Thursday, July 14 2005 14:55 Hrs (IST) - World Time -

New Delhi: India will provide a Rs 1,984 crore assistance package to Bhutan, a Himalayan kingdom, for its IXth five year plan ending 2007.

The decision will lead to continued strengthening of India-Bhutan relations based on "our strategic and economic interests in an area of high geopolitical sensitivity", said an official statement issued after a cabinet meeting.

The package, cleared at the meeting chaired by Prime Minister Manmohan Singh, would be funded from the non-plan budget of External Affairs Ministry.

The assistance to Bhutan for the plan period (July 2002-June 2007) would comprise development subsidy of Rs 710 crore, project tied assistance of Rs 734 crore and other subsidies and refunds of Rs 540 crore, the statement said.

The decision would also throw open opportunities for Indian companies to participate in Bhutan's major projects and strengthen goodwill for New Delhi in Thimphu by fulfilling "our existing commitments", the statement said.

It said there was no dilution of India's role in the developmental and modernisation process in Bhutan, despite the opening of other bilateral and multi-national doors.

India has extended support to five year plans of Bhutan since their inception in 1961.

This support is viewed as an essential component of Bhutan's planned development and is extended in a variety of ways including by expanding the domestic revenue base by undertaking projects, which would generate surplus revenues in Bhutan.

The support is also extended through undertaking projects in Bhutan in social, health, infrastructure and strategic sectors and through cash support to bridge the resource gap, the statement said.

It said economic cooperation with Bhutan has been the cornerstone of the multi-faceted and mutually beneficial relations between the two countries.

Economic cooperation, particularly in the hydropower sector represents a win-win situation for both countries with India receiving an assured supply of cheap and clear energy and Bhutan receiving a significant revenue stream, it said.

The 336 MW Chukha and 60 MW Kurichhu projects, which have already come on stream and the 1,020 MW Tala project nearing completion are symbols of India-Bhutan friendship and cooperation, the official statement said.

Besides the tangible benefits, "Our economic cooperation also translates into tremendous goodwill in Bhutan for the people and the Government of India," it said.

"The cooperation has also paid rich dividends by way of guarding our strategic and security interests as demonstrated by the successful operations undertaken by Royal Bhutan Army to flush out the Indian insurgent groups based in Bhutan in December, 2003, and January, 2004", the release added.