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India and Bhutan are enhancing collaboration in their power sector, focusing on optimizing the 1020 MW Punatsangchhu-II project and advancing the commissioning of the 1200 MW Punatsangchhu-I project. Discussions held in New Delhi involved Bhutan's Minister of Energy, Lyonpo Gem Tshering, and India's Union Power Minister Manohar Lal, emphasizing the future direction of the Sankosh Hydropower Project and transmission infrastructure planning through 2040.

The meeting also highlighted the need to streamline power scheduling approvals, especially during Bhutan's lean months. India has provided a Rs 4,000 crore Line of Credit to Bhutan for economic development.

Notably, a Memorandum of Understanding on renewable energy cooperation was signed to institutionalize bilateral engagements in areas like solar and wind energy. The budget for Bhutan in India's fiscal year 2026-27 includes Rs 2,288 crore for development projects.