To strengthen political and economic ties with Bhutan, India is expected to sign an agreement for construction of the 1095 MW Punatshangchu Hydroelectric Project with Bhutan during External Affairs Minister Pranab Mukherjee’s visit to the country, which begins on July 27.

The Water and Power Consultancy Services Limited (WAPCOS)—a Government of India undertaking—has prepared a detailed report on the Punatsangchhu project. Sources said that the Government of India has agreed to provide funds equivalent to 40 per cent of the estimated total cost as grant and 60 per cent of the estimated total cost as a loan with an interest.

The Punatshangchu I project comes under the agreement for cooperation in hydroelectric power, signed between Bhutan and India on July 28, 2006, in New Delhi. According to the agreement, India will import 5,000 MW of power from Bhutan by 2020.

Both the countries are also expected to take up the issue of better border management, which includes better roads and communication systems.