  
• 
  International water co-operation,
  
• 
  Licensing and regulating activities,
  
• 
  Report to the Government/National Assembly
  

6. 
   Further, in collaboration with relevant sectors, the NEC is expected to coordinate:
   

• 
  Research, development planning and support,
  
• 
  Capacity building and technical backstopping,
  
• 
  Coordination of emergency preparedness,
  
• 
  Data collection and distribution,
  
• 
  Flood and disaster management related to water resources
  

6. 
   With accelerated development of HP Sector, the role of NEC in each of the above areas will increase substantially. This will call for additional resources (financial and human resources) to execute the above functions in an effective manner.
   

5. 
   Glacial Lake Outburst Floods (GLOF)
   

11.6.2. There are various interventions being pursued through GEF in the country. These are:

• 
  Lowering of Thorthomi lake/early warning system in Punatsangchhu valley and hazard zonation of Chamkharchhu. The total amount of the project is US$ 3.5m and PDF-B has been approved for project. The NEC, as the focal agency on United Nations Framework Convention on Climate Change (UNFCCC) is the executing agency and the DGM is the implementing agency.
  
• 
  Hazard zonation of Punatsangchhu (downstream of Khuruthang until Kalikhola): The total project amount is 84,000 Euros funded through the Netherlands Climate Assistance Programme (NCAP). The NEC, as the focal agency on UNFCCC is the executing agency and the DGM is the implementing agency.
  

3. 
   Future development in the HP sector may be pursued keeping in mind the above programmes and also future programmes that might come in as a result of the UNFCCC process.
   

11. 
    Integration with the 10^th FYP
    

1. 
   To achieve the above targets in the sector, a lot of activities will have to be initiated within the 10^th FYP. During the 10^th FYP, the energy sector would like to focus on accelerated hydropower development and institutional capacity building of the sector. This includes the development of major hydropower projects of Nu. 179.00 billion (outside of the normal planned works) and total planned works of Nu. 6.30 billion.
   
2. 
   The 10^th FYP projects mainly include the interconnection transmission lines for industrial development in Bhutan, rural electrification of 25,000 households, hydropower development DPRs and feasibility studies, Institutional Strengthening and Capacity Building, Renewable Energy, and others for total plan outlay of Nu.6,308 million.
   

Table 12.1 Summary of the 10 FYP works.

1. 
   The bulk of the above planned works are for the power transmission works (Nu. 1,340 million), the Rural Electrification Programme (Nu. 3,162 million), and Development of Renewable Energy (Nu. 343 million). Fund for these projects have already been identified under GoI, JBIC loans, and RGoB budget respectively. Budget for the power transmission network is being proposed as part of the GoI assistance for the upcoming industrial estate. Funds for the RE is being negotiated with the JBIC to be directly passed onto the BPC who will be implementing the RE projects.
   

3. 
   For accelerated hydro development, the direct cost is for the activities identified for the preparation of the project feasibility studies and DPRs (Nu. 792 million). Since the DPR and reports are very crucial for accelerating the development of the hydropower projects, fund requirement for these activities shall be sourced from internal resources such as the hydropower retained earnings (20%) in the event the budgetary support for the amount is not available.
   
4. 
   The budget required for strengthening of hydro-meteorological services is Nu. 146.00 million mainly for the collection of data and hydrological studies important for the design of the hydropower development. This amount is required for strengthening and establishment of additional gauge stations for the new hydropower sites where readings are either not available or need to be validated.
   
5. 
   The budget for electricity regulation (Nu. 200 million) and for private sector participation (Nu. 72 million) are mainly for strengthening of the BEA, developing the regulations, preparation of the tender documents and policies for private sector participation. Since IPP is being taken up on priority basis, bulk of the budget shall initially be used to acquire short term institutional requirement like hiring of the professional services, etc. Fund for this shall be sourced either through NORAD institutional cooperation and other donor agencies or collected through the levy of licensing fees from the generating plants as per the provision of the Electricity Act by the BEA.
   
6. 
   The development of the major hydropower projects under the accelerated program has been kept outside the plan works as used to be done in the past, especially for those projects identified under the bilateral financing:
   

Table 12.2: Summary of Major Hydropower Projects Budget outside Plan works.

#.	Description of Projects/ Activities	Budget (Nu. Millions)
1	Construction of Punatsangchhu I HEP (95 % of fund disbursement)	44,905.00
2	Construction of Sunkosh HEP (34 % of fund disbursement)	58,991.00
	Bilateral	103,896
3	Construction of Dagachhu CDM HEP (100 % of fund disbursement)	7,387.00
	RGoB	7,387.00
4	Construction of Mangdechhu HEP (50 % of fund disbursement)	16,800.00
5	Construction of Punatsangchhu II HEP (50 % of fund disbursement)	24,800.00
	Joint Venture	41,600.00
6	Construction of Kholongchhu HEP (35 % of fund disbursement)	8,505.00
7	Construction of Nikachhu HEP (30 % of fund disbursement)	3,120.00
8	Construction of Chamkharchhu I HEP (23 % of fund disbursement)	7,705.00
9	Construction of Rotpashong HEP (35 % of fund disbursement)	7,000.00
	IPP	26,330.00
	Total:	179,213.00

12. 
    Recommendations
    
    1. 
       The energy sector shall target an additional capacity of 10,000 MW by the year 2028.
       

2. 
   Facilitate and enable the sector to achieve the above target through the following action plans.
   
   1. 
      Adopt the draft Energy Policy, Hydropower Policy & IPP Guidelines.
      
   2. 
      Amend FDI policy to include 100% participation in power sector with investment in Rupees also.
      
   3. 
      Establish Druk Green Power Corporation (DGPC).
      
   4. 
      Strengthen and grant autonomy to BEA.
      

3. 
   Initiate IPP projects.
   

4. 
   Initiate and establish Joint Working Group as per Umbrella Agreement.
   
   1. 
      Start DPR studies for the listed projects by July 2008. Update studies for Sunkosh.
      

5. 
   Accommodate the change in strategy for urban growth centres and cluster growths (road networks and other infrastructure) in the RE Master Plan, in consultation with other zoning group and NSP-2008
   

6. 
   Remove subsidy for industrial power tariff.
   

7. 
   Explore the following financing options:
   
   1. 
      Initiate for more bilateral projects, including Sunkosh.
      
   2. 
      Promote Joint Venture partnership between Indian PSUs and RGoB.
      
   3. 
      Attract and promote private sector investment through IPP.
      

8. 
   Create the following enabling environment for investment:
   
   1. 
      When DPR is ready, all clearances for project DPRs are ready.
      
   2. 
      Government to do all land acquisitions and endorse the draft RoW Regulations within the proposed National Spatial Policy/Act.
      
   3. 
      Adopt suggested definition of forest cover and identify hydropower sites and transmission corridors as per the PSMP (2004) and the document on Accelerated Hydropower Development in the zoning strategy.
      
   4. 
      0.5% to 1% of project development costs should be dedicated to watershed conservation and management during project construction.
      

9. 
   Enact the following Legislations/Regulations:
   

• 
  Contract Law
  
• 
  Arbitration Law
  
• 
  IPP Law
  
• 
  Amend Electricity Act to transfer some of the powers vested in the Minister to BEA
  
• 
  RoW Regulations
  

10. 
    Implement following strategic project infrastructures:
    
    1. 
       Upgrade existing and construct new highways and bridges line with the hydro strategy.
       
    2. 
       Encourage private sector participation for construction colony developments.
       
    3. 
       Align power network (construction power) and telecommunication networks in line with the hydro sites.
       
    4. 
       Facilitate supply of local materials like sand and stones to the project sites. DGM to identify quarries and test material quality in advance.
       
    5. 
       Require transmission licensee (BPC) to invest in the transmission network both for domestic as well as generating plants including IPP through self financing and joint ventures.
       
    6. 
       Allow evacuation of power from Indian projects in Gongri head waters in Arunachal Pradesh to load centres in India using Bhutan’s transmission lines.
       

11. 
    Re-invest 20% (from June 2007) of profit after tax of the fully government-owned hydropower plants to be used for preparation of DPRs and equity injection in new power plants.
    

12. 
    Expedite clearances and permits through inter-sectoral coordination amongst agencies like NEC, DoF, DGM, DoR, DRC, RSTA and Dept. of Immigration.