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In the second model, it compares cost of production and distribution of electricity to the tax revenue gained from industries. Here again, there is a benefit of Nu 152.8m over and above cost of production.

“Electricity is the only plentiful raw material, which can be used by our industries to compete with external competitors by value adding on the reasonably priced power,” said economic affairs minister Lyonpo Khandu Wangchuk.

Economic affairs secretary Dasho Sonam Tshering said, “We can’t rely on export of power alone. Right now, there’s a strong demand for electricity in the region but, if our buyers becomes self sufficient, then what do we do? So encouraging industries is necessary.”

He said the government would encourage industries that not only used electricity, but also locally available raw material. “Value addition on both electricity and local raw materials, like in the case of Penden and Dungsam cement plants, will be more sustainable in the long run, even if electricity prices change in the region,” said the secretary.

Norway also used its hydropower to initially bankroll its industrial development through power intensive metallurgy and fertilizers, according to Dasho Sonam Tshering.

But a challenge will be the low generation in winter, which the four reservoir projects like 4,060 MW Sunkosh, 900 MW Wangchu, 620 MW Amouchu and 180 MW Bunakha could address. “Still, industries mustn’t outgrow the lower winter supply,” said the secretary. Dasho Sonam Tshering also said that technically both domestic power users and industries were not getting any subsidy from Bhutan power corporation.

“This is because the government has a right to 15 percent of the power produced by the hydro projects as ‘power royalty’ at a cost price of 30 chhetrums and it’s from here where domestic consumers and industries are getting their electricity, after BPC adds its distribution costs.”

However, by 2011, the industrial subsidy will be phased out and become at par with export rates. The Bhutan chamber of commerce and industry has asked the government to consider extending this subsidy from 2011 to 2015.

The study was done after the National Assembly made a specific request to RAA and MoEA to find out the benefit or loss from power subsidy to industries.