India's Modi expands energy ties with Bhutan, extends $450 million credit line

The Indian prime minister is on a two-day visit to the country and addresses a gathering to mark the birthday celebrations of Bhutan's King's father

India's Prime Minister Narendra Modi addresses a gathering during a programme to celebrate the 70th birth anniversary of the Fourth King of Bhutan, Jigme Singye Wangchuck, at Changlimithang ground in Thimphu, Bhutan, Nov 11, 2025. India's Press Information Bureau/Handout via REUTERS

India and Bhutan expanded their energy ties on Tuesday during Prime Minister Narendra Modi's visit to the Himalayan nation where he extended a 40 billion rupee ($455 million) line of credit and inaugurated a hydroelectric power project.

India's outreach to Bhutan is seen as an effort to grow its influence in the region and draw the country wedged between China and India closer to New Delhi as Beijing steps up its engagement to resolve a long-running border dispute with Bhutan and establish diplomatic relations.

Modi is on a two-day visit to the country and on Tuesday addressed a gathering to mark the birthday celebrations of Bhutan's King Jigme Khesar Namgyel Wangchuck's father.

"The partnership of trust and development between India and Bhutan stands as a model for the entire region," he said. "As both our countries progress rapidly, our energy partnership is further accelerating this growth."

Later in the day, he inaugurated the India-funded 1,020-megawatt Punatsangchhu-II hydroelectric power project, which he said would increase Bhutan's hydropower generating capacity by nearly 40 percent.

It is the fifth Indian-backed hydropower project in the country which altogether generate a total of nearly 3,000 megawatts of power. The line of credit extended by India on Tuesday is also aimed at funding energy projects, the Indian government said.

Lok Nath Sharma, a former minister for energy in Bhutan, said the excess energy will be exported to India after meeting local demand which is about 1,000 megawatts.

Indian private companies like Tata Power, Adani Group and Reliance Power have signed agreements with Bhutan's Druk Green Power Corporation for building hydroelectric projects.