The Four Faces of One Transfer

A ngultrum and a rupee are one-to-one by statute since 1974. Every cross-border ngultrum receipt is automatically a rupee receipt. The current account balances in ngultrum; the dollars are never required to balance because the dollar leg is never explicitly recorded.

When the rupee depreciates against the dollar by 4–5% per year — as it has done, with brief reversals, every year since the Tala PPA was signed in 1985 — the Bhutanese ngultrum receipt is fully intact on the RMA balance sheet. The USD purchasing power it represents has fallen.

The peg works as designed: price stability, seamless cross-border trade. It also works as a structural blindfold. The country cannot see the four flows below because they do not produce ngultrum imbalances — they produce dollar imbalances, and the dollar is not measured.

The Common Monetary Area between South Africa, Lesotho, Eswatini, and Namibia includes a formula: the South African Reserve Bank compensates the smaller states annually for rand circulating in their economies. The formula is 2/3 × SA 10-year government stock yield × rand-in-circulation.

In FY 2023/24 that payment totalled R1.4 billion across the three states. It is not a gift. It is the standard compensation for foregoing one’s own currency.

A mid-scenario application of the CMA formula to Bhutan would be roughly Nu 855M / year — about USD 10M. Apply it retroactively across 52 years of unclaimed seigniorage and the cumulative undiscounted figure is USD 520M+.

This is a negotiation-table number. India does not owe what was never asked for. But the precedent in the CMA establishes that the smaller state in a currency-sharing arrangement has a claim — and that claim is currently zero only because Bhutan has not claimed.

Between December and April Bhutan’s rivers run low. BPC imports electricity from the Indian Energy Exchange at Nu 4–6/kWh. It then resells that imported power to the same HV1 industrials at Nu 1.60/kWh — the price set decades ago.

The cash loss — not opportunity cost, actual cash — is USD 33–44M per year.

This is the cleanest case of the four. Bhutan buys power expensive, sells it cheap, and the gap is paid out of the BPC balance sheet. It is a direct subsidy, paid in cash, four months of every year, from the Bhutanese consumer’s electricity bill to the HV1 industrial.

The structural fix is pumped-storage hydropower — generation that can be shifted between months. The first such project at scale is still on the planning shelf.

The first step toward fixing any of the four leaks is dual-ledger accounting — every material ngultrum flow with India should carry a parallel USD-equivalent line in RMA and Ministry of Finance reports.

Until that change, the question of should Bhutan claim seigniorage / renegotiate PPAs / raise HV1 tariffs / build pumped storage cannot be debated on the basis of evidence the country’s own financial-reporting system produces. The numbers do not appear in any internal report because the system was designed for a one-to-one peg that does not require dual measurement.

None of the five is novel. Each is the work of a specific ministry. The reason none has happened is that no internal report shows the cumulative cost of not doing them — because the books are still kept in ngultrum.