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WB okays $400 mn loan to Power Grid

This would help the country realise goal of optimal utilisation of power resources and strengthen transmission system.

india Updated: Jan 21, 2006 17:17 IST

The World Bank has approved a $400 million loan to the Power Grid Corporation of India.

This would help the country realise the goal of optimal utilisation of electricity resources and strengthen the transmission system.

The allocation has been made for the Power System Development Project. The loan is backed by a Government of India guarantee.

The Bank noted that India has identified the power sector as key to achieving its goals of high and sustainable economic growth and to reduce poverty. However, with peak time power shortages of a little more than 12 per cent the power sector is currently "inadequately" positioned to support these goals, it said,

"India continues to face severe power shortages that translate into substantial losses to the economy. It stifles development of industry and commerce, increases the cost of doing business, and reduces productivity," said Michael Carter, World Bank Country Director for India.

"The reform agenda is a complex one; while progress has been mixed, this project will help realise the goal of optimal utilisation of electricity resources across the country."

According to the Bank the project for which the allocation has been made will improve service delivery of the Power Grid Corporation of India by strengthening transmission system in power deficit regions and increasing inter-regional transmission capacity.

It would also help develop institutional capacity to facilitate implementation of open access and inter-regional trading.

"The large distance between generating stations and load centres necessitates power transfers across the country and therefore a strong transmission network," said Sunil Khosla, World Bank Senior Energy Specialist and Task Team leader for the project.

"This project will help improve the level of grid integration, and strengthen the transmission network", he added.

The Bank said the growth in power exchanges between the regions would be used as the key indicator to measure the performance in achieving the development objectives of the project.

The World Bank has been actively involved in the reform of the transmission sector in India, and specifically in the creation and development of the Power Grid Corporation of India.

In the last ten years funding support has been provided to Central government entities for generation, transmission and renewable investments, and to selected State Electricity Boards (SEBs) for investments associated with sectoral reform.

First Published: Jan 20, 2006 10:14 IST