The Green Kingdom That Imports Brown Power

The full numbers

Hydropower export earnings (verified by year, from RMA Annual Reports):

• 2020 (post-Mangdechhu commissioning): hydropower exports rose +106.3%
• 2022 (calendar year): Nu 22,663 million ≈ USD 273M (Nu 83/USD)
• 2023 (calendar year): Nu 17,351.6 million ≈ USD 208M — fell 23.4% on unfavourable hydrology and surging domestic consumption (+51.1%)
• FY 2022/23: Nu 20,590.8 million ≈ USD 247M (RMA AR 2023)
• FY 2024/25 outlook: RMA AR 2025 projects electricity-sector growth +19.8% in 2025 on PHPA-II commissioning (December 2024) — expected to lift the export number meaningfully, but PHPA-II’s first full-output year is 2026 The single best, sourced point-estimate is CY 2023 = Nu 17,351.6M = USD 208M. Earlier “USD 280–400M” range was a rule-of-thumb; the actual recent verified band is USD 200–275M (low-hydrology 2023 to high-hydrology 2022). PHPA-II should push the 2026 figure higher, but not above ~USD 350M at current tariffs. Fuel imports (verified): In 2025, Bhutan imported Nu 13.6 billion of diesel, Nu 5.2 billion of petrol, and Nu 18.8 billion of jet fuel — a total of Nu 37.6 billion (USD 442 million) in fossil fuel imports. In the first six months of FY 2026, the government has already spent Nu 2.5 billion subsidising domestic fuel prices to shield citizens from the global price spike.

Update May 2026 — the speculative-benchmark exposé: In the May 2026 parliamentary debate, MoICE confirmed publicly that Bhutan’s fuel pricing benchmarks are not crude oil but two speculative finished-product markets: diesel is priced off the Arab Gulf Gasoil index and petrol off 2 RON Singapore Gasoline. Domestic pricing parameters have not been revised since 2023. Components include 5% Excise + 5% GST + Nu 0.25/litre Import Permit Fee + dealer margins (Nu 2.5 petrol / Nu 1.6 diesel, vs ~Rs 4 / Rs 3 in India). The G2G MoU on petroleum supply was signed 21 March 2024 (valid until March 2027). The Indian Oil Marketing Companies (OMCs) have not responded to Bhutan’s efforts for four years to obtain a break-up of fuel prices. Per the PM in the National Assembly (22 May 2026), the government has spent Nu 1.45 billion in fuel subsidies to date. The petrol subsidy was lifted on 16 May 2026; the diesel subsidy continues at Nu 23+/litre. Government will procure 99 additional EVs + 45 electric buses as a direct policy response to fuel exposure.

The March-April 2026 diesel price escalation (5 government review cycles, per The Bhutanese 23 May 2026):

The peak shock — 17 April 2026: Actual diesel cost Nu 199.66/L. To maintain the consumer price at Nu 98.31, the government provided Nu 101.35/L subsidy — meaning the government was effectively paying more than the consumer for every litre of diesel sold in the country. Nepal Oil Corporation receives a more comprehensive cost break-up from IOCL than Bhutan does; Nepal’s new General Supply Agreement (GSA) negotiation (current expires 31 March 2027) will demand greater pricing transparency. Bhutan’s government has explicitly stated it will NOT seek a further internal price break-up, citing the “longstanding and trusted strategic partner” relationship with India.

The net ledger: USD 442M out, USD 208M in (2023 vs 2025). Bhutan ran a net energy deficit with India of roughly USD 234M in that comparison year — over 2× the hydropower revenue went back out as fuel. And it has now also become an electricity importer. Per BPC Power Data Book 2025, Bhutan imported 1,406 GWh from India in 2024 and 1,102 GWh in 2025 during lean-season months (Dec–Apr). At IEX clearing prices around INR 4–6/kWh, this is Nu 5–7 billion/year flowing back to India during winter — money that further offsets hydropower export earnings. The “electricity superpower” is, for one-third of the year, a net electricity importer from its only border country (see paradox #5 for the storage gap that drives this). Meanwhile, Bhutan’s installed hydropower capacity is roughly 3,500 MW. PHPA-II (1,020 MW) came online in December 2024. The country’s hydropower generation now exceeds 10,000 GWh per year — enough to power around 5 million households in India. Of this, about 75% is exported.

Imagine this

A farmer in Punakha drives to Thimphu in a Toyota pickup. The diesel in his tank was refined in Assam, hauled by truck through Phuentsholing, taxed by RGoB, and subsidised so he can afford to fill the tank. As he drives north along the Wangchhu, he passes underneath the high-voltage transmission lines that carry electricity from the dam he just walked past — to India. The fuel he is burning and the electricity he is selling come from the same neighbour, in opposite directions. And the fuel side is now bigger than the electricity side. In the most recent year of full data (CY 2023 hydro exports = Nu 17,352M; CY 2025 fuel imports = Nu 37,600M), the fuel bill was 2.2× larger than the electricity revenue. India ends the year with the cash; Bhutan ends it with the fumes — and an external deficit on top.

Where this came from

Bhutan built its hydropower sector since the 1980s as an export industry. Domestic consumption was never the design goal — domestic loads were small, the grid was built to carry power south to the border, and the economic logic was “earn rupees by selling power.” The fuel side grew separately: as living standards rose, vehicle ownership exploded (100,000+ registered vehicles for 777K people today), and almost all of those vehicles run on Indian-refined fossil fuel.

Nobody coordinated the two flows. They evolved as two unrelated stories. Today the bill arrives at the same border.

Why this matters now

The global fuel-price spike of 2025 forced Bhutan to choose between letting petrol hit Nu 174/litre (the unsubsidised rate) or spending Nu 2.5 billion in 6 months to cushion citizens. The country chose the cushion. But the math doesn’t sustain — at the current burn rate, the subsidy will cost Nu 5-7 billion per year if global prices stay elevated.

That’s roughly a quarter of the entire RMA balance sheet of capital and reserves. The fuel subsidy is now a structural drain on national finances, even though we are an electricity superpower.

What it should be

• A country with this much hydropower should run on its own electricity.
• Cars, kitchens, factories, heating — all electric.
• The fuel import bill should be 20% of what it is, covering only what genuinely needs liquid fuel (aviation, some construction equipment).
• The electrification gap is not an engineering problem; it’s a policy and investment sequencing problem.

How others do it

• Norway — similar hydro-rich economy. As of 2024, over 90% of new cars sold are EVs. Domestic transport is heavily electrified. Norway exports about 30 TWh of electricity annually and burns almost no oil domestically except for aviation and shipping. The Norwegian electricity grid is fully integrated with consumer behaviour.
• Iceland — uses 100% of its renewable electricity domestically. Geothermal heats every home. The aluminium industry was specifically attracted to Iceland to consume excess electricity, keeping the rent inside the country.
• Quebec, Canada — hydro-rich province where domestic electric heating is dominant, EV adoption is accelerating, and Hydro-Québec exports its surplus to New York at marginal prices.
• Paraguay — similar position to Bhutan (massive hydro exporter to Brazil + Argentina) but has gradually electrified domestic consumption. Still imports fuel, but at a fraction of its electricity export earnings.

The question we should be sitting with

If we built the world’s cleanest grid, why are we still subsidising petrol pumps? What would it take to spend Nu 2.5 billion on EV infrastructure instead of fuel subsidy, every year, for the next ten years?