Bhutan has assured India that the security of the two countries is entwined and during its Prime Minister Tshering Tobgay’s first overseas visit after wining the elections, reiterated Thimphu’s desire to continue with the cooperation, as in the past, on matters relating to core national interests. Continuing with the pattern of high level exchanges, President Pranab Mukherjee will visit Bhutan in October.

But there was little cheer on the economic front despite India’s promise of stepping up its contribution to the Bhutanese Eleventh Plan (Rs. 4,500 crores) and helping in a Rs. 500-crore stimulus for its economy. This is because of no forward movement on the revised funding pattern for several hydel projects due to shortage of funds.

Bhutan’s assurance about commonality in security interests comes against the backdrop of the previous government’s dalliance with the Chinese, which did not go down well in the Indian strategic community. India’s withholding of subsidy on gas and subsidy to Bhutan on the eve of its second round of general elections was seen as an attempt to undermine the electoral prospects of the Druk Phuensum Tshogpa (DPT), which was in power at that time.

A warning shot across the bows came from Thimphu at the time Mr. Tobgay was reiterating his government’s desire to walk in step with New Delhi on security and strategic issues over lunch with Prime Minister Manmohan Singh. “We’ll also extend our full support to the government in resolving our border issues with China,” promised DPT leader and second Opposition leader Pema Gyamtsho with a warning caveat: “Talks with China must move forward on the progress we’ve made so far, without any setback due to any new or additional conditions.”

These statements have a background. India-Bhutan ties suffered a blip last month after New Delhi did away with subsidies on gas and kerosene in the middle of its general elections. It was said that India had done so to teach the DPT a lesson for holding talks with China without taking New Delhi into confidence.

The Ministry of External Affairs (MEA) contested this assessment but conceded there was a mix up between two Ministries and the timing of scaling back subsidies was not right. The voting pattern in the two rounds of polling showed there was no sharp fall in votes gathered by the DPT in the second round. This proved the decision had no impact on the then ruling party’s electoral fortunes. Rather, the index of opposition unity had approved in the second round and this increased votes polled by Mr. Tobgay’s party, claimed the MEA.

While Mr. Tobgay promised to keep strategic ties on an even keel, both sides would have to make extra efforts to maintain the momentum of the current partnership in the hydel sector.

Both sides have planned to evacuate 10,000 mw of electricity from Bhutan’s four major river systems — Torsa, Wangchu, Sankosh and Manas — but have been struggling with seven projects after a smooth start to three projects, the last one over six years back.

One of the largest projects on the drawing board — Punatsangchhu Stage-I (1,200 MW) — is facing fund constraints as the cost has jumped to nearly Rs. 10,000 crores from Rs. 3,515 crores. Four projects — Kholongchhu, Wangchu, Bhunakha and Chamkharchhu — would have a revised equity holding format in which the market forces would play a greater role. On the other hand, the earlier projects came up on the easier grant-cum-debt model.

Mr. Tobgay had an unpublicised meeting with Congress vice president Rahul Gandhi in addition to interactions with the top leadership. The request came from the Bhutanese side and reflects their assessment of the Indian power structure, said government sources.