The Tariff Born Before the Dam

The full numbers

Long-term Power Purchase Agreements with India set wholesale rates between INR 2.0 and INR 3.5 per kWh, depending on project vintage and contract negotiation. Bhutanese domestic retail tariffs, set by Bhutan Power Corporation, run from BTN 1.50/kWh for the lowest residential tier up to BTN 4-5/kWh for higher residential tiers; HV industrial customers pay around BTN 1.60/kWh (ERA 2022 revision). The average Bhutanese household pays more per kWh than the bulk Indian buyer. Winter dry season produces another inversion: when Bhutan’s hydropower generation drops to a fraction of summer levels (~30%), the country has to import electricity from India — at INR 4-6/kWh, on average a 50-100% markup over the export rate. Bhutanese households experience this as winter blackouts and rationing.

Imagine this

A shopkeeper in Phuentsholing turns on the lights of her general store at 6 AM. The electricity flowing through her wires was generated at PHPA-II, 100 km north. Two of her neighbours in Jaigaon (just across the border in India) are also opening their shops with the same electricity, coming through the same grid. The Indian shopkeeper pays less per kWh than she does, because the same electricity is sold to India in bulk at INR 2-3 and to her in retail at BTN 3-5. The kWh that powers the same overhead lights has two different prices depending on which side of the border the consumer stands.

Where this came from

When the hydropower sector was set up as an export industry, the wholesale rate to India was negotiated on a project-by-project basis to make the financing work. The Indian Exim Bank lent capital, the Indian utility committed to take-off at a fixed rate, and the rate was set to repay the loan within the project’s amortisation period.

Domestic tariffs, meanwhile, were set by BPC to recover operating costs and fund domestic distribution investment. The two pricing systems were never reconciled. They evolved on different logics.

Why this matters now

As domestic electricity demand grows (industrial HV consumers accounted for 88.47% of domestic consumption in 2024 per [BPC AR 2024][^bpc-ar-2024-domestic]), the difference between export rate and domestic rate becomes more visible. Bhutanese consumers, especially in higher residential tiers, increasingly ask: “Why am I subsidising the Indian buyer of our own resource?” This is a political question with a structural answer — and the structure is unlikely to change without a complete renegotiation of legacy PPAs.

What it should be

• Bhutanese should pay the lowest tariff in South Asia, given we generate the cleanest abundance in the region.
• Domestic tariffs should be a fraction of export tariffs — or at minimum, parity.
• Resource-rich countries almost universally subsidise their own citizens.

How others do it

• Quebec, Canada — Hydro-Québec sells electricity to citizens at CAD 0.07/kWh while exporting to New York at higher rates. Domestic discount is explicit policy.
• Norway — among Europe’s cheapest domestic electricity. Hydropower rents flow into citizen tariffs first, exports second.
• Saudi Arabia, UAE, Russia, Venezuela — heavily subsidised domestic energy prices vs export prices. In some cases citizens pay 1/5 of the export rate.
• Bolivia — natural gas exports priced higher than domestic, with the rent subsidising household cooking gas.

The question we should be sitting with

Whose welfare is the national grid actually optimising for? If you had to redesign the tariff structure tomorrow, who would you protect first — the Indian utility, the Bhutanese household, or the large industrial buyer?