India and Bhutan deepened their energy cooperation during PM Narendra Modi’s visit to Thimphu on Tuesday. Modi announced a $455 million (40 billion rupees) line of credit and inaugurated a 1,020-megawatt hydroelectric project. The move highlights India’s aim to strengthen ties with Bhutan, which sits between India and China.

The visit comes as China increases its engagement with Bhutan to settle a long-standing border dispute and establish diplomatic relations.

PM Modi praises friendship

During his two-day trip, Modi also attended a celebration for Bhutan’s former King Jigme Singye Wangchuck’s birthday. He praised the two nations’ strong relationship.

“The partnership of trust and development between India and Bhutan stands as a model for the entire region,” PM Modi said, as quoted by Reuters. He added, “As both our countries progress rapidly, our energy partnership is further accelerating this growth.”

New project boosts power generation

Modi inaugurated the India-funded Punatsangchhu-II hydroelectric project. The 1,020 MW plant will increase Bhutan’s power generation by almost 40%.

This is the fifth hydro project India has supported in Bhutan. Together, these projects now produce about 3,000 megawatts of electricity. India said the new credit line will help fund more such projects.

Bhutan to export surplus power

Former Bhutanese energy minister Lok Nath Sharma said the new project will meet Bhutan’s domestic demand of about 1,000 megawatts. The remaining power will be exported to India.

Indian private companies like Tata Power, Adani Group, and Reliance Power have also signed deals with Bhutan’s Druk Green Power Corporation to build more hydropower plants.