MoU between India and Bhutan

MoU between India and Bhutan

GS-2: India's relations with Neighboring countries

Important for Prelims:

Important facts of Bhutan, Indian Union Cabinet, Power Projects.

Important for Mains:

India-Bhutan relations, challenges, Way forward, Conclusion.

18/03/2024

Why in news:

Recently, the Union Cabinet gave its approval to the signing of MoU between the Government of India and the Royal Government of Bhutan.

Key points related to the MoU:

  • This MoU pertains to normal supply of petroleum, oils, lubricants (POL) and related products from India to Bhutan.
  • It aims to benefit India and its citizens with improved economic and commercial relations with Bhutan, especially in the field of hydrocarbons, irrespective of any gender, class or income bias.

Significance of MoU:

  • This MoU will promote bilateral trade in the hydrocarbon sector.
  • It Will ensure secure and long-term supply of petroleum products to Bhutan.
  • This MoU will encourage India's export of goods to Bhutan and will also strengthen self-reliant India.
  • This MoU will be strategically appropriate as an energy bridge in India's Neighborhood First policy.

India-Bhutan relations: An overview

  • Diplomatic relations between India and Bhutan were established in 1968 with the establishment of a Special Office of India in Thimphu.
  • Earlier our relations with Bhutan were looked after by our Political Officer in Sikkim.
  • The basic framework of India-Bhutan bilateral relations was the Treaty of Friendship and Cooperation signed between the two countries in 1949, which was amended in February 2007.
  • The India-Bhutan Friendship Treaty not only reflects the contemporary nature of our relations but also lays the foundation for their future development in the 21st century.

Major areas of cooperation

Hydropower cooperation

  • Hydropower projects in Bhutan are an example of win-win cooperation, providing India with a reliable source of affordable and clean electricity, generating export revenues for Bhutan and strengthening our economic integration.
  • Ongoing cooperation between India and Bhutan in the hydropower sector is covered under the 2006 Agreement on Cooperation in Hydropower and the Protocol to the 2006 Agreement signed in March, 2009.
  • Till date, Government of India has constructed three hydroelectric projects (HEPs) totaling 1416 MW (336 MW Chukha HEP, 60 MW Kurichhu HEP and 1020 MW Tala HEP) in Bhutan, which are operational and exporting surplus power to India.
  • About three-fourths of the electricity produced is exported and the rest is used for domestic consumption.

Bilateral trade

  • The India-Bhutan Agreement on Trade, Commerce and Transit – which was first signed in 1972 and most recently and amended for the fifth time in 2016 – establishes a free trade arrangement between the two countries.
  • India is Bhutan's largest trading partner. Since 2014, India's merchandise trade with Bhutan has almost tripled from USD 484 million in 2014-15 to USD 1422 million in 2021-22, accounting for about 80% of Bhutan's total trade. The balance of trade is in favor of India.
  • In 2021-22, India's bilateral trade with Bhutan was US$1422 million, of which India's exports to Bhutan were US$877 million and India's imports from Bhutan were US$545 million.

Border management

  • There is a Secretary level mechanism on border management and security related matters. There is also a Border District Coordination Meeting mechanism between the border states and the Royal Government of Bhutan to facilitate coordination on border management and other related matters.

Water resources management

  • There is a Joint Group of Experts (JGE) on Flood Management between India and Bhutan to discuss/assess the potential causes and impacts of frequent floods and erosion in the southern foothills of Bhutan and adjacent plains of India and Recommends appropriate measures for both.

Educational and cultural cooperation

  • A large number of college going Bhutanese students are studying in India. It is estimated that around 4000 Bhutanese are studying in undergraduate courses in Indian universities on self-financing basis.

ITEC Training Program Scheme

  • Every year the Government of India provides 300 training slots under the ITEC program and 60 additional slots under the TCS Colombo Scheme in various sectors to Bhutanese to upgrade their administrative and technical skills.

Challenges:

  • China's growing influence: China's growing presence along the disputed India-Bhutan-China border and its growing economic ties with Bhutan raise concerns for India's strategic interests.
  • Delays in projects: Delays and disagreements over revenue sharing from India-Bhutan hydropower projects could create tension.
  • Trade Dependence: Bhutan's heavy dependence on India for trade makes it vulnerable to economic fluctuations in India.
  • Hydropower Projects and Environmental Risks: Bhutan has concerns about environmental and social impacts from hydropower projects.
  • Motor vehicle agreement: India's plans for a motor vehicle agreement within the Bangladesh-Bhutan-India-Nepal grouping have faced delays.
  • Power Purchase Policy: India's sudden change in power purchase policy, harsh tariffs and refusal to allow Bhutan to join the national power grid and trade with third countries like Bangladesh have strained relations.

Key facts related to Bhutan:

  • Bhutan is a parliamentary monarchy with its capital, Thimphu, in its eastern part.
  • Bhutan became a democracy in 2008 after the first democratic elections were held in the country. The King of Bhutan is the head of state.
  • It is known as 'Kingdom of Bhutan'. Its traditional name in the Bhutanese language is Druk Gyal Khap, which means 'Land of the Thunder Dragon'.
  • Bhutan is situated between India and China and is a country surrounded by mountains, valleys and land on all sides.
  • The longest river in Bhutan is the Manas River with a length of more than 376 km.
  • The Manas River is a transboundary river located in the Himalayan foothills between southern Bhutan and India.
  • Bhutan shares borders with only two countries: India and Tibet, an autonomous region of China.

Way forward:

  • Cultural and educational exchanges: Programs that promote cultural understanding and educational opportunities can strengthen ties between the two countries.
  • Carrying out multilateral cooperation: Cooperation on regional projects such as hydropower and infrastructure development can be done through organizations such as BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical Cooperation).
  • Establishing better connectivity: Better road, rail and air connectivity will boost trade, tourism and people-to-people exchanges.
  • Strengthening economic cooperation: India can invest in infrastructure development, tourism and other sectors to diversify Bhutan's economy and reduce its dependence.
  • Maintaining strategic dialogue: Regular high-level talks on security and border issues can address concerns and maintain transparency.
  • Addressing Bhutan's concerns: India should address Bhutan's concerns regarding China's influence through sensitive diplomacy and economic cooperation.
  • Bhutan and China normalize relations: In October 2023, Bhutan's first foreign minister visited China and concluded the 25th round of border talks, aimed at ending the decades-old territorial dispute.

Conclusion:

India and Bhutan enjoy unique bilateral relations based on mutual trust, goodwill and understanding. Maintaining strong and mutually beneficial relations with Bhutan is vital to India's strategic interests in the region. By addressing the current challenges and implementing necessary measures, India and Bhutan can ensure a prosperous and secure future for both countries.

Source: PIB

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Mains Question:

Mention the importance of the recent MoU between India and Bhutan.

Discuss the way forward to address the current challenges in India-Bhutan relations.