India’s $1 Billion Hydropower Push in Arunachal Pradesh Raises Tensions with China

India is planning to invest a significant $1 billion to accelerate the construction of 12 hydropower stations in the northeastern Himalayan state of Arunachal Pradesh. This move, according to two government sources, has the potential to raise tensions with China, which asserts its claim over the region. The federal finance ministry, under the leadership of Nirmala Sitharaman, recently approved up to 7.5 billion rupees ($89.85 million) in financial aid for each hydropower project in the northeastern region. These sources indicate that approximately 90 billion rupees are likely to be allocated for the 12 hydropower projects in Arunachal Pradesh under this scheme. This initiative is expected to support northeastern states and facilitate their financial participation in the projects they host. The involvement of state governments is generally seen as beneficial for expediting regulatory approvals, local rehabilitation efforts, and negotiations on electricity sharing with the host state.

The plans for the hydropower stations are anticipated to be formally announced in the 2024/2025 federal budget, which Prime Minister Narendra Modi’s government will unveil on July 23. The sources, who have requested anonymity due to the confidential nature of the information, declined to be named. The Indian finance and power ministries, as well as China’s foreign ministry, have not responded to Reuters’ requests for comment on the matter.

Last August, the government awarded contracts to state-owned companies NHPC, SJVNL, and NEEPCO for the construction of these 11.5-gigawatt-capacity plants, representing an estimated investment of $11 billion. This project is part of a broader initiative aimed at developing infrastructure in the border region. Despite requests for comments, none of the companies have responded. Previously, private sector firms were involved in these power plant projects, but they failed to materialize due to various reasons.

Over the past two decades, India has constructed less than 15 gigawatts of hydropower plants, a stark contrast to the nearly tenfold increase in new coal and renewable energy sources. India and China share a 2,500 km (1553.43 mile) largely undefined border, which was the site of a war in 1962. India asserts that Arunachal Pradesh is an integral part of its territory, while China claims it as part of southern Tibet. Beijing has previously voiced objections to other Indian infrastructure projects in the region.

The Indian government’s push for projects in the eastern region stems from reports suggesting that China may construct dams on a segment of the Brahmaputra river, known as the Yarlung Tsangbo in China. This river originates in Tibet and flows through Arunachal Pradesh. India is concerned that Chinese projects in the region could potentially trigger flash floods or create water scarcity.

Both countries are actively engaged in improving infrastructure along their border regions. This follows the deadly clashes in the western Himalayas in 2020, which resulted in the deaths of 20 Indian and at least four Chinese troops. Last week, Indian Foreign Minister Subrahmanyam Jaishankar met with his Chinese counterpart Wang Yi in Kazakhstan, where the two agreed to intensify talks aimed at resolving issues along their shared border.

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