India's Modi extends a $450 million credit to Bhutan and expands energy relations

India and Bhutan strengthened their energy ties during Prime Minister Narendra modi's visit on Tuesday to the Himalayan country where he opened a hydroelectric project and extended a line of credit worth 40 billion rupees ($455 millions).

India's outreach towards Bhutan is seen as a move to increase its influence in the area and bring the country wedged in between China and India nearer to New Delhi, as Beijing intensifies its engagement with Bhutan to resolve the long-running dispute over its border and establish diplomatic relations.

Modi, who is in Bhutan for a two-day trip, spoke on Tuesday at a celebration of the father of Bhutanese King Jigme Namgyel.

He said that the partnership between India and Bhutan, which is based on trust and development, was a role model for all of Asia. "As our two countries grow rapidly, our partnership in energy accelerates this growth."

He inaugurated the 1,020-megawatt Punatsangchhu II hydroelectric power plant, funded by India, later that day. According to him, this project would increase Bhutan's capacity for hydroelectricity generation by almost 40%.

This is the fifth hydropower project that India has backed in the country. It generates a total power of almost 3,000 megawatts. According to the Indian government, India's line of credit was extended on Tuesday in order to fund energy projects.

Lok Nath Sharma said that the excess energy would be exported to India once it has been used for Bhutan's local demand of about 1,000 megawatts.

Bhutan's Druk Green Power Corporation and Indian private companies such as Tata Power, Adani Group, and Reliance Power signed agreements for the construction of hydroelectric projects.

(source: Reuters)