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Project Number: 32298 February 2007
Proposed Multitranche Financing Facility India: Madhya Pradesh Power Sector Investment Program
CURRENCY EQUIVALENTS (as of 28 February 2007) Currency Unit Rs1.00 $1.00 – = = Indian rupees/s (Re/Rs) $0.0226 Rs44.22 ABBREVIATIONS ADB CDM CEA CMD CO2 CSP DFID DISCOM DISCOM-C DISCOM-E DISCOM-W EA EARF ECF EIRR EMP EPA CERC FFA FIRR FMA FRP FY GDP GENCO GOMP GRC HVDS ICB IEE IPDF IPP LIBOR MFF MOP MP MPPSDP MPSEB MPERC – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Asian Development Bank clean development mechanism Central Electricity Authority chairman and managing director carbon dioxide Country Strategy Programme Department for International Development of the United Kingdom distribution company Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited executing agency environmental assessment and review framework Energy Conservation Fund economic internal rate of return environmental management plan Environmental Protection Agency Central Electricity Regulatory Commission Framework Financing Agreement financial internal rate of return Financial Management Assessment Financial Restructuring Plan fiscal year gross domestic product Madhya Pradesh Power Generating Company Limited Government of Madhya Pradesh grievance redress committee high-voltage distribution system International Competitive Bidding initial environmental examination indigenous peoples development framework independent power producer London interbank offered rate multitranche financing facility Minister of Power Madhya Pradesh Madhya Pradesh Power Sector Development Program Madhya Pradesh State Electricity Board Madhya Pradesh Electricity Regulatory Commission
MIS MYT NEP O&M OCR PFR PMU PPA PPP RF RP SCADA TRADECO TRANSCO WACC
– – – – – – – – – – – – – – –
Management Information Systems Multi Year Tariff National Electricity Policy operation and maintenance ordinary capital resources periodic financing request Project Management Unit power purchase agreement Private Public Partnership Resettlement Framework Resettlement Plan Supervisory Control and Data Acquisition Madhya Pradesh Power Trading Company Limited Madhya Pradesh Power Transmission Company Limited Weighted Average Cost of Capital WEIGHTS AND MEASURES
GWh ha (hectare) km (kilometer) kV kW kWh MVA MW MWh VA
– – – – – – – – – –
gigawatt-hour (1,000 megawatt-hours) Unit of area 1,000 meters kilovolt (1,000 volts) kilowatt (1,000 watts) kilowatt-hour megavolt-ampere(1,000,000 volt-amperes) megawatt (1,000 kilowatts) megawatt-hour Volt-ampere
NOTES (i) The fiscal year (FY) of India and its agencies runs from 1 April to 31 March of the following year. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2006 ends on 31 March 2006. In this report, "$" refers to US dollars. L. Jin, Operations Group 1 K. Senga, South Asia Department (SARD) T. Kandiah, Energy Division, SARD N. T. Anvaripour, Senior Energy Specialist (Finance), SARD M. Canonica, Energy Specialist, SARD I. Caetani, Social Development Specialist, SARD A. Djusupbekova , Senior Counsel, Office of the General Counsel V. Karbar, Project Implementation Specialist, India Resident Mission D. Millison, Senior Energy Specialist, SARD N. Sakai, Energy Specialist (Private Participation), SARD L. B. Sondjaja, Energy Specialist, SARD
Vice President Director General Director Team leader Team members
CONTENTS Page MULTITRANCHE FINANCING FACILITY AND INVESTMENT PROGRAM SUMMARY MAP I. II. THE PROPOSAL RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES A. Performance Indicators and Analysis B. Analysis of Key Problems and Opportunities INVESTMENT PROPOSAL A. Impact and Outcome B. Outputs C. Technical Justification and Selection Citeria D. Special Features E. Investment Program and Financing Plan F. Implementation Arrangements BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS A. Technical Analysis B. Financial Analysis C. Financial Management D. Past and Projected Financial Performance E. Economic Analysis F. Environmental Analysis G. Social Assessment H. Poverty Assessment I. Potential Risks ASSURANCES A. Financial B. Commercial C. Human Resources D. Safeguards RECOMMENDATION i xiii 1 1 1 3 12 12 12 13 14 15 16 18 18 19 19 20 21 21 22 23 23 24 24 24 25 25 27
APPENDIXES 1. Design and Monitoring Framework and Sector Road Map 2. Power Sector Reforms, Restructuring, and Capacity Development 3. Power Sector Assessment 4. External Assistance to Power Sector 5. Detailed Cost Estimates 6. Investment Program Implementation Structure and Readiness 7. Investment Program Implementation Schedule 8. Procurement Plan 9. Financial Analysis of Tranche 1 and Tranche 2 10. Financial Management 11. Past Financial Performance and Projections for Sector Companies
27 35 39 45 46 50 53 54 59 63 64
12. 13. 14. 15.
Economic Analysis of Tranche 1 and Tranche 2 Summary Initial Environmental Examination Summary Poverty Reduction and Social Strategy Summary Resettlement Plan
68 73 81 84
SUPPLEMENTARY APPENDIXES (available on request) A. Tariff Structure B. Energy Efficiency and System Loss Reduction C. Private Sector Participation D. Review of MP Program and Project Loan E. Financial Assessment F. Financial Management Assessment G. Past and Projected Financial Performance of Executing Agencies H. Economic Analysis I. Environmental Assessment Review Framework J. Short Resettlement Plans by Project Components K. Environmental Management Plan
open access. greater private sector participation. and competition. multiyear tariff determinations. and energy trading Themes: Sustainable economic growth. institutional and financial restructuring. providing the legal framework for the efficient development of the sector. It also increased delivery capacity of the power sector. and distribution. and protection of consumers’ interests. The main policy instrument in the power sector is the National Electricity Policy. Reform of the Madhya Pradesh (MP) power sector has progressed within the policy and legislative framework of India. With substantial support from ADB’s program loan. GOMP Environment Assessment Overview .FACILITY INVESTMENT PROGRAM SUMMARY Borrower Classification India Targeting classification: General intervention Sector: Energy Subsector: Transmission. including substantial reduction in transmission losses. The Government of Madhya Pradesh (GOMP) has demonstrated its commitment to reforms and has made encouraging progress. distribution. and tariffs set within 20% of the deemed cost of supply. energy efficiency. reduced aggregate technical and commercial losses. full development of hydropower. sector-wide capacity development. In December 2001. as well as downstream networks to evacuate. use of information technology for greater operational efficiencies. transmission. as well as availability-based tariffs and 100% rural electrification. 2003 (the Act) is the cornerstone legislation for the power sector. and distribute the power. The act is concerned primarily with unbundling of state electricity boards. The Electricity Act. better cost recovery.000 megawatts (MW) of new generating capacity. governance. the Asian Development Bank (ADB) approved the Madhya Pradesh Power Sector Development Program that combined program lending with physical investment financing that addressed key reform areas. The act also mandates full metering for all consumer classes. which calls for power for all by 2012 (including rural electrification). and private sector development Subthemes: Fostering physical infrastructure development Tranche 1 – Category B Tranche 2 – Category B India’s goal to establish universal power supply at an affordable price by 2012 will require an estimated 100. Five companies were established for generation. restructuring of the power sector was completed. transmit.
while transformation capacity has risen 41%. To facilitate economic growth by increasing electricity supply to its urban and rural population. Peak demand is expected to grow on average at about 9% to 2012. Transmission losses have been reduced to an acceptable level of about 5%. the transmission capacity is inadequate to serve peak demand. The peak deficit has exceeded 20% and the energy deficit consistently has been about 13% for the past 3 years. the challenges in the power sector can be summarized as follows: Generation. Generating capacity available to meet peak demand is significantly less than required to eliminate the energy deficit. as well as renovation and modernization of existing generating facilities. GOMP conducted a diagnostic assessment of earlier reforms and physical investments. were reduced to an internationally acceptable level. MP has suffered from chronic peak capacity and energy shortages in recent years. the transmission system served the highest ever maximum demand of 5. Transmission losses. Losses for distribution companies exceed 35%. Therefore. Distribution. and power quality is poor due to undersized conductors. and overloading of distribution transformers. Based on the diagnostic work. Through implementation of power sector reforms under the ADBfinanced Madhya Pradesh Power Sector Development Program . GOMP recognizes the need for further private sector participation to meet the sector’s overall financing requirements and to enhance operational efficiencies. Installed capacity in or available to MP is about 6. Loss reduction and reliability improvement are also sector policy imperatives for the distribution subsector. due to continued growth in demand. However.780 MW. The distribution network needs significant investment to reach these targets.ii achieved a comprehensive financial restructuring that included injecting equity and taking over loan arrears in lieu of rural electrification loans and subsidies. Throughout the reform process. The transmission network will require significant investment if capacity is to be increased to match this forecast demand growth. Since 2002. transmission circuit length has increased almost 14%. Private Sector Participation.000 MW owned and operated by the generating company. with about 3. the MP Electricity Regulatory Commission (MPERC)—an independent. new physical investments. are essential. and availability of the transmission network has exceeded 98% for the past year. GOMP policy targets 100% village electrification by 2008 and 100% household electrification by 2012. targeted through physical investments. long low-voltage circuits.300 MW. Transmission. During 2006. state-level regulatory agency—adopted a realistic and supportive position through its regulatory mechanisms.
socioeconomic impact studies also are being conducted. financial. (viii) human resources and e-mail solutions. GOMP has created the enabling environment for private sector participation and public-private partnerships (PPP). However.iii (2001). ADB and DFID jointly have supported the MP power sector since the initial stage of reforms. The financial fragility of the sector is perceived to be the key impediment to private investment. (iv) bilateral electricity trading. together with the appropriate network infrastructure and support. ADB and the Department for International Development of the United Kingdom (DFID) are partnering in capacity development. (iv) management information systems. (iii) metering data management. commercial. (ii) capacity building in MPERC. although the number of projects implemented is expected to be a small subset of this total. This assistance was successful. The DFID program under implementation across the sector emphasizes (i) mapping further reforms by supporting GOMP. and some minor maintenance functions have been outsourced. In addition to these principal areas of work. (vi) materials management. Capacity Constraints. (iii) further distribution network franchising and leasing. and GOMP has demonstrated the capacity to formulate and execute sector policy since 2001. and (iii) financial management and human resources development in all companies. However. and (v) maintenance contracting. The constraint being addressed through a comprehensive functional support and capacity-building program. (vii) project systems. GOMP has proposals for independent power producer thermal projects in the next 5 years with a combined capacity of 12. Capacity development also is required to improve the companies’ internal audit and control capability. In generation. private sector contributions have been slow to develop. DFID is providing £18. (ii) transmission network ownership and leasing. Key areas identified include design and implementation of a “backbone” enterprise resource planning system covering (i) billing and collection.2 million as of 21 September 2006) in technical assistance (£14. ADB has included an additional $10 million under the investment program for a selective capacity development program. (ii) finance and accounting.5 million) and financial assistance (£4million) covering 2006–2010. Opportunities for private sector involvement include (i) electricity generation from renewable and nonrenewable resources.5 million $35. and management constraints in the new power sector companies. the diagnostic assessment by GOMP demonstrated technical. This .000 MW. Pilot distribution system franchising schemes have been implemented. ADB’s 2001 program loan included a capacity development component to address the policy environment. (v) maintenance management.
It also targets significant reductions in technical and commercial losses. and opportunities identified through diagnostic work paved the way for defining a strategic framework. procurement. and communications for the new trading company. fiduciary oversight and governance. In addition. The investment program is predicated on building sufficient capacity to evacuate power from existing and planned power stations and substations.000 MW of peak power is the main driver of the investment program for the transmission and distribution systems. With energy losses currently at about 41%. evaluation.000 MW of peak generation and network capacity will have to be added over the next 5 years to serve this demand. unrestricted consumer demand for electricity in MP is forecast to increase by 7% from 2007 to 2012. These are encapsulated in a medium-term sector road map (2007–2012). whose future role is pivotal in the effective commercial operation of the reformed sector. and moderate increases in tariffs to bring them in line with the true cost of supply.iv program focuses on implementation support of Supervisory Control and Data Acquisition (SCADA) systems in the distribution companies. and reporting. The action plans are sequenced and complement transactions involving the private and public sectors. which is expected to drive strong growth in demand for electricity. Physical Investments. and delivering power reliability and efficiency to consumers. capacity development. supervision. The financing plan involves the . metering. The need to transmit an additional 6. knowledge management. Sector Road Map and Investment Program Description Key constraints. The objective of full household electrification by 2012 is expected to generate further growth in electricity demand. and action plans over the short to medium term. project implementation. The total investment program for the power sector is estimated to be $5. safeguards. monitoring. reducing the requirement for additional capacity by more than 1. a new sector strategy. with $3. more than 6. Based on consistent growth in the national and state economy. challenges. Reserve Bank of India forecasts a significant improvement in MP’s economic performance from 2007 to 2012. and development of a trading and settlements support system. The sector road map is linked to a comprehensive investment program covering physical investments and nonphysical interventions in further sector reforms.0 billion needed for transmission and distribution. disbursements.3 billion (2007–2012). ADB’s capacity development program will support energy efficiency activities and strategic PPP. A coherent and realistic state and regional plan for expansion of generation capacity is in place with contributions from public and private financial resources.000 MW and returning to a capacity and energy surplus by 2011.
(ii) the performance of the previous loan can guide the provision of subsequent loans. independent state regulatory commission. and one set of project from each subsector is presented in the Report and Recommendation of the President. and (iv) restructuring tariffs and issuing new tariff orders that allow revenue realization. power quality and reliability. The Investment Program will be a logical replication of the project component of the previous ADB loan. The project component of the earlier ADB loan covered the transmission and distribution subsectors. In this context. as well as the private sector and institutions such as ADB. blending reform and capacity development with investments. ADB’s . Remaining policy issues are currently being addressed. and more efficient revenue collection. (ii) unbundling the MPSEB into five companies. Nonphysical Investments.. as stated in the sector road map. Subprojects are designed in a repeater nature in the transmission and distribution subsectors.g. including a fully operational. The impact of the transmission component will be further reductions in losses and increased capacity for electricity transmission to meet forecast demand growth. and (iii) the MFF can offer the flexibility required for the Investment Program to support the participation of four companies with different levels of readiness. ADB is providing $10 million for capacity development in various areas to maximize the synergy with the DFID-funded capacity development program. and central-level generating projects (e. The MFF is particularly well suited for the Investment Program because (i) the aim of the Investment Program is to support GOMP’s long-term objectives. improved voltage profiles. (iii) improving sector governance through more functional independence. The program component assisted GOMP in (i) implementing key policy reforms and establishing a policy framework. India requested ADB support for the investment program in the form of a multitranche financing facility (MFF). ultra mega power projects) are planned to eliminate the generation deficit.v state government budget. covering transmission and distribution subsectors by taking into account the interrelated nature of the subsectors. Such support provides a platform for financial and expert assistance. The executing agencies (EAs) have gained substantial experience from implementing the previous ADB project. private sector investments. ADB support will be extended for the transmission and distribution segments of the sector since a joint venture between state and central power utilities. thereby offering proper incentives for implementation. The impact of the distribution component will be reduced technical and nontechnical losses.
The MFF will allow financing of individual subprojects.7 1. distribution.. The tentative implementation schedule of the MFF envisages five tranches covering transmission. UK Private Investors Internal Funds Government of Madhya Pradesh Total Funding Sources: Asian Development Bank estimates $ Million 1.0 Multitranche Financing Facility India has asked ADB to extend financing of $620 million (included in the Country Operations Business Plan 2007-2009) over 8 years through an MFF for its power sector investment program.0 100. metering.7 13. reforms. This financing represents 11.g. as projects and conditions warrant.600 40 5. and developing a trading and settlements support system.585 620 35 700 800 600 5. capacity. and nonphysical . In addition.1 26. whose future role is pivotal in the effective commercial operation of the reformed sector. by linking financing to project readiness. and work on various themes.7 100.345 620 25 100 610 300 3. Clean Development Mechanism).7% of the financing plan for the transmission and distribution segment.8 20.0 11. $ Million 2. Sector Investment and Financing Plan Table 1: Power Sector Financing Plan.2 30. and communications for the new trading company.0 0.2 100.300 1. nonphysical investments will provide substantial support for the establishment of (i) an energy conservation fund and other energy efficiency initiatives (e.0 48.6% of the total financing plan and 20.340 2.340 % 43.0 10.2 3.000 % 44.3 20. and (ii) strategic PPP with the intention of achieving the requisite reduction in distribution losses and improving the quality of service to consumers.400 1.vi capacity development program will focus on implementation support of SCADA systems in the distribution companies. 2007–2012 Investment Program 2007–2012 Investments Generation Transmission Distribution Nonphysical Investments Total Investments Financing Sources Domestic Financial Institutions Asian Development Bank Department for International Development . 2007–2012 Financing Sources Domestic Financial Institutions Asian Development Bank Department for International Development.6 0.1 15. UK Private Investors Internal Funds Government of Madhya Pradesh Total Funding Sources: Asian Development Bank estimates.0 Table 2: Transmission and Distribution Financing Plan.8 11.
Due diligence in key areas. and disbursement and subproject selection criteria. and report to Management. ADB staff will inform the Government of India (the Government). and (iii) one new 400/220/132 kV substation with 315 MVA transformer capacity. economic.000 consumers. (ii) remote metering of about 2. The distribution component will undertake (i) construction of high-voltage distribution systems in six distribution circles in the eastern distribution zone of MP. Before ADB accepts a Periodic Financing Request (PFR). financial. ADB teams will provide ongoing guidance to the authorities. . and sector companies will ensure full compliance with the terms and conditions of the FFA. procurement. financial management. Framework Financing Agreement India has entered into a financing framework agreement (FFA) with ADB. PFR 2. such as technical.500 cct-km of 220 kV transmission lines across the state of MP. India.000 industrial consumers. including conversion of about 7. The capacity development component will provide support if necessary. ADB teams will evaluate all funding requests. (ii) eight new 220/132 kV substations. and the Board on the status of individual loans. Transmission Capacity Expansion. anticorruption. (iii) metering of about 250. and (iv) renovation of the protection system at about 100 substations. and make available additional experts under the capacity development component.400 km of low-voltage lines to high-voltage lines. This component includes construction of (i) 2 circuit kilometers (cct-km) of 400 kilovolt (kV) and about 1. The FFA satisfies the requirements established in Appendix 4 of the Pilot Financing Instruments and Modalities. covering safeguards. MP.vii investments. PFR 1. Periodic Financing Requests The MFF transaction is accompanied by two PFRs. has been completed for Tranche 1 and Tranche 2. Failure to comply with any of these automatically will hold back additional financing under the MFF. It is underway for further tranches. and safeguards. with transformer capacity of 160 megavolt-ampere (MVA) each. Distribution Efficiency Enhancement. The FFA records the full set of warranties and representations of ADB operating policies and procedures on all crosscutting themes. if needed. and will ensure that they adhere to representations made and will continue to do so. governance. one for Tranche 1 for transmission components and another for Tranche 2 for distribution components that are ready for implementation. including the performance on warranties and representations.
The Government. Pursuant to the FFA. Each PFR will specify the nature of expenditure if retroactive financing is requested. Retroactive Financing Period of Utilization Estimated Project Completion Date Executing Agencies and Implementation Arrangements The EAs will be Madhya Pradesh Power Transmission Company Limited (TRANSCO). each future tranche may be financed under terms different from the financing terms of previous or subsequent tranches. GOMP will onlend to sector companies. with a 1 percentage point spread. Madhya . Each tranche under the MFF would be at least $40 million. Both PFRs are presented to the Board with the MFF and the FFA. GOMP. not including a grace period of 5 years. The Government can choose from eligible currencies and interest rate regimes. Allocation and Relending Terms The Government will make loans available to GOMP on the same terms and conditions as the ones applicable to the Government. Until 30 June 2015. Currency and interest rate swaps will be made available during the financing period. and EAs have been informed that approval of advance procurement action and retroactive financing does not commit ADB to financing any of the proposed subprojects. the Government has submitted two PFRs to ADB totaling $151 million for Tranche 1 and Tranche 2 to finance transmission and distribution subprojects. as the EA.viii Amount and Terms The MFF will provide up to $620 million. Tranche 1 and Tranche 2 loans will have a principal repayment period of 20 years. 31 December 2014. through respective onlending agreements. Retroactive financing may be possible under individual loans for expenditures incurred 12 months before the signing of the corresponding loan agreement. secured from the ordinary capital resources of ADB. which can change with each loan. except for the nonphysical investments component. However. with final terms and conditions to be established under individual loan agreements based on prevailing ADB policies. Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited (DISCOM-C). Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (DISCOM-E). in accordance with the Board paper on Cost Sharing and Eligibility of Expenditures for Asian Development Bank Financing: A New Approach. Repayment schedules can be structured to satisfy the needs of individual loans. with the last PFR submission by 31 December 2010. with a ceiling of up to 20% of the loan amount. Financing will be made available under ADB’s London interbank offered rate (LIBOR)-based lending facility. which would have a minimum loan amount of $5 million.
monitoring. and will be in line with ADB’s Environmental Assessment Guidelines (e. who has extensive experience at major project delivery and loan disbursement through an earlier ADB loan. The Energy Department (ED) of GOMP handles overall investment program management in MP. Teams have been set up to conduct best practices in technical. MPERC will take part in monitoring since it conducts due diligence for all investment proposals and reviews detailed project reports from the state power companies or private sector before warrant approval. International competitive bidding (ICB) will be used for supply and construction of the facilities being funded under the investment program (substations. environmentally responsible procurement). transmission lines. This approach will ensure the sharing of best practices within the state. Limited international bidding or national competitive bidding will be used for supply contracts estimated at $250. They also will oversee professionally and efficiently the investment operations planned over the next few years. Once an investment program is approved. and reporting systems will be part of the work. and environmental and social safeguards. The staff of all power sector companies has acquired substantial experience.g. (2006. Based on national policies. including management skills and systems in the previous ADB-financed project. ICB will be utilized for supply contracts estimated to cost the equivalent of or more than $1 million. The EAs will be guided by a coordinating committee chaired by the chairman and managing director of TRANSCO. The Government will be responsible for the implementation of the MFF and loans in accordance with the FFA and individual loan agreements. financial. and the Madhya Pradesh Power Trading Company Limited (TRADECO). as amended from time to time). The ED will monitor and evaluate the implementation of the approved investment program and report it to Ministry of Power. the companies will implement and be responsible for it. project management.. and transformers. and long-term investment plan. It also is responsible for creating an enabling environment for private sector investment in the state. procurement. Procurement Procurement to be financed under the MFF will be undertaken in accordance with ADB’s Procurement Guidelines.ix Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (DISCOM-W).000– .). etc. The EA for the energy efficiency component will be identified in the future. road map. equipment. Evaluation. the Energy Department formulates state power sector policies.
as amended from time to time). thereby enhancing production and output and reducing equipment failures. Consulting Services Consultants will be selected and engaged in accordance with ADB’s Guidelines on the Use of Consultants (2006. and with minimal scheduled and unscheduled outages. Rural consumers in particular will see a significantly improved electricity supply. particularly cost overruns. augmentation. investment timing mismatches. undermining the Project Benefits and Beneficiaries of the Facility .000. If tariff increases are substantial. This would support the Government’s projections for growth in energy demand. The investment program will enable urban and rural domestic consumers to receive a supply of electricity at an acceptable voltage level. Industrial and commercial consumers also will benefit from improved supply reliability and quality. Individual experts may be recruited following ADB’s procedures for engagement of individual consultants based on resume submitted in response to specific terms of reference for the assignment. as well as its plan to make affordable grid-based electricity supplies available to the entire population by 2012. and stalled sector reforms. Contract packages will be prepared to ensure maximum competition under ICB. and will open up opportunities for energy-dependent rural enterprises. the investment program will create short-term and long-term employment opportunities and tax revenues. and other social services. the demand growth upon which the investment program is predicated could be constrained. hospitals. and industrial consumers within the state of MP.x $1 million. In addition. and will ensure improved conditions for schools. and shopping for contracts estimated at less than $250. agricultural. This will have positive outcomes for educational and social activities. The MFF is designed to benefit all grid-connected consumers with adequate and reliable supply of electricity. Consulting firms will be chosen through international competition using the quality. the economic and financial cost of supplying electricity will be reduced by directly addressing inherent inefficiencies.and cost-based selection method. Given the cost-plus tariff setting mechanism employed in MP and in other Indian states. At the state level. A secure and predictable electricity supply will enable social and economic benefits to materialize. Risks and Assumptions The MFF is accompanied by some risks. and expansion of the power transmission system will increase reliability of supply to the residential. unaffected by the lengthy scheduled outages that are currently experienced. cost overruns can be passed through to consumers. commercial. Substantial investments in rehabilitation. commissioning delays.
Capacity building and public policy reform are essential to the long-term growth and sustainability of the sector. Moreover. TRANSCO’s experience in managing and disbursing major loans and capital programs provides further comfort. Benefits expected to flow from one component might be reduced if commission delays are experienced in other components. staff will report on any issues or problems faced by the authorities and the EAs under the program. its viability requires a strong local presence and quality resources allocated to implementation. ADB will conduct periodic review missions. from headquarters and through the India Resident Mission. Sufficient slippage provision will be built into the implementation program to minimize the risk of commissioning delays outside the control of contractors. safeguards framework. subproject management. experienced staff. The FFA captures critical provisions for ADB financing. This risk is deemed to be small. which are intended to ensure program success. A program support office has been established that will coordinate specific implementation tasks. Although an MFF can be a flexible instrument for the authorities. turnkey contracting will be used where appropriate. including (i) subproject eligibility criteria. Each new financing request to be converted into a new loan will require an evaluation of the performance of the previous one. The provision of ADB finance through an MFF requires an agreement on key warranties and representations. including procurement. a clear investment and capacity development program. financial management. . and the people and institutions to deliver on the objectives and targets. thereby transferring a large part of price and implementation risk to turnkey contractors. The Government and GOMP remain committed to the reform process as a secure and reliable power supply is viewed as a key enabler for economic growth and poverty reduction. In addition. monitoring. (v) monitoring. which will include due diligence on warranties and representations made to ADB. (iii) procurement and disbursement procedures. The risk of a slowdown or reversal in the reform process is very unlikely. and reporting. The office will comprise professional. administration. and reporting. and supervision. and have been based on a basket of tender prices submitted over the past 12 months. Investment components are interrelated to some extent. (ii) selection. Warranties and Representations MP has a well-defined power sector road map. (iv) financial management and fiduciary oversight. especially in the areas of safeguards. and implementation. Such risk will be contained and managed through contractual mechanisms that include provisions for liquidated damages when commissioning delays are the fault of contractors. and the remedial actions suggested to overcome them. Cost projections are thorough and conservative. capacity building.xi economic and financial viability of investments. ADB will provide direct support to the EAs responsible for program implementation. administration.
multiyear tariffs (MYT). received additional impetus from the Electricity Act. An independent central regulatory body was established. the Government developed the Integrated Energy Policy 1 .I. unbundling has been 1 Planning Commission. RATIONALE: SECTOR PERFORMANCE. Separation of generation. economically viable. 4. which began in 2001. The past poor performance of state electricity boards was a roadblock to private sector investment. and have accelerated in the past two years. tariff restructuring. I submit for your approval the following report and recommendation on a proposed multitranche financing facility (MFF) to India for the Madhya Pradesh Power Sector Investment Program (Investment Program). and (v) increase the delivery capacity of the power system. (ii) pursuing technologies that maximize energy efficiency. and Analysis 2. (iv) reduce system losses. THE PROPOSAL 1. Compulsory metering. In December 2001. India faces formidable challenges in achieving balanced infrastructure development. In 2001. where the provision of adequate energy plays an essential role in reducing poverty through sustainable economic growth. The Integrated Energy Policy provides for specific measures. facilitation of power trading. The policy encapsulates the vision to meet the demand for energy services of all sectors reliably with safe. The Central Electricity Regulatory Commission has prescribed detailed rules for cost accounting and allowable tariffs. which had a $150 million program component and a $200 million project component. Integrated Energy Policy. the Government adopted a program of unbundling. Design and Monitoring Framework is in Appendix 1. A. lifeline tariff for the poor and rural consumers and rationalization of tariffs have been initiated. The Electricity Act. 2003 was intended to improve governance in the power sector through continued institutional restructuring and improved management of sector entities to ensure long-term sustainability. open access to transmission systems. and 100% rural electrification. AND OPPORTUNITIES Background. With substantial support from ADB’s program loan. transmission. The government of Madhya Pradesh (GOMP) has demonstrated its commitment to reforms and has made encouraging progress. 2006. India . (iii) establish and begin operations of new sector companies. the Electricity Act. the Asian Development Bank (ADB) approved the Madhya Pradesh Power Sector Development Program (MPPSDP). with the restructuring supported by the Accelerated Power Development and Reform Program. 2003. and convenient energy in a technically efficient. Power sector reforms (Appendix 2) in Madhya Pradesh (MP). Government of India. Performance Indicators. availability-based tariffs. 2003 mandated full metering for all consumer classes. which will require 100. and conservation. open access. and rationalization. and environmentally sustainable manner.000 megawatt (MW) of new generation capacity and related transmission and distribution facilities. The Government of India (the Government) has confirmed its “Power for All” initiative to provide universal power supply by 2012. 3. and the formation of state-level regulatory bodies was made mandatory. demand-side management. II. tariffs to be within 20% of the deemed cost of supply by 2012. and (iii) continuing related power sector reforms to control technical and commercial losses of the state transmission and distribution utilities. Cognizant of the vast impact on the global environment and energy security. clean. (ii) improve sector governance through institutional and organizational actions. Further. including (i) optimizing the power supply mix through greater use of indigenous hydropower resources and renewable energy. PROBLEMS. and distribution has been made obligatory. The objectives of the program component were to (i) establish independent regulation.
DISCOMs filed MYT applications on 31 October 2006 to be effective as on 1 April 2007. which has helped in meeting the growth in energy demand during this period. allowable costs and returns for TRANSCO. MP Power Transmission Company Limited (TRANSCO). and uniform retail tariffs for DISCOMs. Between 2001 and 2004. Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (DISCOM-W). MPERC proposed to determine a full-cost tariff for all consumer categories with the objective of ensuring that the sector companies receive enough income to cover expenditures and provide a reasonable return on assets. However. In March 2006. Installed capacity in or available to MP is about 6. The first multiyear retail tariff will cover 2008–2010. a single 1-year tariff was ordered. In the revised tariff philosophy of December 2003. plant utilization has increased from 63% in 2002 to more than 70% in 2006.2 completed. five power sector companies have been incorporated: MP Power Generating Company Limited (GENCO). Following the unbundling of the Madhya Pradesh State Electricity Board (MPSEB). However. the companies started to operate independently. In 2001. and capacity is being developed in all companies to operate in the evolving commercial and competitive sector. The formation of the MP Power Trading Company Limited (TRADECO) was announced in June 2006 for the bulk procurement of electricity from generators in order to sell to DISCOMs. it issued its first tariff orders (Supplementary Appendix A) for all sector companies—offtake tariffs for GENCO. the distribution retail tariff order still covered a single year. To provide an avenue for sector companies to reach financial sustainability. Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (DISCOM-E). all sector companies have been given cost-reflective tariffs that will gradually move to full cost recovery. B. The Government’s and GOMP’s main objective for the power sector is increasing electricity supply to its urban and rural population to facilitate economic growth. an independent. has adopted a realistic and supportive position through its regulatory mechanisms. the MP Electricity Regulatory Authority (MPERC).300 MW. Analysis of Key Problems and Opportunities 7. The three DISCOMs have taken over the distribution and supply activities in three geographic areas (east. 5.000 MW owned and operated by GENCO. All power purchase agreements for which MPSEB was the purchasing counterparty have been transferred to TRADECO. In September 2002. Based on diagnostic work undertaken by GOMP. In June 2005. 6. Electricity demand is estimated to have grown at an average of 5% 2 Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited (DISCOM-C). MPERC passed the first MYT orders for generation and transmission covering 2007–2009. Generation. central. achieving this objective in MP faces the following challenges (Appendix 3): 1. MPERC introduced a time-of-day tariff applicable to some classes of consumers. MPSEB will remain in place until the successor entities have built enough capacity to handle their own corporate affairs and financial management. 2007. GENCO has been vested with MP’s electricity generation assets and has taken over their operation. and west). with about 3. . Sector Constraints 8. Throughout the reform process. TRANSCO has become the sole transmission company in the state. Less than 100 MW of net installed generating capacity has been added in MP in the past 5 years. and three distribution companies (DISCOMs 2 ). GOMP undertook sector financial restructuring that included injecting equity and taking over loan arrears in lieu of rural electrification loans and subsidy arrears in 2005–2006. state-level regulatory agency formed in 1999.
The high network losses (Supplementary Appendix B ) are a pressing energy efficiency issue for MP. Annual energy demand is estimated to exceed supply by more than 13% in 2007. and private sectors. including MP. which are 3 Supply can be maintained to all customers with the outage of one major item of equipment. MP has consented to take 12. which are under construction or in the planning phase. In addition. These projects will meet the power needs of some states. Previous investments have successfully targeted transmission losses. reflecting the availability of coal to MP. Private sector projects are expected to be predominantly coal-fired thermal plants. The peak deficit has exceeded 20% and the energy deficit consistently has been about 13% for the past 3 years. An (n-1) security level is used for transmission planning. and is forecast to grow by approximately 7% through 2012. The bulk of planned generation capacity expansion will be coal-fired thermal plants. the Government is developing ultra mega power projects under tariff-based competitive bidding. MP has suffered from chronic peak capacity and energy shortages in recent years. are all thermal-based. and availability of the transmission network has exceeded 98% for the past year. Since 2002. Distribution. and overloaded distribution transformers (10% of all distribution transformers were overloaded at some stage in 2005). Development of planned generation expansion will be shared equally by the state. MP will receive an allocation from the central sector and joint venture hydropower and thermal projects that are in development. and low development risk of coal-fired plants. whereas actual sales have increased by more than 7% on average. In broad terms. the MP distribution system suffers from such a severe capacity shortage that it is incapable of providing adequate quality and reliability of supply to all customers. By most measures. Transmission. which means that supply security is significantly less than (n-1) for parts of the transmission network—in other words failure of a major network component might necessitate load shedding. Losses arising from poorly executed connections at distribution transformers exceed standards. System Losses 12. through the transmission of power regionally and nationally. and 47% in west zone). Consequently. It is characterized by high ratios of Low Voltage (LV) circuit length to Medium Voltage (MV) circuit length (about 64% in central and east zones. Investments in capacity are planned to remove the peak deficit by 2012. 3 Investment in the transmission network has not matched the consistently high demand growth in recent years. 10. However. Safety is compromised on the networks of the three DISCOMs due to shoddy installation of equipment and inadequate maintenance practices. These are expected to increase the installed capacity by approximately 700 MW by the end of 2007. Approximately 800 MW of additional hydropower capacity is planned. 2. primarily as peaking plants. central. Private sector contributions will come through competitively bid and greenfield projects. MP also will receive an allocation of approximately 400 MW of new capacity from the Kawas and Gandhar gas-based projects. the distribution system is the primary bottleneck in electricity delivery in MP. transmission losses have been reduced to an acceptable level of about 5%. transmission capacity within MP is inadequate to serve peak demand due to continued growth in demand.000 MW based on the power securing agreement with the Ministry of Power. transmission circuit length has increased almost 14%. . 11. The current portfolio of MP state projects. including the 500 MW Omkareshwar hydropower project. while transformation capacity has risen 41%. overloaded power transformers (20% of all power transformers were overloaded at some stage in 2005). 9. relatively short project development cycle. The supply-demand balance is now critical.3 over the same period.
opportunities for PPP include outsourcing operation and maintenance. Energy efficiency initiatives are another area where PPPs might play a key role (Supplementary Appendix C). the private sector is not yet playing a major role in the MP power sector. and will be rewarded if they exceed the targets. Comparing the DISCOMs with a notional international benchmark distribution network indicates that—after correction for different system characteristics. As a result. In generation. GOMP has started a scoping exercise with ADB involving potential investors and other stakeholders. will help in identifying and isolating losses. MPERC will be able to more accurately measure and report on the technical performance of DISCOMs. DISCOMs and MPERC have agreed on loss reduction targets. Incorrect and manipulated meter reading for high-value customers is suspected of causing significant commercial losses. ADB’s intervention has the potential improve the sector’s financial viability. 2005. Distribution network losses in many areas are 40%–45%. They also are exploring a strategic partnership schemes in urban distribution systems for achieving the requisite reduction in distribution losses. . and energy supplied—a reasonable target for technical distribution losses in MP is about 19%. and agreed that further private sector participation would be a critical medium-term objective. DISCOMs will be penalized financially if they fail to achieve these targets. The private sector is expected to participate in the establishment of an Energy Conservation Fund (ECF) as financier. As this is a reasonable level for a transmission network. only minor further improvements are anticipated. wind. as well as improving the quality of service to consumers. although the number of projects implemented is expected to be a small subset of this total. such as consumer and distribution transformer metering. GOMP has been cognizant of the need for further private sector participation to meet the sector’s financing requirements and to enhance operational efficiencies. further opportunities in renewable energy generation—small to medium hydroelectric. load factor. and biomass—abound.000 MW. In 2005. which form part of distribution tariff determinations. and remote metering of these customers will address the issue. Government of India. The financial fragility of the sector is perceived to be the main impediment to private investments. Private Participation 13. GOMP has created enabling environments for private sector participation and public-private partnerships (PPP). among other things. National Electricity Policy. In distribution. and financing recipient. Despite these initiatives. 15. Through implementation of power sector reforms under MPPSDP. fund operator. In addition. 14. and 15 private investors have been short-listed. which is unacceptably high. Through its National Electricity Policy (NEP) 4 . In transmission. 2003. the Central Electricity Authority (CEA) has stated that private participation in the sector is desirable and is to be encouraged. Other measures. The first project is in the bidding phase. ADB and GOMP has continued policy dialogue since processing the MPPSDP in 2001. The 4 Ministry of Power. India. The distribution component of the MFF will address losses. GOMP has proposals for independent power producer thermal projects in the next 5 years with a combined capacity of 12. MPERC defined the terms and conditions for intrastate open access in MP with the intention of further enabling private sector participation in the generation and retail subsectors (Supplementary Appendix C).4 now about 5%. and in keeping with open access and other provisions in the Electricity Act. DISCOMs are piloting franchising schemes for rural distribution systems. To this end. The high-voltage distribution system (HVDS) subproject in particular will impact directly technical and nontechnical losses. 3. so that the private sector increasingly will see investment reward as commensurate with risk and will begin to participate as intended under federal and state policy.
systematic billing and collection by distribution companies. Energy Service Company (ESCOs). delays in tariff subsidy from GOMP. GOMP prepared a financial restructuring plan (FRP) with the objective of restoring the sector’s financial sustainability. In addition to reducing these losses. payments of intercompany obligations. Tariffs include consideration of good governance. shortfalls in sector revenues are likely to continue for next 3 to 5 years as a result of high distribution losses. Rather than pass these through to GOMP. as necessary. nonremunerative investments in rural electrification schemes to meet social obligations. and that all consumers will pay for electric service. In this context. In this way. will be detailed following due diligence for Tranche 4 of the MFF. 19. GOMP undertook financial restructuring of the sector. and cofinancing from new carbon and energy efficiency funds expected to be operational by 2007 and 2008. In line with this.5 ECF could provide technical assistance for project development. Sustainability currently is undermined by energy inefficiency. the companies deduct subsidy payments before they remit the cash to the MPSEB. The tariff orders support the rationalization of operating costs and the commercialization of overall system operations. they are set off against electricity tariff subsidies. 17. the tariff orders reflect the official viewpoint that electric power will be provided on a cost-of-supply basis. Currently. and other entities. However. MPERC is determining tariffs in compliance with the NEP of CEA. 4. such as domestic consumers and small farmers (for irrigation). which included injecting equity and taking over loan arrears and rural electrification loans in lieu of subsidy arrears in 2005–2006. MPSEB has been defaulting on payment obligations to its suppliers and lenders by reducing capital investments and pursuing suboptimal repair and maintenance practices. distributive justice. 18. financial sustainability. Achieving financial sustainability of the sector is a key objective of GOMP power sector reforms. GOMP continues to extend subsidies to various customer groups. targeted lossreduction investments are critical to bring the cost of supply in line with average retail tariffs by the end of the Eleventh Plan (2008–2012). Most importantly. MPSEB’s financial position was critical due to inadequate tariffs. Sector companies began operating independently in June 2005. mobilizes private participation. Financial Sustainability of the Sector 16. economic . Before the sector reforms. subsidies are not paid upfront. power developers. specifically the level of technical and nontechnical losses in the distribution subsector. GOMP is updating the FRP to reflect the results of the financial restructuring and to map further reforms in the sector. including community-owned energy service providers. Design and operational procedures of the ECF. ADB participation in the fund also would add substantial value to the MFF proposal as it presents innovative financing. The fund also could help finance revenue-generating energy efficiency projects implemented mainly by the private sector and through PPP schemes. GOMP is reducing progressively the number of categories and the level of subsidies to be paid. Instead. Following the unbundling of MPSEB in 2002. However. Sector companies collect development cess of 10 paisa per kilowatt-hour (kWh) and electricity dues on behalf of GOMP. and could capitalize on carbon credit opportunities. and timely remittance of subsidies by the Government are essential for the financial sustainability of the sector. and to achieve sector profitability and eventually financial sustainability. To meet cash flow requirements. power sector subsidies are reflected as a line item in the state budget. ADB’s direct participation would open the opportunity for additional credit enhancements in the form of partial credit guarantees. and high commercial and technical losses in the transmission and distribution networks. which are mandated under the Energy Conservation Act 2001.
return on equity. repairs and maintenance expenses. Staff have been allocated to the new companies on an “as is where is” basis. and human resources development. With the proper implementation of the tariff policy. Clean Development Mechanism (CDM). MPERC fee. ADB and DFID have supported jointly the MP power sector. and the work regime from MPSEB. technical planning. modeling. depreciation. controls. liabilities. DFID assistance. Therefore. and fair pricing. and recently trading. sector companies in the transition phase face resource constraints for financial management and reporting. They have inherited assets. this component will be included in the third tranche that is scheduled for April 2008. (ii) initiate the establishment of a commercial and competitive business environment to promote efficiency gains and loss reduction. ADB (Supplementary Appendix D) helped GOMP (i) improve the policy environment and governance of the sector. providing extensive support for the development of financial restructuring plans.0 million) from 2006 to 2010. e. Department for International Development of the United Kingdom (DFID) is providing assistance 5 for further capacity development. transmission.g. The funds also will support information technology and management information systems (MIS) 6 for TRADECO that are not covered under the DFID program. which will cover 2006–2010. MPERC allowed TRANSCO to base its tariff on full cost recovery of loan capital. DFID’s capacity development assistance covers (i) defining the commercial relation ships between sector companies. Boards have been appointed. Concerns have been raised that earlier efforts to contain costs in the loss-incurring MPSEB have led to shortages of skills in strategically significant disciplines and work areas. operation and maintenance expenses. The early stages of reform led to the creation of successor companies that have assumed operating responsibilities for generation.. administrative and general expenses. TRANSCO is projected to maintain profitability. From 2002 to 2005. 21. planning. such as the establishment of ECF and other energy efficiency initiatives. DFID provided complementary support to the reform process through detailed needs assessments for accounting and information and technology systems for the successor companies. and (iii) introduce a computerized information and revenue management system. They also are consistent with ADB guidance. organization structures in the new companies have been evolving. The Canadian International Development Agency worked with ADB from 2002 to 2004. as well as in commercial areas. including market operation support during the transition to the new market mechanisms. 5. 22. Since the initial stage of reforms.5 million) and financial assistance (£4. In 2006. energy billing arrangements. GOMP included a $45 million nonphysical investment component for capacity development to support physical investments. including 5 6 DFID is providing £18. while DISCOM-E is expected to achieve profitability by 2008.5 million in technical assistance (£14. will complement ADB’s physical investments included under the MFF. specifically in financial management. and reporting. as well as the first MYT order for generation and transmission covering 2007–2009. In addition. Recognizing these constraints. cost and revenue centers. interest on working capital. and preparation of PPAs. Below this level. and income taxes. A needs assessment will be conducted to design the capacity building component for TRADECO.6 efficiency. systems. ADB also included an additional $10 million under the MFF for capacity development to support energy efficiency activities. procedures. (ii) financial management through setting financial policies. MPERC passed a distribution and retail tariff order for 2007. as well as the assessment of pension fund liabilities. (iii) accounting systems. as well as for enhancing their internal audit and control capability. From 2002 to 2006. . Capacity Development 20. distribution.
(iv) human resource strategies. and energy.3 billion in investments through to 2012. hydrocarbons. ADB is providing a comprehensive technical assistance program that began in 2005. Country Strategy and Program Update (2004–2006): India. Sector Road Map 23. (v) development. The investment program includes $40 million for a comprehensive capacity building program to meet the sector’s increasing management capacity requirements. DFID assistance also supports technical areas. including run-of-the-river hydropower projects. 2005. accounting for $2. . 25. such as distribution investment planning. organizational structure. Country Strategy and Program Update (2005–2007): India. needs assessment. and (iii) ensuring financial health of the power sector through continued power sector reform at the sector and corporate levels. Guided by the CSP. ADB. job descriptions). including components such as billing. 2004. facilitation of decentralization and standardization. Cognizant of the strong nexus between infrastructure and poverty reduction. power quality and reliability. and development of recruitment procedures and supporting mechanisms (e. Within the energy sector. while technical and nontechnical losses will be reduced through enhanced transmission capacity and the adoption of more appropriate voltage levels for distribution. Based on the sector road map. rural electrification. load forecasting. The road map aims to deliver the following outcomes: (i) strengthening power supply capacity to improve access to reliable and affordable electricity. (iv) strengthening institutions to implement reforms required by the 2003 Electricity Act. and technical applications. project management. The largest component is generation. Manila. and implementation of integrated MIS solutions. (ii) enhancing efficiency and quality of power supply. 6. railways. accounting. other forms of renewable energy. (ii) promoting higher efficiency and low-carbon power sources. ADB’s overall assistance has taken a balanced infrastructure development approach.3 billion of planned investment (43%).6 billion for distribution. 7. GOMP has developed a sector road map linked to a comprehensive investment program. water transport. including filing tariff applications and interaction with MPERC. (v) promoting private sector participation. The physical investments will address current unserved energy demand and provide additional capacity to meet forecast demand growth. comprising road systems. and (vi) regulatory support. Under its energy efficiency and carbon market initiatives..7 specification of long-term accounting requirements and preparation of chart of accounts. and (vi) encouraging energy conservation and ensuring environmental and social sustainability. (iii) expanding and optimizing transmission and distribution systems.g. the country strategy and program 2003–2006 (CSP) focused investment programs on clean energy development. The sector road map’s objective is to establish the route to achieving the sustainable growth of the power sector in MP. The program includes: (i) 7 ADB. benchmarking. Manila. asset maintenance management. the MP power sector needs an estimated $5. and $1. Asian Development Bank’s Strategy 24. procurement. The need for load shedding also will be reduced during peak demand periods (A matrix that summarizes the sector road map is in Appendix 1). the 2004 and 2005 CSP updates 7 outlined six priorities of ADB’s power sector assistance: (i) reforming the power sector.4 billion for transmission (26%). materials management. including rural electrification (30%). and equipment standards for all DISCOMs and transmission investment planning studies to meet demand growth and open access requirements for TRANSCO. This is followed by $1. The installed generating capacity of thermal and hydropower plants will be increased. and energy efficiency improvements. To overcome these challenges.
External Assistance 29. and development of renewable energy resources. As a result. ADB could not achieve fully its desired goal of policy reforms with its power sector borrowers. and ensured that these lessons are incorporated into MFF design and project preparedness criteria agreed between India and ADB. finalizing procurement packages. The power sector in India has received assistance from various international development partners (Appendix 4). and has provided assistance for energy management. such as Assam. Gujarat. The World Bank has been the major source of external funding to the sector. rehabilitation and improvement. In the past. ADB extended assistance to discrete power projects in various states. In most states. ADB conducted project performance audits of energy projects in India. as well as to the central power sector agencies. The interventions will promote knowledge transfer in relation to best practices in the international power sector. ADB also will intensify its efforts in the states where it is already active. which identified the following lessons: (i) ADB needs to be flexible and adaptable to changing conditions in India. (ii) support the inception of the energy efficiency initiative in developing member countries 9 for country-level assessment of near-term energy efficiency opportunities focusing on conservation and demand-side management. with an ultimate goal of reducing greenhouse gasses through CDM projects. focusing on reforms in generation. The experience is reflected in the preparation of the proposed MFF. Manila (TA 6346-REG) . In 2003. (iii) construction contracts should be properly packaged to facilitate implementation and coordination. Manila (TA 4496) ADB. ADB will continue to expand its promotion of and support for power sector reforms in other states. India recognized that macro management of the state’s finances needed to be improved to turn around the power sector. 26. 28. MP. 9. and ensure that appropriate environmental and social safeguards are incorporated into new power sector investments. which provides capacity building for financial and municipal sectors. with studies on state sector reforms. in this case with the emphasis on the transmission and distribution subsectors. Since 2000. Lessons 27. Although this policy enabled ADB to support many projects. These issues were taken into consideration when selecting the subprojects. 2004. (ii) land acquisition should be carried out expeditiously to minimize implementation delays. ADB has focused its lending on states committed to reforming and restructuring their power sectors on the premise that improving the power sector toward financial sustainability will increase the ability of state governments to allocate resources for poverty reduction. The proposed intervention in MP is consistent with the strategy of supporting state-level sector reforms. and (iv) loan covenants should be appropriate. Technical Assistance to India for Capacity Development for Clean Development Mechanism.8 CDM 8 . and Uttaranchal. it spread ADB’s resources too thinly. Kreditanstalt für 8 9 ADB. 8. Technical Assistance to India for Support the Inception of the Energy Efficiency Initiative in Developing Member Countries. and implementing subprojects under the ongoing loan. The United States Agency for International Development has supported policy aspects of private sector participation. improve corporate governance in state-owned utilities. 2006. the power sector was the largest recipient of state resources in terms of subsidies and capital investments. and (iii) assistance for renewable energy in rural areas through the ADB Renewable Energy and Climate Change Program.
according to projections in the FRP.10 per kWh cess on power sales into a statelevel ECF to be created. TRANSCO’s projections show that it will make a profit. and the global environment facility. The Energy Conservation Act 2001 mandates the creation of state-level ECF. GOMP is aware that energy efficiency and renewable energy potential to bridge supply gaps. Policy Dialogue 31. the cash flow mechanism could be discontinued beginning 1 April 2008. reconfiguration of distribution operations. Governance Measures. 10. including rural electrification. wind power. Haryana. and assessment of pension fund liabilities. and West Bengal. debt service. However. Use of ADB guidelines on procurement and consulting services and standard bidding documents will provide an opportunity for better monitoring. Companies are introducing an enterprise resource planningbased procurement system. 44. Priority is given to payment of salaries and wages. including directing 5% of the Rs0. Sector cash management. Bid specifications and packaging will ensure maximum competition under international competitive bidding procedures. and administrative and capital expenditures. Energy Efficiency. Japan Bank for International Corporation has supported the expansion of public sector generation. second-tier carbon markets. and biofuels. and efficiency in procurement. essential operation & management expenses. in terms of revenues and payments. Cash Management. DFID has provided technical and financial assistance for power sector restructuring in Andhra Pradesh. Further details are discussed in para. 11 32. DISCOMs’ financial projections indicate that DISCOM-E will achieve profitability in 2009. power purchases. and distributed and decentralized generation is roughly equivalent to current state-wide power imports. is centralized under MPSEB. renewable energy. which will increase transparency. the revenues from their businesses are consolidated and utilized by MPSEB in accordance with a prescriptive cash flow mechanism. . and will be capable of meeting its own operating costs and debt repayments. 33. 30. Total potential of energy efficiency. Although the five companies are operated separately and independently. 10 11 Appendix 4 provides further details. coal and oil supplies. MP will be among the first few states in India to create the ECF. Orissa. solar water heating and photovoltaic systems. The Canadian International Development Agency worked with ADB from 2002 to 2004 on MP power sector reform. as well as in MP in cooperation with ADB. transmission. specifically in distributed and decentralized generation application.9 Wiederaufbau of the Government of Germany has focused on improving the energy efficiency of thermal power plants and clean electricity production in various states. ADB has been coordinating with other development partners to maximize the value of sector reforms and physical investments 10 . The main sources of this potential are conservation and demand-side management. while DISCOM-C and DISCOM-W are expected to reach that milestone in 2010 with only small operating losses in 2009. The cash flow mechanism is expected to be retained until the sector is returned to profitability in 2011. and distribution. accountability. GOMP approved on 26 September 2006 a new policy for unconventional resource development. Accordingly. small hydropower. biomass-biogas. Cofinancing of energy efficiency projects is possible through the Kyoto Protocol. and has provided extensive support for development of financial restructuring plans. in 2007. Similarly. is substantially unrealized. commercial clean energy investment funds.
Promotion of private sector participation and public-private partnership. Regular access to the Executing Agency’s accounting and control systems to monitor expenditures and other financial transactions and safe custody of project-financed assets. 35. Appointment of independent board of directors. financial management. External auditors acceptable to ADB to audit financial statements. and ensure safe custody of project-financed assets. ADB review missions will have regular access to the executing agencies’ (EA) accounting and control systems to monitor expenditures and other financial transactions. which will be published regularly and reported to the shareholders. as well as public disclosure of operational and financial performance of the sector entities on the MPERC web site. . Measure Use of the Asian Development Bank (ADB) guidelines on procurement and consulting services. and efficiency in procurement. Use of ADB’s standard bidding documents and standard request for proposal documents for procurement and recruitment of consultants. Expanded use of advanced information and communication technology-based financial management systems will ensure efficient and accountability. Introduction of an appropriate internal audit system through the capacity building program. which will be published regularly and reported to the shareholders and MPERC. Expansion of computerized billing system. and benchmarked.10 Recruitment of financial management experts and establishment of internal control 34. Delegation of powers to companies’ management. and benchmarked by MPERC. evaluated. External auditors will audit the financial statements. Bid specifications and packaging to be prepared to ensure maximum competition under international competitive bidding procedures. Implementation of an operational risk mitigation action plan and undertaking a joint operational risk assessment with development partners. evaluated. Development of formal code of conduct for board of directors. Fully functional sector regulator to ensure equal opportunities for all sector entities and to improve sector governance. and audit capabilities. Public disclosure of operational and financial performance of the sector companies to improve transparency. Capacity development of the sector companies in accounting and internal control systems. Measurable financial performance indicators for each company to be established. systems supported with advanced information and communication technology-based financial management systems will ensure efficiency and accountability. A summary of governance measures is in Table 1. The appointment of independent board members in the sector companies will clarify and enhance their role as custodians of stakeholder interests. Revisions to board recruitment procedures and establishment of board-level committees will encourage diversity and facilitate the introduction of additional private sector expertise. will ensure transparency in the power sector in MP. Revision of board recruitment procedures. Measurable financial performance indicators for each company will be set. Capacity development of sector entities on e-procurement to increase transparency. Continued introduction of a new corporate culture through further commercialization. The development of a formal code of conduct for board members. accountability. Table 1: Governance Measures Area Procurement • • • • Financial Management and Audit • • • • • • • Institutional and/or Corporate Governance • • • • • • • • • Source: ADB assessment.
The proposed Investment Program to be supported by ADB will require 8 years for full implementation. and will ensure improved conditions for schools. independent state regulatory commission. while the distribution component will extend power to end connections and target physical and nonphysical system losses. Impact and Outcome 38. Subprojects are designed in a repeater nature in the transmission and distribution subsectors. Consequently. and will require flexibility in subproject selection to achieve overall objectives and to mitigate risk. and quality of life will improve. and (iii) the MFF can offer the flexibility required for the Investment Program to support the participation of four companies with different levels of readiness. central. as stated in the sector road map. The EAs have gained substantial experience from implementing the previous ADB project. and delivering power reliability and efficiently to consumers. The targeted lossreduction investments will bring the cost of supply in line with average retail tariffs by the end of the Eleventh Plan (2008–2012). and private sectors. INVESTMENT PROPOSAL 36. for details. See para. and will provide additional operational flexibility to TRANSCO in its role as an independent system operator in MP. and one set of project from each subsector is presented in the Report and Recommendation of the President (RRP). The project component of the earlier ADB loan covered the transmission and distribution subsectors. Remaining policy issues are currently being addressed. productive uses of electricity will escalate economically. A. The Investment Program will be a logical replication of the project component of the previous ADB loan. and will achieve sector profitability and eventually financial sustainability. The transmission component will complete the establishment of a backbone for transmission. and (iv) restructuring tariffs and issuing new tariff orders that allow revenue realization. and will promote open access and development of intrastate and interstate power trading by 12 The generation expansion will be shared equally by the state. (ii) the performance of the previous loan can guide the provision of subsequent loans. 9. Supply reliability will be improved further.4 billion). as well as part of the distribution investment program ($360 million of a total estimated investment requirement of $1. Additionally. (ii) unbundling the MPSEB into five companies. The Investment Program will address directly sector issues and provide a solid foundation for the sustainable growth of the reformed power sector in MP. 37.11 III. hospitals. including a fully operational.6 billion). and other social services. the direct benefit to electricity consumers will underpin the expected economic value of the reforms. quality and reliability of supply to consumers will improve. . (iii) improving sector governance through more functional independence. covering transmission and distribution subsectors 12 by taking into account the interrelated nature of the subsectors. thereby offering proper incentives for implementation. The program component assisted GOMP in (i) implementing key policy reforms and establishing a policy framework. The construction of new transmission lines will remove constraints to power flow. ADB will finance key components of the transmission investment program from 2007 through to 2012 ($250 million of an estimated total investment requirement of $1. The MFF is particularly well suited for the Investment Program because (i) the aim of the Investment Program is to support GOMP’s long-term objectives. The transmission and distribution component of MP’s investment program from 2007 through 2012 is predicated on building sufficient capacity for evacuation of power from existing and planned power stations and substations. A secure and predictable electricity supply will enable social and economic benefits to materialize.
development of a trading and settlements support system for TRADECO. substations. facilitation of strategic PPP. financially. The distribution component also will impact directly technical and nontechnical losses. Outputs The ADB supported subset of the investment program will cover three areas: (i) Transmission capacity expansion. and (c) one new 400/220/132 kV substation with 315 MVA transformer capacity. 39. Improvements in voltage profiles will be evident through better lighting and fewer equipment failures. (ii) (iii) C. From the perspective of consumers. the impact of the distribution component will be more pronounced and apparent. TRANSCO’s transmission network was modeled using power system analysis framework software.435 cct-km of 220 kV transmission lines across the state. and from state energy and demand forecasts produced with the assistance of DISCOMs. and this model was the primary transmission planning tool for assessing the technical benefits of the transmission components.000 volt-amperes (MVA). and (d) expansion of the village lighting scheme (feeder separation scheme). and economically viable. and establishment of ECF and other energy efficiency initiatives such as CDM. (b) eight new 220/132 kV substations with transformer capacity of 160 MVA 14 each. Technical Justification and Selection Criteria 40. Time-critical transmission lines. The scope of transmission work will comprise the construction of (a) 2 cct-km of 400 kV 13 and 1. A number of nonphysical investments will complement physical investments. Supply will be more consistent and momentary outages will be reduced significantly. Distribution components were modeled and analyzed using power systems analysis software. B.000.12 providing sufficient excess substation and line capacity to handle unplanned power transfers. The expansion program is technically. Targeted capital works will be designed to improve efficiency through loss reduction and to enhance supply reliability in all DISCOMs. Subprojects will include (a) rollout of an HVDS. and modernization of substations and substation Supervisory Control and Data Acquisition (SCADA). Distribution efficiency enhancement. and auxiliary equipment will be constructed to evacuate and transmit power from new power stations and substations to consumers. It can be implemented with minimal environmental and social impact. TRANSCO’s planning process uses investment signals provided through the national and regional demand forecast produced by the CEA. MP. and are focused on network augmentation and reinforcement rather than expansion. and TRANSCO. Nonphysical investments. 41. and eventually sector profitability and financial sustainability. (c) renovation of substation protection. . (b) remote metering of high-value customers (metering of unmetered consumers and distribution transformers metering). including implementation of SCADA systems in DISCOM-E. Best practice design standards and construction techniques will be applied to all investments. Transmission components form part of the least-cost expansion plan of the Government. 13 14 The following are the criteria for selecting each subproject: Kilovolt (kV) Megavolt-ampere 1.
High-Voltage Distribution System. Gwalior city under DISCOM-C has been selected for pilot testing the scheme. this scheme will be extended into other semi-urban and urban areas in MP. The objective of HVDS is a virtual elimination of theft-related commercial losses. voltage profiles also will improve and interference between neighboring customers’ loads will be decreased. selected through competitive bidding process. Category A subprojects will require a summary environmental impact assessment (SEIA). In the absence of LV voltage drop. Further. Under the modality. Operations of the ECF will be outsourced through competitive . lower-rated transformers close to consumers’ premises.13 (i) Subproject designs will be consistent with overall least-cost expansion plans designed on a least cost basis and reflect “best practice” design. the strategic partnerships with the private sector. Subprojects will display performance-based design consistent with international benchmarks for system efficiency and operational risk. as well as significant reduction in technical losses. category B subprojects will require a summary initial environmental examination (SIEE). These franchises will be at least long enough to recover the investments in network augmentation and expansion. and operations and maintenance features. unscheduled supply interruptions are expected to be reduced from fewer overloaded transformers and circuits. If successful. A pilot study undertaken by DISCOM-W confirmed the viability of the HVDS scheme. construction. a strategic partnership with the private sector will be developed in selected urban areas under the franchising modality with the intention of achieving the requisite reduction in distribution losses and improving the quality of service to consumers. This will be achieved by replacing the overhead open wire low-voltage (0. Strategic Public-Private Partnership Scheme. Energy Conservation Fund. with distribution loss in the study area reduced from 26. SEIA and SIEE for category A and B-sensitive subprojects respectively must be prepared and made available to the public 120 days before a Periodic Financing Request (PFR) is submitted to ADB.4%. 43. Subproject designs will be consistent with the environmental management plan (EMP). illegal connections from lengthy low-voltage lines will become difficult. 44. Land acquisition and resettlement plans (RP) and indigenous people development plans (IPDP) based on the agreed IPDF and the RF will be prepared as necessary for additional subprojects before ADB approves funding. and placing additional. (ii) (i) (ii) D. EMPs with budgets will be prepared for each subproject. All subprojects require environmental assessments in accordance with ADB’s Environment Policy (2002). By extending the 11 kV network closer to consumers’ service connections. ADB funds will partly capitalize a new special purpose vehicle created for the ECF.7% to 8. Special Features 42. including long-term capital investment and operation and maintenance. would buy power from the incumbent’s distribution licensee at bulk import points. and the indigenous people development framework (IPDF). Subprojects should have quantifiable energy efficiency improvements. the resettlement framework (RF). The PPP would be responsible for all downstream distribution-related activities.4 kV) distribution system with a high-voltage (11 kV) distribution system. Under the Investment Program.
(ii) 15 ADB.400 1.7 13. . United Kingdom Private Investors Internal Funds Government of Madhya Pradesh Total Funding Sources: Asian Development Bank estimates. distribution. ADB will assist in further development accordingly through a technical assistance.600 40 5.14 bidding to a consortium of an ESCO with experience in project implementation and a financial institution with professional experience in fund management.2 30. Investment Program and Financing Plan 46. Technical Assistance for Supporting the Inception of the Energy Efficiency Initiative in Developing Member Countries.300 1. Cofinancing of alternative energy projects is possible through the Kyoto Protocol CDM. cofinancing from the new CDM and energy efficiency funds expected to be operational by 2007 and 2008.6 0. second-tier carbon markets.4 11. mobilizes private participation.0 2. the designated national authority for CDM. CDM and second-tier carbon markets might be the best options for carbon credit transactions.0 0. 15 E. capacity building.2 100. 2007–2012 Investment Program 2007–2012 Investments Generation Transmission Distribution Nonphysical Investments Total Investments Financing Domestic Financial Institutions Asian Development Bank Department for International Development .585 620 35 700 800 600 5. $ (million) 2. Manila (TA 6346-REG).0 11. tentatively scheduled for April 2008.340 48. ADB’s direct participation will create the opportunity for additional credit enhancements in the form of partial credit guarantees. ADB will assist in preparing a project concept note for submission to the ministry to estimate the relative prospects for CDM. The total power sector investment program and indicative financing for 2007–2012 is shown in Table 2. Various parties will need to be consulted during the development of the ECF. it will be included in one of the further tranches of the MFF.7 100. and the Global Environment Facility. ADB’s participation as a partner (i) reduces the cost of funds.1 26.340 % 43. The Government has requested financing up to the equivalent of $620 million (included in the Country Operations Business Plan 2007-2009) from ADB’s ordinary capital resources to help finance part of the Investment Program covering transmission. ADB participation in the ECF offers innovative financing. Table 2: Madhya Pradesh Power Sector Investment Program. 45. ADB will provide indirect support through an ongoing technical assistance project executed by the Ministry of Environment and Forests.1 15. commercial clean energy investment funds. The HVDS is the only component confirmed for ADB funding that appears to be a promising CDM candidate based on expected emissions reductions. Additional equity contributions by power sector companies and private financiers will be possible. and energy efficiency. For this reason. The ECF investments will be repaid from revenue generated directly by the projects. Indicative cost estimates for appraised subprojects are in Appendix 5.0 47. 2006. Carbon Emissions Trading. and capitalizes on carbon credit opportunities.
with interest to be determined in accordance with ADB’s LIBOR-based lending facility. which will have a minimum loan amount of $5 million. and (iii) helps to attract other long-term financiers to the sector. with transformer capacity of 160 MVA each. except for the capacity building component. (b) eight new 220/132 kV substations. The Government is required to comply with the FFA requirements. The Government and GOMP have asked ADB to extend this finance in the form of an MFF.435 cct-km of 220 kV transmission lines across MP. 48. The Government will provide the proceeds of the loans under the MFF in local currency to the state and through the state to the EAs. 16 The Staff Instructions on the Use of MFF 17 was followed in processing the MFF. If the Government requests any cofinancing arrangements or related assistance for projects under the MFF from ADB. The Framework Financing Agreement (FFA) satisfies the requirements set forth in Appendix 4 of the Pilot Financing Instruments and Modalities (footnote 35). This component includes construction of (a) 2 circuit kilometers (cct-km) of 400 kV and 1. Manila. The MFF will extend multiple loans to finance a range of projects under the Investment Program.15 establishes standards in various thematic areas. The Government will make loans available to GOMP on the same terms and conditions as the ones applicable to the Government. ADB may assist with these. GOMP will bear the foreign exchange risk on the loans. Manila. Pilot Financing Instruments and Modalities. subject to any modifications that might be included under any loan agreement. 2006. Staff Instructions on the Use of MFF 18 ADB. 16 17 ADB. with a 1 percentage point spread. The Government can choose from eligible currencies and interest rate regimes for each loan. 52. as the EAs. The Government has provided ADB with (i) the reasons for its decisions to borrow under ADB’s LIBOR-based lending facility. . 50. 51. (i) PFR 1. Transmission Capacity Expansion. 2001. Ordinary Operations Loan Regulations Applicable to LIBOR-Based Loans Made from ADB’s Ordinary Capital Resources. The loans under the MFF will finance equipment supply and erection. and other capacity building activities. subject to the submission of a related periodic financing request (PFR) by the Government and execution of the related loan and project agreements. The minimum amount of a PFR will be $40 million. Each PFR will be accompanied by a detailed cost estimate. 49. ADB. as well as an implementation schedule. and (c) one new 400/220/132 kV substation with 315 MVA transformer capacity. consulting services. subject to related ADB policy and procedures. The specific terms of each loan will be based on the related PFR. The MFF transaction is accompanied by Tranche 1 and Tranche 2 PFRs to finance a set of subprojects consisting transmission and distribution components. GOMP will onlend to sector companies. respectively. All provisions of the ordinary operations loan regulations applicable to London interbank offered rate (LIBOR)-based loans 18 will apply to each loan. and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB. which are ready for implementation. 2005. The financing will be provided under an MFF in accordance with ADB policy. through the respective onlending agreements.
including resettlement. Implementation Arrangements 53. and bidding documents to ensure compliance with requirements of the Government and ADB. TRADECO will implement the capacity building component included in the third tranche. and DISCOM-W will be the EAs for the distribution components in their respective areas. The distribution component will undertake (a) construction of HVDS in six distribution circles in the eastern distribution zone of MP. (ii) capacity building and training in power trading.000 industrial consumers. and implementation of the Investment Program. The EAs will be responsible for the appraisal. resettlement and indigenous people’s development plans. At the central level. while the EA for energy efficiency will be determined once the design is finalized. However. they will not require assistance from consultants for project design and implementation. financial. ADB will meet with GOMP . As the staff of TRANSCO and the three DISCOMs are technically competent and fully familiar with ADB’s policies and guidelines. ADB assistance will be extended for design and implementation of the energy efficiency component. the Ministry of Power will monitor state sector policy and investment program implementation. 57. Review. headed by a full-time project manager. preliminary design reports. (c) metering of about 250. processing. DISCOM-C. TRADECO will require consulting services for (i) design. A Board information report will be submitted annually.16 (ii) PFR 2. ADB will field an Inception Mission within 3 months of the approval of each tranche. procurement. Since the PMU staff of TRANSCO and DISCOMs has substantial experience from implementing the previous ADB-financed project. Distribution Efficiency Enhancement.000 consumers. (b) remote metering of about 2. as well as monitoring the overall implementation of the Investment Program. if necessary. TRANSCO will be the EA for the transmission component.400 km of low-voltage lines to high-voltage lines. 54. will be established to monitor and coordinate the overall implementation of the Investment Program. and safeguards divisions. Further. The coordinating committee will report to the Energy Department of GOMP. The Investment Program Implementation Structure is in Appendix 6. and (d) renovation of protection system at about 100 substations. A coordinating committee comprising the chairman and managing director of the EAs. Executing Agencies. At the state level. The MPERC will monitor the performance and improvement of service delivery of the EAs at the state level. All EAs have established their project management units (PMU). the Energy Department will monitor the implementation of reform policy and overall power sector investment. The ADB team will prepare periodic reports to inform the ADB Board of Directors (the Board) of overall progress. and implementation of a power trading system. and supplemental progress reports will be submitted before Management approves individual loan agreements. ADB will review the implementation and operations. In addition. procurement. and environmental aspects based on quarterly progress reports. Performance Monitoring and Evaluation. Overall investment progress will be considered when new financing requests are submitted. 56. and led by the chairman and managing director of TRANSCO. environmental assessment reports. Each PMU will have technical. F. DISCOM-E. detailed design reports). The responsibilities will include the preparation of technical reports (feasibility studies. Performance will be monitored and evaluated based on indicators and targets stipulated in the design and monitoring framework. they are fully conversant with ADB’s guidelines and procedures. Investment Program Management. and (iii) implementation of information technology and MIS design. 55. including conversion of about 7.
etc.000. . will be utilized by the relevant EAs for project purposes only. including procurement and construction activities. as amended from time to time). 58. which ever is lower. HDVS.). Disbursement Arrangements. An MFF completion report will be prepared after the completion of all ADB-supported activities and projects under the Investment Program. a procurement plan for the subprojects under Tranche 1 and Tranche 2 are presented in Appendix 8. environmental. Simplified technical proposals will be used for contracts worth between $600. from 2007 to 2014. This will be applicable to expenditures of $100.17 and the EAs semiannually to discuss implementation progress. A completion report will be submitted within 3 months of the completion of each tranche. 60.000 and $1 million. operate. Consulting firms will be selected through international competition using the quality. ADB’s statement of expenditures will be used to reimburse eligible expenditures and to liquidate advances to the FGIA and SGIA. Under NCB the bidding documents and procurement procedures agreed between EAs and ADB. The loan agreements are expected to have implementation periods of 4–5 years (Appendix 7). Limited international bidding or national competitive bidding (NCB) will be used for supply contracts estimated at $250. International competitive bidding (ICB) will be used to procure equipment (conductors. Any modification to these will be agreed between EAs and ADB and further reflected in the procurement plan. The Investment Program will be implemented over 8 years. and shopping for contracts estimated at less than $250. Representatives of ADB and the EAs will take part in the review. Procurement to be financed under the MFF will be in accordance with ADB’s Procurement Guidelines (2006. ICB will be utilized for supply contracts estimated to cost the equivalent of or more than $1 million. the Government will establish. if any. Full technical proposals will be required for contracts valued at more than $1 million.) and turnkey construction of the facilities being funded under the Investment Program (transmission lines. A midterm review to be carried out 2 years after each tranche becomes effective will focus on the engineering. Implementation Period. and social aspects of the ADB-supported investments. Procurement and Consulting Services. which will facilitate withdrawal of funds to meet project expenditures whenever needed. resettlement. The FGIA account will be a current account. ADB will conduct a training seminar on its disbursement procedures for DISCOMs. The SGIA will be established in a non-interest bearing current account at a commercial bank acceptable to ADB and the Government. 59. Consultants will be selected and engaged in accordance with ADB’s Guidelines on the Use of Consultants (2006. The review will allow for any necessary midcourse corrections to ensure successful implementation and achievement of objectives. transformers. Loan proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007. as amended from time to time). and will review the financial status of EAs. and the resume for technical proposals for those less than $600. as also set out in the procurement plan will be followed.000.and cost-based selection method. etc. A second generation imprest account (SGIA) will be established for each loan in the name of each EA to receive funds from the FGIA to meet project expenditures incurred.000–$1 million. as amended from time to time).000 or less. For each loan. Interest income earned from the SGIA. Individual experts may be recruited following ADB’s procedures for engagement of individual consultants based on resume submitted in response to the terms of reference for the assignment. Contract packages will be prepared to ensure maximum competition under ICB. 61. The initial advance to an imprest account will be 6 months of estimated expenditures or 10% of the loan amount. In accordance with these arrangements. The last PFR should be submitted no later than the end of 2010. and maintain a first generation imprest account (FGIA) in Reserve Bank of India in accordance with ADB’s Loan Disbursement Handbook.
accountability. and transparency. consultants. 64. ADB’s Management may consider and allow retroactive financing of eligible expenditures when included in PFRs. ADB has reviewed and approved bidding documents for transmission subprojects. Retroactive Financing. or coercive practices relating to subprojects under the MFF. directly or through its agents. Advance Contracting. Further. Anticorruption Policy. fraudulent. The EAs will maintain separate accounts for each loan (tranches). Accounting. any alleged corrupt. but not earlier than 12 months preceding the signing of the related loan agreement. 65. 38 for governance measures in these areas). AND RISKS Financial Analysis 66. collusive.18 62. 63. For each future tranche. and compliance with conditions of the FFA and individual loan and project agreements also will be included in the progress reports. ADB approved the request of the Government for advance contracting. and as long as they do not exceed an amount of 20% of the individual loan. Consistent with its commitment to good governance. Auditing. ASSUMPTIONS. they will be issued in February 2007. the progress reports will include an evaluation of issues or problems faced by the EAs and recommended remedial actions. overall progress. provided that these are incurred before the effectiveness of the related loan agreement. the expenditures incurred for equipment and consulting services will be eligible for advanced contracting. IMPACTS. A. the EAs will submit audited project accounts and financial statements. BENEFITS. and a summary of financial accounts that will consist of loan expenditures during the period. Within 6 months of the close of the financial year. the Government will request ADB’s approval for advance contracting. Retroactive financing will apply from the third tranche onward. relevant provisions of ADB’s policy on Anticorruption are included in the loan regulations and the bidding documents for the MFF. as amended up to date) was explained to and discussed with GOMP and the EAs. Once ADB reviews and approves the documents. ADB’s policy on Anticorruption (1998. IV. year to date. and other service providers as they relate to the subprojects and components under the Investment Program (see para. In particular. The bidding documents for distribution subprojects are being prepared. The Government and EAs have been informed that approval of advanced contracting and retroactive financing does not commit ADB to finance any of the proposed subprojects. Except as otherwise agreed with ADB. all contracts financed by ADB in connection with subprojects under the Investment Program will include provisions specifying ADB’s right to audit and examine the records and accounts of the EAs and all contractors. and Reporting. An independent auditor acceptable to ADB will be hired by the EAs to conduct the audit. which were issued in December 2006. Each PFR will specify the nature of expenditure if retroactive financing is requested. Progress on environmental and social compliance. To support these efforts. A project completion report will be submitted within 3 months of the completion of each component. ADB reserves the right to investigate. The reports will include a description of physical progress and problems. To expedite the implementation of Tranche 1 and Tranche 2 subprojects. and total to date. suppliers. Institutional and financial analyses of the Tranche 1 and Tranche 2 subprojects (Appendix 9 and further details are in Supplementary Appendix E ) have been carried out in accordance with Guidelines for the Financial Governance and Management of Investment . Quarterly progress reports will be prepared for the individual components for review by ADB.
investments have net present values of Rs1. Sensitivity and risk analysis indicates that the FIRR for Tranche 1 and Tranche 2.8% for Tranche 1 transmission subprojects and 8. 19 ADB. The unbundled power sector companies inherited billing. While these systems can meet the companies’ statutory reporting requirements.8 billion for the distribution subprojects. B.7 billion in 2005. the EA for Tranche 1. are considered financially viable and sustainable. Financial Management 67. The financial internal rate of return (FIRR) is estimated to be 4. When discounted at WACC. therefore. The analysis was conducted for 2008–2032 for TRANSCO. accounting.2 billion for the transmission subprojects and Rs2.373 billion to Rs3. In addition. and management information systems from MPSEB that were developed to meet the Electricity Supply Association Accounting Rules established in 1985. 20 Approximately 50% of the cost will be met by the DFID grant with the companies providing the balance of the funding for the proposed software and hardware.19 Projects Financed by the ADB 19 . 2002. the EA for Tranche 2. (iii) 10% reduction in benefits. (iv) 2-year delay in project completion plus 20% increase in costs. as a result of sector financial restructuring.4% for TRANSCO and 2. funding has been allocated to meet the £18. accounting. the MPSEB reduced annual financial losses from a high of Rs13.3% for DISCOM-E.53 per kWh to Rs3. Guidelines for the Financial Governance and Management of Investment Projects Financed by the ADB.7 billion in 2002 to Rs2. as well as preparing their long-term business plans.05 per kWh. and developing internal audit procedures. and 5-year service support. which is 3. The improvement of the financial situation is mainly attributable to an increase in electricity sales and in average revenues from Rs2.121 billion in 2005. 20 implementation. As part of the capacity building support.3% for Tranche 2 distribution subprojects. Manila. they cannot provide useful and timely online information for management of the new companies and meet the information requirements of MPERC. The financial evaluation of subprojects was undertaken in real terms using constant 2006 prices. Over 2001–2005. companies have been updating the chart of accounts and accounting policies to comply with the Companies Act 1956. The current systems have limitations and are not fully computerized. assisting with the preparation of tariff petitions to MPERC. The FMA is an independent assessment based on discussions with officials of sector companies and review of reports prepared for the sector companies under the earlier DFIDsponsored technical assistance. as well as the overall Investment Program. interest charges declined from Rs11. covering billing. and DISCOM-E. and (v) no residual value.5 million cost of new systems. Past and Projected Financial Performance 68. (ii) 10% increase in operational and maintenance costs. This compares favorably with their weighted average cost of capital (WACC) for this period. A financial management assessment (FMA) was carried out using ADB’s FMA questionnaire to review the capacity of the sector companies to manage financial aspects of the MFF. Under the capacity development program. are robust with (i) 10% increase in capital costs. training. and MIS for the three DISCOMs and TRANSCO to purchase software and hardware. C. preparing cost accounting manuals. the new companies are receiving comprehensive training on revised accounting procedures. These systems are not suitable to meet the management and reporting requirements of commercial companies operating under the Companies Act 1956. Incremental costs and benefits attributable to investments were derived by comparing “with” and “without” project scenarios. . Tranche 1 and Tranche 2 investments. In addition.
DISCOM-E return on equity will be positive from 2008. Debt to debt-plus-equity ratio is forecast to fall from 68. with the balance financed by internal funds. Economic analysis (Appendix 12) was undertaken for transmission and distribution components to be funded under the Tranche 1 and Tranche 2 in accordance with the Guidelines for Economic Analysis of Projects 21 . The self-financing capacity of the company improves towards the end of the forecast period. For Tranche 1. Incremental output was valued using consumers’ willingness to pay for incremental consumption. For Tranche 2. DISCOM-E exhibits a strong cash flow with a debt service ratio of at least 1. 1997. all tariffs are to be plus or minus 20% of the cost of supply by the end of 2011. 2003 and National Tariff Policy. ADB will fund about 57% of the proposed project with the balance funded by equity from GOMP. Initial estimates indicate that Tranche 1 transmission subprojects have an overall EIRR of 15. TRANSCO’s projected financial performance indicators improve over the forecast period with a debt service coverage ratio exceeding 1. These benefits arise from a reduction in technical and nontechnical losses.2 in all years from 2008. Non-incremental output from the subprojects was valued based on the displaced generation from coal-fired thermal plants. were based on projections of historical sales data. ADB will fund about 63% of the capital expenditures. These EIRRs indicate that Tranche 1 and Tranche 2 components are economically viable.3 in all years. and the impact of real increases in household income. with TRANSCO able to meet at least 20% of capital expenditures from internal sources from 2013 onward. and PFC loans. Following single-year price determinations in 2006 and 2007 for distribution companies. Return on historic average net fixed assets will increase to 19.20 69.6% by 2012.7%. The self-financing capacity of DISCOM-E exceeds 20% from 2009. progressive increases in tariffs. and indicate that the company is capable of absorbing the proposed investments under the MFF (Appendix 11. Economic internal rates of return (EIRR) were calculated by comparing “with” and “without” project scenarios. This will provide certainty for companies and customers.3% in 2009 and remain above 16% thereafter.. At the same time. Grants from the Government will fund 90% of rural electrification with 10% financed by loans through the rural electrification corporation. Benefits were quantified through load flow analyses and from pilot studies undertaken in other states. D. removal of network constraints. Guidelines for the Economic Analysis of Projects. Economic Analysis 72. MPERC will provide a 3-year tariff determination covering 2008 to 2010. Full electrification of MP state is projected to be achieved at the end of 2009. retained earnings. the impact of real tariff increases. Thus. 70. and PFC loans. 71. Demand forecasts.0% and Tranche 2 distribution subprojects an overall EIRR of 14. Sensitivity analysis 21 ADB. GOMP equity. The projections for DISCOM-E show sustained financial improvement from 2007 through to 2016.3% in 2006 to 39. . DISCOM-E tariff increases approved by MPERC allow profitability to be achieved by 2008. At the proposed tariffs. Supplementary Appendix G). coupled with a reduction in losses from the current level of 41% for transmission and distribution to 24% by 2012. Supplementary Appendix G). MPERC has introduced MYT determinations for generation and transmission companies. per the Electricity Act. prepared by TRANSCO for Tranche 1. will continue to improve the companies’ financial performance over the next 5 years. The main economic benefits are displaced thermal electricity generation and incremental consumption. The improving self-financing ratio and adequate debt service ratio assure the financial sustainability of the company with the ADB investment (Appendix 11. Manila. and improved reliability of supply. modified by population growth. The debt to debt-plus-equity ratio of 67% in 2007 falls steadily to 45% by 2016. TRANSCO’s financial position is improving as a result of increasing tariffs and revenues.
Environmental Analysis 73. and periodic clearing of vegetation during operations. the implementing agencies will be responsible for overall implementation of site-specific EMPs. proper management of construction-related wastes. 75. although sensitivity to forecast demand growth is apparent for some subprojects. Adequate provisions have been made for the environmental mitigation and monitoring requirements and their associated costs. procedures. with equivalent carbon dioxide (CO2) reductions of more than 1 million tons per year. which are considered largely positive. Environmental Assessment Guidelines (2003) 22 . reflecting the urgent need for augmentation of the transmission network. The principal impacts are related to acquisition of rightsof-way for transmission lines. Environmental assessment also will be prepared in due course for the remaining components in each tranche. Manila. 22 23 ADB. 2006. outlining the policy. 24 Each tranche will be subject to environmental categorization. 2003. No endangered. Manila. The project sites are mostly on government-owned land. Based on the environmental assessments and reconnaissance surveys.the EARF. or threatened species of flora or fauna have been reported at any project sites. . and institutional requirements for the overall Investment Program and each tranche (Supplemental Appendix K). The EAs are responsible for preparing the required environmental assessments and obtaining ADB concurrence before implementation. as necessary. All tranches are expected to be Category B or C.21 revealed that expected economic outcomes from transmission subprojects are robust under a range of downside scenarios. Distribution subprojects are also robust. most of the impacts will occur during construction. 74. ADB Staff Instructions on the Use of the Multitranche Financing Facility (2006) 23 . Environmental Assessment Guidelines. These impacts will be mitigated by selective routing of transmission lines. The first and second tranche investments are classified as category B 24 in accordance with ADB’s Environmental Assessment Guidelines. ADB. Public consultations indicate strong local support for the proposed investments. The EAs (TRANSCO and DISCOM-E) have prepared IEEs for Tranche 1 and Tranche 2 components. A summary IEE (Appendix 13) for Tranche 1 and Tranche 2 outlines environmental benefits and negative impacts. Environmental assessment of the proposed investments has been and will continue to be conducted following ADB’s Environment Policy (2002). and provision of compensation for reforestation. as outlined in the EARF. A draft environmental assessment and review framework (EARF) has been prepared for the Investment Program. unused. proposed mitigation measures. Tranches will be re-categorized as necessary if Category A. The EARF will guide environmental management activities robustly for the life of the MFF. Distribution and transmission system efficiency improvements will result in energy savings of at least 1. The land acquired for new substations is mostly uninhabited. earthmoving and initial clearing of vegetation for construction. rare. and the Government’s environmental assessment regulations and guidelines. Environmental and social benefits of the investment components and long-term program objectives outweigh the negative impacts. and preliminary EMP (Supplementary Appendix L). Although the contractors will have primary responsibility for implementation of mitigation measures during construction. and outside towns and villages. appropriate erosion-control measures.or B-sensitive projects and/or subprojects are identified. Staff Instructions on the Use of the Multitranche Financing Facility.200 gigawatt-hour (GWh) per year. E. The proposed Investment Program has potential cumulative and induced impacts. Mitigation measures related to construction and specified in the EMP will be incorporated into civil works contracts.
supplies. substantial loss of land value is not expected on any of the affected plots. Policy on Indigenous Peoples (1998). affecting a maximum of 1. No private land is required permanently or temporarily for the expansion of the distribution system under Tranche 2. Appendix 15 and Supplementary Appendix J). and IPDF were prepared. and other social services. Government policy includes support to poor households via a lifeline tariff for the first 1 kWh of consumption per household per day. will be updated during the preparation of Tranche 3. Frameworks that are part of the FFA will be considered a prerequisite to apply for financing by the EAs. the short RP. especially for women who are traditionally responsible for the activities inside the house. affecting three households. The EA also has ensured that scheduling the construction of towers and the stringing to minimize crop disruption is common practice. the EA has allocated sufficient budgetary resources to cover the compensation packages provided in the RP. The short RP also covers the transmission network expansion to be financed under Tranche 3. and IPDF were disclosed to the affected persons in their local language in December 2006 (Appendix 14. 77. RP. which will be the basis for preparing subsequent RPs and IPDPs for additional subprojects in accordance with ADB’s policy on Involuntary Resettlement (1995). A secure and predictable electricity supply will enable social and economic benefits to materialize. hospitals. Future RPs and IPDPs will be prepared and disclosed to affected persons. In addition. 78. Poverty Assessment 79. as well as ensure improved conditions for schools. Demand for electric installations. The RP. and maintenance is expected to increase. Appraisal of successive tranches will require a review of the RF and IPDF. Social Assessment 76. G. Minimal land acquisition is required for the transmission network expansion under Tranche 1. One of the 18 substations will require the acquisition of 3 hectares (ha) of private land. creating additional new job opportunities.22 F. and all compensation will be paid before the start of civil works. are expected to be minimal. In full consultation with stakeholders and affected persons. If land acquisition from private owners is required. GOMP has agreed to monitor the implementation of both frameworks. which would support the Government’s projections for growth in energy demand and its intent to make affordable grid-based electricity supply available to the entire population by 2012. if any. or the appropriate indigenous people (IP) actions for all subprojects with IP issues. A maximum of 612 ha of land is estimated to be acquired temporarily for transmission lines. and to endorse the frameworks for future tranches. Since the EA has ensured that all the transmission lines will pass through agricultural land. Compensation packages and a short RP have been prepared for the subproject components of Tranche 1. if needed. Improvements in quality and reliability of supply that will accrue from targeted investments are expected to improve living conditions in the rural areas through the creation of job and income opportunities. Farmers and small business owners are expected to increase their productivity. and relevant sections of the Operations Manual. a reliable electricity supply improves quality of life of households.528 people (for less than 10% of their assets). Impacts of Tranche 1. as well as the preparation of the RPs and IPDPs. RF. However. an RF. Tranche 1 and Tranche 2 will have no impacts on indigenous people. . and future tranches. The MFF is designed to benefit all grid-connected consumers with adequate and reliable supply of electricity.
Counterpart Funding. (iii) the energy balance demonstrates that adequate excess will be available for purchase within MP and from outside of MP to meet electricity sales forecasts. Audits. 86. with any deficits met by commercial borrowings or other satisfactory means. In addition to the standard assurances. (vii) tender documents are prepared for Tranche 1 transmission subprojects and are being prepared for Tranche 2 distribution subprojects. the Government and GOMP have given the following assurances. In addition the EAs will ensure that independent auditors whose . which have been largely incorporated in the FFA. A. leading to further energy and peak capacity shortages. resulting in limited financial independence of companies and continued centralization of cash flow mechanisms. leading to lower-than-expected demand for electricity. and will be incorporated in the individual loan agreement(s) and project agreement(s) as applicable and mutually agreed between the Government and ADB for each project under the MFF. TRANSCO. so that the EAs can commence commercially independent operations. Cash Management Responsibilities. GOMP will ensure that the cash management responsibilities are transferred to TRANSCO from 1 April 2008 and DISCOMs from 1 April 2009. 85. The EAs will engage independent private audit firms to conduct annual finmancil and procurement audits. ASSURANCES 81. and TRADECO with respect to commercial. and MPERC’s tariff-setting principles allow costs of approved investments to be passed through in the tariff. as well as lower electricity sales and revenues than forecast. The Government and GOMP will ensure and cause the availability and timely release of counterpart funding for the timely implementation of each subproject. Risks include (i) inability of DISCOMs to reduce losses as agreed with MPERC. Potential Risks 80. (iv) adequate physical and price contingencies are provided to meet quantity and cost escalations. (ii) GOMP is committed to ongoing sector reforms and full financial independence of the operating companies. The Government and GOMP will continue to emphasize and support the autonomy of DISCOMs. 83. (vii) delays in procurement and contract awards. administrative. GOMP will ensure timely implementation of the capacity development program (financed by DFID). resulting in lower revenues and failure to meet debt service on subproject investments. (vi) failure to mobilize the necessary counterpart funds. 84. and (viii) appropriate risk management mechanisms will be incorporated in the evolving corporate governance framework. Financial and Sector Reforms 82.23 H. resulting in financially nonviable investments. and operational activities. (iv) increases in the prices of construction materials. V. (ii) delays in power sector reforms. (vi) GOMP has provided assurances on the timely provision of counterpart funding. Sector Reforms. These risks are regarded as low. Capacity Development. or have been minimized to the extent possible in project formulation and implementation as follows: (i) investment has been provided to achieve the targeted loss reduction. cost estimates have been based on a basket of recent tender prices. and (vii) increases in the cost of delivered electricity due to suboptimal power purchasing and other factors. and advance action for procurement has been requested. (iii) delays in construction of power projects not financed by ADB.
and (ii) business process and performance audits in all operational areas. The EAs will ensure that the following measures to strengthen corporate governance will have been completed by 31 December 2007: (i) independent directors at the board level are recruited. DISCOMs will have established. (ii) negotiate longer terms of guarantees on equipment. 88. Self Financing Ratio. DISCOMs’ MYT will be effective as of 1 April 2007. Billing and Collection Efficiency. B. commercial functions. 89. (ii) board-level committees. 93. Recruitment.24 qualifications. The EAs will maintain a debt service coverage ratio of 1. C. (ii) information technology specialists. The EAs will (i) ensure utilization of turnkey contracts. 94. Loss Reduction. actions through the duration of the investment program. made operational. 91. Turnkey Contracts. experience. issuing flyers to the public. Debt Service Coverage Ratio. 95. and terms of reference are acceptable to ADB and GOMP conduct (i) energy audit for distribution reconfiguration and corporatization and divestment. Tariff. (iv) internal controllers reporting to the chairmen and managing directors of the respective EAs on a regular basis are appointed. 87. By not later than 31 December 2008. and placing newspaper and television ads in local language to ensure that people are aware that HVDS networks may result in serious injury or death in case of attempts to illegally connect to overhead circuits. by 31 December 2008 to 29. DISCOM-E will ensure improved collection efficiency from 92% in 2006 to 96% by not later than 31 December. and will have recruited (i) chartered accountants. and (iii) include long-term maintenance provisions in the turnkey contracts. 92. By not later than 31 March 2009. Customer Service Centers. including audit and risk management committees. where appropriate. and (iii) . are formed.5%. Corporate Social Responsibility.5%. DISCOM-E will ensure that agreed loss-reduction targets are met as follows.2 from 2007 and onwards. Corporate Governance. by 31 December 2007 to 32. and by 31 December 2009 to 26. information technology. Commercial 90. The GOMP will ensure the accountability and transparency of EAs is maintained through the stakeholders meeting and publication of its agendas. DISCOMs will conduct extensive public awareness campaigns through installing appropriate signs. Human Resources 96. The EAs will maintain historic self-financing ratio of 20% from 2010 onwards (3 years moving average capital expenditure).5%. and fully staffed with specialists with appropriate skills a number of customer service centers in large cities and a customer service center in small towns. (iii) internal audit functions strengthened and internal audit guidelines in line with best practices are developed (internal audit scope to cover revenue audit and internal audit reports to the audit committee of the board). the EAs will have appointed directors for operations. and finance.
In addition. GOMP will cause respective EAs to ensure that all land and rights-of-way required by the subprojects will be made available in a timely manner and that the provisions of the RPs. GOMP will cause each EA to undergo a full consultation and participation (C and P) process including: (i) stakeholder analysis. 103. The EAs will have legally established trust funds to cover pension arrears by 31 December 2008. GOMP will cause respective EAs to ensure that prior to land acquisition and any resettlement under each subproject. other local infrastructures. GOMP will cause respective EAs. 97. will be implemented in conformity with all applicable laws and regulations of the Government. subject to compliance with the relevant provision of the RF and RPs and EARF and EMP and in accordance with all applicable laws and regulations of the Government and MP.25 specialists in commercial areas. 102. and (iv) adequate monitoring of the C And P process. Land Availability. GOMP will cause respective EAs to ensure that affected persons by each subproject are fairly compensated in a timely manner on replacement values in accordance with the related RPs and RF. and agricultural land to at least their pre-project condition upon construction completion. and cleared the utilities. Safeguards 98. Resettlement and Indigenous Peoples. The EAs will submit progress and completion reports on land acquisition and resettlement under the quarterly progress reports for each subproject. (iii) announcement of the date for consultation on specific issues. 99. 101. trees. required for commencement of construction activities in accordance with the schedule agreed under the related civil works contract. such that their living standards are not adversely affected. and commercial functions. (ii) provision and disclosure of documents to the stakeholders. Pension Funds. including compensation and entitlements for affected households and persons. operations. GOMP will cause respective EAs to ensure that the requirements set out in the IPDF and the Government’s and GOMP’s applicable loans on IP will be implemented. to acquire or make available the land and rights to land free from any encumbrances. agricultural land. 100. EAs will ensure that essential public infrastructure that may be affected under land acquisition and resettlement is replaced as appropriate in an expeditious manner in accordance with the RPs. and other infrastructure prior to transport of material and construction commencement. Provision should be made for adequate recording of the condition of roads. The EAs will have established management training programs in finance. and the agreed RF. GOMP and ADB’s policy on Involuntary Resettlement (1995). In order to strengthen the effectiveness of stakeholder consultation and participation in the implementation of the Investment Program. D. 104. the related RP including its update based on consensus of AP. the external monitoring report shall be submitted to ADB on a semiannual basis for review. and any other obstruction from such land. GOMP will cause respective EAs to ensure that construction contracts contain binding requirements for construction contractors to fully reinstate pathways. is disclosed with all necessary information made available to persons affected by the subproject and confirm that it be uploaded onto ADB’s web site. .
EAs will prepare and implement the necessary IEE. and regulations of the Government and ADB’s Environment Policy (2002).26 105. VI. GOMP through the EAs will ensure that proposed investments under the MFF are undertaken and that all subproject facilities are operated and maintained in accordance with all applicable laws. For any category A or B sensitive subprojects. Haruhiko Kuroda President 8 March 2007 . audit. and such other terms and conditions as are substantially in accordance with those set forth in the Framework Financing Agreement presented to the Board. For subprojects not defined prior to approval of the MFF. a Summary Environmental Impact Assessment (SEIA) or IEE for subsequent tranches will be prepared and made available to the general public 120 days before a PFR is submitted to ADB. environmental impact assessment. I am satisfied that the proposed multitranche financing facility would comply with the Articles of Agreement of ADB and recommend that the Board approve the provision of loans under the multitranche financing facility in an aggregate principal amount not exceeding $620 million equivalent to India for the Madhya Pradesh Power Sector Investment Program from ADB’s ordinary capital resources. Environmental. RECOMMENDATION 106. EAs will monitor. For each subproject. the environmental categorization and assessment procedures defined in the EARF will be followed as part of subproject appraisal. rules. and report to ADB twice a year on the implementation of the EMPs for each subproject. with interest to be determined in accordance with ADB’s LIBOR based lending facility. and EMP (with budget) in accordance with the EARF.
Assumptions and Risks Assumption Central and state governments remain committed to power sector reforms. Assumptions • Operation and maintenance of the installations are carried out according to standard requirements. including associated facilities not financed by ADB. Enhance system availability from 95% in 2005-2006 to 97. . and power delivery capacity of Madhya Pradesh. Increase transmission capacity from 5. Eliminate financial losses in the sector by 2011 (from Rs2. Reduce distribution losses from 40%–45 in 20052006 to 19% in 2012. • Risks • Delays in implementation of related power grid transmission projects. Contributed to meeting the energy demand growth in Madhya Pradesh. • Availability of adequate competent staff in the companies. Distribution enhancement: Reduction in system losses and improved supply quality and reliability. Design Summary Impact Contributed to sustaining economic growth and social development in Madhya Pradesh. Reduce customer complaints about quality of electricity supply MP Energy Department able to conduct further reform. Reports of the MPERC. Capacity of sector institutions strengthened. Reduced dependence of the sector on direct state support from approximately 30% of total investment funding to 0% by 2012.Appendix 1 27 DESIGN AND MONITORING FRAMEWORK A. Load growth as projected. Successful implementation of DFID capacity development program.563 MW in 2005-2006 to 8. • Generating capacity.5% in 2008-2009. not commissioned in a timely manner.70 billion in 2005). Improve system reliability. Reduce technical losses in transmission system from 5. Investment Program Performance Targets/Indicators Gross state product (GSP) grows by at least 6% annually in 2007–2012. substantial reduction in fault restoration time. Consistency of regulatory mechanisms and intervention.170 MW in 2008-2009. Outcome Sustainable and commercially operated power sector companies. voltage profile.9% in 2008-2009. Data Sources/Reporting Mechanisms Annual economic review and a performance reports.2% in 2005-2006 to 4. Annual reports of the transmission and distribution companies. • • Transmission expansion: Improvement in operational efficiency. Energy deficit is reduced from 13% in 2007 to 0% in 2012.
By 2012: High-voltage distribution systems: 16. Outputs Transmission expansion: Construction of transmission lines for power evacuation and strengthening of transmission systems. Timely approval of contract awards by relevant authorities Timely land acquisition and regulatory approval of construction of transmission lines and substation. Distribution enhancement in east distribution zone: Installation of remote metering and high-voltage distribution systems.545 cct-km. Improved human resources in all sector companies.28 Appendix 1 Design Summary Performance Targets/Indicators Improved capacity of MPERC. Capacity for interstate power trade built. renovation of substation protection system and customer service lines. Risks • Regulatory approval for rights-of-way in forest areas is not obtained in a timely manner • Increase in prices of raw materials exceeds contingency and inflation forecasts.4 kV distribution transformers: 24. Data Sources/Reporting Mechanisms Assumptions and Risks Improved energy efficiency. 132 kV substation: 10x40MVA 132/33 kV 33x40 MVA 132/33 kV additional transformers 132 kV lines: 1.500 km conversion of LT lines to HV lines 11/0.506 cct-km. implementation of SCADA.000 numbers of 25 . Assumptions • Counterpart funds for timely project implementation are made available • 220 kV substation: 8x160 MVA 220/132kV 3x100 MVA 220/33 kV • 220 kV lines: 1. Private investment in power sector substantially increased. Energy conservation funds that supports smallscale projects promoting energy efficiency fully operational. Improved financial management and accounting in all sector companies. Increased private sector participation. By 2011: 400 kV substation: 315 MVA 400/220 kV Quarterly project progress reports. loan review missions.
600 single phase Substation protection system: 40 33/11 kV substations Distribution system strengthening: 500 km 33 kV line 2. High-voltage distribution systems: 13.4 kV distribution transformers: 22. of 25 kVA 32.000 nos. of meters Distribution enhancement in west distribution zone: Installation of high-voltage . and consumer metering.Appendix 1 29 Design Summary Performance Targets/Indicators kVA 30.000 three phase 500. Jyoti Gram Yojna: 3.800 x 25 kVA distribution transformers By 2013: Data Sources/Reporting Mechanisms Assumptions and Risks Distribution enhancement in central distribution zone: Installation of high-voltage distribution system and remote metering for industrial consumers.800 industrial customers Consumer metering: 131.000 three phase 187.000 numbers of 16 kVA Remote metering: 2. and distribution transformer metering. of 16 kVA Remote metering: 3.800 km 11 kV line 1.100 km conversion of LT lines to HV lines 11/0.200 nos.000 nos.000 industrial customers Consumer metering: 250. renovation of substation protection system.000 single phase Substation protection system: 330 33/11 kV substations.300 km 11 kV line 21 new 33/11 kV substations Distribution transformers metering: 23. SCADA: Installation of SCADA system for Jabalpur city circle. and distribution system strengthening.
of 16 kVA Substation protection system: 400 33/11 kV substations SCADA: Installation of SCADA system Jyoti Gram Yojna: 5. Financial sustainability of power sector.200 kVAR 115 nos 600 kVAR Data Sources/Reporting Mechanisms Assumptions and Risks Nonphysical investments: Development of MIS for power trade function. Performance Targets/Indicators By 2013: High-voltage distribution systems: 3.500 km 11 kV line 21 new 33/11 kV substations Distribution transformers metering: 23. substation protection system. Establishment of Energy Conservation Fund. . Facilitation of private sector participation in distribution through piloting strategic partnership modality and expanding franchising scheme. distribution system strengthening. of 25 kVA 19. Pilot scheme is implemented in Gwalior city.000 x 25 kVA distr transf Distribution system strengthening: 580 km 33 kV line 2. Cash management responsibilities transferred to sector companies by April 2001.4 kV distribution transformers: 580 nos.30 Appendix 1 Design Summary distribution system.100 km 11 kV line 2. ECF established by 2010 in line with Energy Conservation Act 2001. Ratlam and Ujjain districts. distribution transformer metering. and capacitor banks. Jyoti Gram Yojna. Fully functioning power trading system by 2009.900 km conversion of LT lines to HV lines 11/0. in the areas of Dwas.400 nos. SCADA.000 meters Capacitor banks: 10 nos 1.
Appendix 1 31 Design Summary Performance Targets/Indicators Independent directors at the board level are recruited. business process. and energy. EAs have appointed directors for operations. and finance by December 2008. established. internal audit guidelines developed and internal controllers recruited by December 2007. DISCOMs MYT effective by April 2007. including audit and risk management committees. and 90% by DISCOM-C. Loss-reduction targets agreed with MPERC are achieved. Data Sources/Reporting Mechanisms Assumptions and Risks . board-level committees. and performance audits are conducted by independent private auditors. 94% by DISCOM-W. commercial functions. Annual financial statement. Billing and collection efficiency is achieved by December 2006 at 96% by DISCOM-E.
SCADA = Supervisory Control and Data Acquisition a Handbook of Statistics on Indian Economy. Commissioning by 2011 Distribution-West: 3.in/scripts/publications. kVAR = kilo volt ampere reactive. MFF= multitranche financing facility. MP = Madhya Pradesh. LT = low tension.rbi. GWh = gigawatthour. Commissioning by 2013 ADB = Asian Development Bank. DFID = Department for International Development of the United Kingdom.2 Construction started by December 2008 3.345 billion • DFID: $25 million • Private investors: $100 million • Internal Funds: $610 million • GOMP: $300 million Distribution-Central: 3. . Procurement of major equipment: issuance of bidding documents by January 2008 and contract awards by October 2008 3.3. MYT = multi year tariff. HV = high voltage.3 Construction started by January 2008 1. Procurement of major equipment: issuance of bidding documents by January 2008 and contract awards by October 2008 3.4 Commissioning by 2011 2.1 Procurement of major equipment: issuance of bidding documents by February 2006 and contract awards by September 2007 1.32 Appendix 1 Activities with Milestones 1. MPERC = Madhya Pradesh Electricity Regulatory Commission. DISCOM = distribution company.org. GOMP = Government of Madhya Pradesh.1. kV = kilovolt.2 Construction started by December 2008 3. kVA = kilo volt ampere.3.1. Commissioning by 2013 Inputs • ADB: $620 million • Domestic Financiers: $1.1.2 Land acquisition for substations by July 2007 1. Distribution-East: 2. MW = megawatt. Transmission: 1. Available at: http://www. cct-km = circuits kilometers.3. MVA = megavolt ampere.aspx and updated monthly. PFR = periodic financing request.2 Construction started by May 2008 2. Procurement of major equipment: issuance of bidding documents by June 2007 and contract awards by February 2008 2.
resourcing. Consolidate MYT. and performanceorientated successor companies to MPSEB developed. Cross-subsidies addressed.Appendix 1 33 B. TRADECO trading. Implement program for reducing system technical and nontechnical Companies (delivery) MPERC (target and monitor) . “Backbone” management support (ERP) systems specified and implemented. CAIFI. Human resource planning. Sector Road Map Impact Reduced burden on the state and release resources for more productive use. Power system capable of meeting forecast demand. Implement organization structure and build capacity of the six successor companies (and supervisory institutions of Energy Department. Responsible Party Sector companies GOMP GOMP MPERC Continue the reform process. introduce intrastate ABT and open access regime (1 MW customers by 2007 ahead of Jan 2009 EA deadline). Review of agricultural subsidy complete and implemented. A tariff policy implemented. costs contained. Business plan targets achieved. Climate for private sector participation enhanced. Improve companies’ capacity to deliver by restructuring and capacity development. Distribution companies to have full control over their revenues and the power procurement process. Make TRADECO operational. Implement final elements of transfer scheme. consolidate and then develop market structure. More autonomous. commercially focused. Adoption of high standards of corporate governance. market relationships established and fully operational Choice of supplier available to major customers Boards of companies working to appropriate standards of governance Audited financial statements prepared to time Companies’ access to finance and services MPERC orders result in progressive performance improvements MPERC targets for availability and losses met. Competition in generation. deal with residual MPSEB functions. Power from generators evacuated to the grid and supplied to customers. CAIDI). and productivity addressed Measurement Unbundling process complete and new structure consolidated. (SAIFI. Economic development through access to competitively priced energy supplies facilitated. MPERC) through successful utilization of DFIDfunded support program. Boards of companies GOMP MPERC Improve power system performance. benchmark surrogate competition in transmission and distribution facilitated. Objective Achieve financially viable power sector. Improving trend in internationally accepted network performance measures. Performance Final phase of FRP consolidated in MYT orders. SAIDI.
Meet increased demand to connect new customers. GOMP and MPERC targets met. MPSEB = Madhya Pradesh State Electricity Board. MW = megawatt. MYT = multi year tariff. MPERC = Madhya Pradesh Electricity Regulatory Commission. HVDS = High Voltage Distribution System. MPERC targets met. TRADECO = Madhya Pradesh Power Trading Company Limited. Customers provided with a continuous supply of power. FRP = Financial Restructuring Plan. DFID = Department for International Development of the United Kingdom. provision of tools and equipment. Source: Asian Development Bank Assessment. System extension to 100% of villages by 2008 and 100% of customers by 2012. network construction standards. training. Improve standard of staff and public safety. GOMP = Government of Madhya Pradesh. Measurement Improving trend in safety indicators. . capacity development. CAIDI = Customer Average Interruption Duration Index . Companies (delivery) MPERC (target and monitor) ABT = .34 Appendix 1 Objective Impact Performance losses. CAIFI = Customer Average Interruption Frequency Index . reduce time to connect. Companies (delivery) MPERC (target and monitor) Improve access to power. system voltages within prescribed limits etc. Ensure transformer loading within ratings. Responsible Party Improve power quality. Ensure compliance with license conditions. by HVDS. All potential customers have the option to take power supplies from their distributor.
Guided by the National Electricity Act. 2003. the single electricity buyer and/or seller role of MPSEB was transferred to a newly incorporated company (TRADECO). and the Madhya Pradesh Electricity Regulatory Commission (MPERC) has implemented the tariff order system aggressively. and three distribution companies (DISCOM-E. 2. open access to the grid.Appendix 2 35 POWER SECTOR REFORMS. In December 2005. and power trading. Madhya Pradesh Power Transmission Corporation Company Ltd (TRANSCO). MPERC issued multiyear tariff (MYT) determinations for the generating and transmission companies. Distribution companies filed MYT petitions on 31 October 2006 and will be effective on 1 April 2007. Reforms comprise unbundling of the Madhya Pradesh State Electricity Board (MPSEB). MPERC’s framework is in place. MPSEB was unbundled into five wholly state-owned government companies: Madhya Pradesh Power Generating Company Ltd (GENCO). the Government of Madhya Pradesh (GOMP) has been driving power sector reforms with the aim of strengthening its physical and/or nonphysical capacities and enhancing financial viability. as well as significant changes in regulatory approaches. tariff rationalization. AND CAPACITY DEVELOPMENT A. DISCOM-C. Power Sector Reforms 1. and sector financial restructuring. Figure A2. . and DISCOM-W). In June 2006.1: Reorganization of Madhya Pradesh State Electricity Board <Before> <After Unbundling of the Power Sector> MPERC State Regulator Power Purchase from Other States and IPPs Power Purchase from Other States and IPPs MPSEB Madhya Pradesh State Electricity Board GENCO Generation Company TRADECO Trading Company TRANSCO Transmission Company Energy Flow DISCOM-W Distribution Company Energy Flow Consumers DISCOM-C Distribution Company DISCOM-E Distribution Company Consumers Source: ADB assessment 3. RESTRUCTURING.
-Abolition of centralized cash management mechanism -Transparent transfer of subsidies from GOMP budget FY = fiscal year. RRP = Report and Recommendation of the President Source: Asian Development Bank Assessment B. new generation and power purchase planning. <Key Pillars> Unbundling of MPSEB Organizational unbundling completed -MPSEB segregated into six successor companies for generation. the FRP was revised to reflect latest changes. In 2003. with Department for International Development (DFID) of United Kingdom and other development partners. and (iv) introducing increases in real tariffs and providing a platform for open access.e. tariffs for each category of consumers should reflect ± 20% of the average cot of supply. GOMP = Government of Madhya Pradesh. (iii) developing a plan to achieve sector financial sustainability through the targeted allocation of financial obligations. Other Depeloment Partners. distribution.36 Appendix 2 4.000 million compared with actual losses of Rs 25. such as coal price increases.. -Overall collection efficiency is targeted to increase from a current average of 85% to 96% from 2005 to 2012. and trading. (ii) ensuring accurate and transparent transfer of assets and liabilities from GOMP to the sector entities.2: Progress of the Madhya Pradesh Power Sector Reform Progress ADB DFID Madhya Pradesh Power Sector Development Program (approved in 2001) MP Power Sector Investment Program 2007Support for the Reform of the Power Sector in MP <Achievement> SRPSMP Phase II (2005) <Way Forward> Final transfer and absorption of the employees in the new companies (by 2007). CIDA has been also involved. Financial Restructuring 5. MPSEB = Madhya Pradesh State Electricity Board. The Asian Development Bank (ADB). Operational efficiency improved Internal Reforms -Considerable net loss reduction -Position and effectiveness of the regulator consolidated Further reduction in transmission / distribution system and enhancement of collection needed -Losses to 19% in all Discoms by 2012. MPERC = Madhya Pradesh Electricity Regulatory Commission.2. (Cumulative forecast losses over this period FY 2001 to FY 2005 were Rs 56. GOMP’s MPSEB developed a financial restructuring plan (FRP) with the objectives of (i) consolidating the financial performance and position of the sector.) Continuity of financial restructuring is essential for the power sector’s financial health. MYT = multi year tariff. by the end of 2010/11.000 million. Financial restructuring undertaken Financial Restructuring -Actual losses of MPSEB have been lower than those forecasted in the 2001 RRP. Multi Year Tariff framework adopted Tariff Rationalization -MPERC has issued the regulations for MYT implementation for the generating company and transmission and distribution licensees (Dec. has assisted this reform agenda with the Madhya Pradesh Power Sector Development Program (MPPSDP) as described in Figure A2. 6. 2005) Implementation of scheduled tariff increases in real terms -As per the tariff policy. transmission. offsetting the cross- . Figure A2. In November 2005. and the tariff order for 2006.g. The update was formulated considering MPSEB as an integrated utility.
Balance Sheet of 2005 was not audited.091 658 2.560 340 1.196 447 1.140 billion).439 50 2.594 77 7 70 2 1.548 (14. The final phase of the FRP will be included as part of the next MYT review.1).378 1.933 468 937 528 1.933 48 2.26 (-) = Negative Note: 2001 accounts are for 15 April 2000 to 31 March 2001 (as per 2002 audited accounts). The power sector is expected to achieve an accounting profit in 2011 with a healthier debt-equity ratio (Table A2.510 288 1. Table A2. Table A2. (ii) contingent liabilities.02 2002 106.043 (15. .690 119.401 128. Maharashtra.6 billion of bad debts in MPSEB’s balance sheet.196 50 2.189 51.455 57.7 1.006 2.3 1.5 0.567 51 2. The revised FRP planned to focus on several pending issues. receivables and payables and power purchase receivable and payables toward.673 45 1.6 0.216 1.468 64 5 58 2 2012 1.202 102. 2005. and (iii) provisioning for nonmoving items.85 billion and a further Rs0.965) 48.510 48 (-) = Negative Source: Financial Restructuring Plan November.2: Sector Financial Projections (Rs million) Item Revenues Expenditure Profit or Loss Provision for Income Tax Profit or Loss After Tax Return on Average Equity (%) Balance Sheet Assets Pension Liability Long-Term Liabilities Equity Total Equity and Liabilities Debt/Debt Plus Equity (%) 2006 643 719 (76) (76) (10) 2007 772 850 (78) (78) (4) 2008 1.853 44.560 49 2. cleaning up of balance sheets largely has been completed (Table A2.064 (46) (46) (2) 2009 1.221 1.567 383 1.017 1.532 1. 7. and write-off of Rs3.673 484 745 444 1.935 (1.223 798 2. (i) remaining pension liabilities.1 : Balance Sheet of Madhya Pradesh State Electricity Board (Rs million) 2001 Assets Equity Liabilities Debt/Debt Plus Equity (%) Current Assets/Current Liabilities 119.61 2003 116.2).320 863 2.025 129.439 419 1.671 1.262 (41) (41) (1) 2010 1.647) 57.6 0. and (iv) adjustment of cross dues.69 2005 154.66 2004 143. Rajasthan and Uttar Pradesh state electricity boards.170) 75.414 (36) (36) (1) 2011 1.Appendix 2 37 company transactions taking place after implementation of the transfer scheme. The revised FRP included (i) additional provisioning for doubtful debts. (ii) conversion of all overdue loans and bonds from GOMP into equity. thereby completing and consolidating the financial restructuring. (iii) transfer of Rural Electrification Corporation loan to GOMP through adjustments against receivables toward free electricity bill waiver (Rs14. As the result of the FRP. and expensed before devolution to the companies.077 (13.256 964 2.634) 61.
commercialisation.4m reviews and GBP 0.5m> System Loss Reduction and Reliability Enahncement -Support to DISCOMs for implementing SCADA systems Source: Asian Development Bank Assessment 9. including financial management. trading and market operations <GBP 3.5m contingencies)> Phisical Capacity Expansion Strengthened Regulation Function <Remaining Issues of MPPSDP> Final Unbundling of MPSEB Support to MPERC. a selective capacity development program is envisaged by ADB. Contemporaneously. stakeholder participation. .5m + 4m> Empowering Trading Function -Support to TRADECO for development systems and capacity building Enhancement of Financial Viability Financial Position Strengthening -Support to DISCOMs.5 million ($35. reward and service rules <GBP 1m> <Non Physical Investment $10M> Further Internal Reforms Backbone MIS -MIS/IT support. ADB has taken a joint approach in capacity development with other Development Partners (DPs). training. including staff transfer. (iii) technical. 10. trading and market operations <GBP1.2 million as of 21 September 2006) in technical assistance (£14.5M ($35. investment and business planning. including financial management and accounting. DFID is providing up to £18. Figure A2. focusing on implementation support of SCADA systems in the DISCOMS and TRADECO. investment and business planning. Capacity Development 8. etc. and financial management support to all sector companies together with MIS and human resources development. Since the initial power sector reforms. ADB and DFID have been exploring a similar collaborative arrangement during implementation of the Investment Program. including subsidy review and communications.3: Overview of Capacity Development Program (ADB & DFID) <DFID £18. including management systems. To maximize the synergy with the DFID program. -HR support to the five companies. whose future role is pivotal for the effective commercial operation of the reformed sector. commercialisation. (ii) capacity development in MPERC. recruitment and training <GBP 2m> -Transmission -TRANSCO -Distriburion-DISCOM-E -DISCOM-W -DISCOM-C TRADECO Transfer of employees. In tandem with the power sector financial and organizational restructuring.6m> -Support to GENCO and TRANSCO. DFID implemented its £10 million capacity building program. to deliver an ERP solution for the five companies <GBP1. regulation. technical support. business planning. and (iii) introduce a computerized information and revenue management system. socio-economic and environmental issues <GBP 4m (+GBP 0. needs assessment. ADB’s earlier program loan and sector investment project helped GOMP to (i) improve the policy environment and governance.2M) > Continued Development of Enabling Environment <ADB $620M > <Phisical Investment $610M> Policy coordination and reform programme management (GOMP) -including communications.38 Appendix 2 C. recruitment. (ii) initiate the establishment of a commercial and competitive business environment to promote efficiency gains and loss reduction. which will include (i) support to GOMP for mapping further reforms. regulation.5 million) and financial assistance (£4 million) from 2006 to 2010.
CEA comprises six full-time members. National Hydroelectric Power Cooperation. such as the National Thermal Power Cooperation. Recognizing that the poor performance of state electricity boards in the past was a roadblock to private sector investment. MOP owns central power utilities. (vi) ensuring electricity supply to the consumers at minimum standards. Provisions of Electricity Act. (iii) licensing for electricity trading. an attached office of MOP. Headed by a chairman. and the Powergrid Corporation of India. 2003. The act includes a provision for MOP to update regularly and publish a NEP. and (vii) provision for establishment of tribunals in place of the High Court for appeals against the orders of CERC. India has confirmed its intent to provide universal power supply at an affordable price by 2012. the same year the Central Energy Regulatory Commission (CERC) was established. a statutory body constituted under the Electricity (Supply) Act. The Government’s Ministry of Power (MOP) provides overall guidance to the sector through the Central Electricity Authority (CEA). open access tariff restructuring. availability-based tariffs. CEA. multiyear tariff determinations. 3. and provides the legal framework for the efficient development of the sector. 4. which will require an estimated 100. CEA is responsible for preparing a national electricity plan in accordance with the National Electricity Policy (NEP). and competition. In technical and economic matters. The Government adopted in 2001 a program of unbundling.000 megawatt (MW) of new generating capacity.Appendix 3 39 POWER SECTOR ASSESSMENT A. The Electricity Act. B. and 100% rural electrification. 1948. The ERC Act gives CERC full autonomy to regulate central power utilities and to set bulk tariffs. MOP is assisted by CEA. is responsible for the technical coordination and supervision of programs. The act is concerned primarily with unbundling of state electricity boards. (iv) arrangement of licenses for laying lines for private transmission. (v) promotion of competition by allowing more than one distribution company in one area of supply. The Electricity Act. 2003 are (i) exemption from licensing requirements for electricity generation. 2003 mandated full metering for all consumer classes. 6. thereby shifting the supply mix in favor of hydropower at the expense of coal-fired thermal plants. 2. as well as between states and central power utilities. Nuclear Power Cooperation. Salient provisions of the Electricity Act. The current policy document is dated 12 February 2005. 2003 5. The ERC Act also encourages the states to establish state electricity regulatory commissions with full authority to regulate state-level power utilities. which are engaged in generation and interstate power transmission. and also is entrusted with some statutory functions. open access. and rationalization. National Sector Structure 1. Its broad policy objectives include (i) access to . A power trading corporation was established recently to take responsibility for power trading among states. The Indian Parliament passed the Electricity Regulatory Commissions (ERC) Act in 1998. 2003 is the cornerstone legislation for the power sector. which was replaced by the Electricity Act. The Rural Electrification Corporation and the Power Finance Corporation are Government-owned institutions dedicated to financing power sector activities. Independent regulatory bodies also were established at central and state levels. The Government also intends to use more indigenous hydropower resources. (ii) open access in electricity transmission. tariffs to be within 20% of the deemed cost of supply.
MPSEB is completing accounts to 31 May 2005. DISCOM-C for the Central area. (vi) financial turnaround and commercial viability of the sector. The bulk power trading function was transferred from MPSEB to the three DISCOMs. (iv) per capita availability of electricity to be increased to more than 1. (iii) efficient supply of reliable and quality power of specified standards at reasonable rates. power shortages. Thereafter. which is in charge of paying the liabilities of the companies. MPEB faced negative equity. A vertically integrated monopoly. these collections are transferred to the escrow account of MPSEB. with excess power generation allocated to the Chhattisgarh State Electricity Board. Madhya Pradesh Power Transmission Corporation Company Ltd (TRANSCO). The most recently incorporated company is the power trade company (TRADECO). C. the state of Chhattisgarh was carved out of Madhya Pradesh state. and (vii) protection of consumers’ interests. 2003. In 2000. However. With the State Act. while non-project related-liabilities were distributed based on population. revenue subsidies from the state government increased from 19% in 1993 to 40% in 1999 of total revenues. Madhya Pradesh State Electricity Board. which took over the role of single electricity buyer and seller from MPSEB in June 2006. GENCO has been vested with MPSEB’s generation assets and has taken over their operation. and 94% of agricultural consumers. Although MPSEB retains few functions and staff. From 1992. In June 2005. transmission. This imbalanced allocation had a negative impact on MPSEB. came into force on 9 June 2003. and in line with the Electricity Act. increases in transmission and distribution losses. (v) minimum lifeline consumption of 1 kWh per household per day by 2012. successor companies will report separately. 2003. The Electricity Act. with the final accounts for MPSEB representing the opening position for each of the . operated the Madhya Pradesh (MP) power sector under state direction. 8. the Madhya Pradesh Electricity Board (MPEB). and DISCOM-W for the Western area). In the early 1990s. as required by the Electricity Supply Act. MPEB interacted with the central power utilities for planning and coordination. As a consequence. Madhya Pradesh Power Sector Structure 7.000 kilowatt-hour (kWh) by 2012. while TRANSCO has become the sole transmission company in the state. 1948. and energy and peaking shortages to be overcome with adequate spinning reserve available. Under the power sector reform program. only 67% of the revenue base. and three distribution companies (DISCOM-E for the Eastern area. (ii) demand to be fully met by 2012. MPSEB assumed about 79% of the long-term debt. The assets and projectrelated liabilities were allocated geographically.40 Appendix 3 electricity for all households by 2010. and power trading. The inability to invest in generation. the central legislation. open access to the grid. The year-end balance sheet for MPSEB as of 31 March 2005 takes into account the restructuring intended by GOMP. 10. and the MPEB was divided in Madhya Pradesh State Electricity Board (MPSEB) and Chhattisgarh State Electricity Board. and distribution due to lack of funds eroded the already weak condition of the MP power sector. it is still a key stakeholder in the sector as it manages cash flow for sector companies and retains the corporate planning function for the sector through its corporate planning group. with each distribution company responsible for collections. 9. it envisaged the reorganization of MPSEB and introduced significant changes in regulatory approaches. it was unable to reach the minimum return of 3% on fixed assets. which represent its final accounts. the companies started to operate independently. and poor quality of power supply. Government of Madhya Pradesh (GOMP) has unbundled the MPSEB into five wholly state-owned government companies: Madhya Pradesh Power Generating Company Ltd (GENCO).
Appendix 3 41 companies from 1 June 2005. MPERC determines tariffs for wholesale. The primary objective of these regulatory bodies was to introduce transparency and economically sound regulation to the sector. grid. distribution supply. . The corporate planning group’s role will diminish thereafter. summon books and accounts related to generation. Figure A3. and (v) promotion of competition.. Alternative Energy Board. MPERC has the same powers as are vested in a civil court—it can pass interim orders in any proceeding. 1998. and economy in the electricity industry. or retail electricity based on tariffs made to it. Key functions of Madhya Pradesh Electricity Commission (MPERC) include (i) rationalization of electricity tariffs. or matter before it. provided for the establishment of central and state electricity regulatory commissions. (ii) regulation of power systems operation. while improving the financial health of state electricity boards and electricity utilities. The Electricity Regulatory Commission Act. and impose penalties for contravention of provisions of licensing. a state government entity. This entity is responsible for verification of energy production and consumption. although MPSEB plans to continue to manage cash flows until the cash deficit in the revenue earnings and expenditure requirements is resolved to the satisfaction of all companies. including energy efficiency. Source: ADB estimate 11. or utilization of electricity for examination. The MP Urja Vikas Nigam Ltd. 12. (iii) reliability and quality standard setting. leads alternative energy development. State Regulatory Affairs. (iv) issuance of licenses and regulation of licensees. transmission.1: Madhya Pradesh Power Sector Structure Energy Flow Revenue Flow Capital Flow MPERC State Regulator Power Purchase & IPP PPA PPA MPSEB Residual of State Electricity Board TRADECO Trading Company GENCO Generation Company TRANSCO Transmission Company Cess/ED Subsidy DISCOM-W Distribution Company DISCOM-C Distribution Company DISCOM-E Distribution Company GOMP State Government Consumers Note: Taxable income of the operating companies goes to the Government. and determines the tariff payable for use of the intrastate transmission facilities. bulk. efficiency. hearing.
000 MW of this capacity. affordable electricity is a prerequisite for economic and social development in MP.3 billion in investments are planned. The peak deficit has exceeded 20% and the energy deficit has been about 13% for the past 3 years. During the Eleventh Plan 2008–2012.399 1. hydropower capacity represents 19%. Based on consistent growth in the national and state economy. Generation. With total energy losses currently at about 41%. Madhya Pradesh Power Sector 1. has 37. 15.289 Planned Additions FY07 71 222 86 0 379 Planned Capacity 31/3/07 2.42 Appendix 3 D. Generation is predominantly thermal (74%). The reforms are underpinned by a realistic investment program. transmission (26%). This means that approximately 17.522 1. and loss reduction through targeted investments in transmission and distribution.000 MW of installed generating capacity. divided among generation (43%). Table A3. more than 6. unrestricted consumer demand for energy in MP is forecast to increase at 7% a year during the Eleventh Plan 2008– 2012.396 43 5.000 MW.1). improvement in the plant factors of thermal stations. MP has suffered from chronic peak capacity and energy shortages in recent years.000 gigawatt-hour (GWh) of additional demand will be added by early 2012.000 MW of . with GENCO owning and operating about 3.621 1. Generating capacity available to meet peak demand is significantly less than installed capacity (Table A3. Government Strategy 13. Installed capacity in or available to MP is about 6.482 43 5. GOMP has requested external financial assistance for implementing critical parts of this investment program.451 1. as well as moderate increases in tariffs to bring them in line with the true cost of supply. with coal-fired plants representing 58% of installed and available capacity. GOMP is driving a power sector reform process with the core objective of strengthening the ability of public and private entities to deliver such an electricity supply to all consumers. 2. Capacity and Constraints 14.1: Peak Generating Capacity Available to Madhya Pradesh (MW) Sector Hydro Thermal Current Total 2. as well as a regulatory regime that recognizes actual and reasonable operating costs in tariff setting and encourages efficient use of capital. $5. which includes MP.300 MW. India’s western region. The Western Region is an importer of capacity during peak periods and an exporter during off-peak periods. The GOMP power sector road map under the Eleventh Plan 2008–2012 is predicated on an increase in the percentage of hydropower in the generation mix. and distribution (30%). The provision of reliable.718 Joint Venture (JV) Source: Asian Development Bank estimates 16. designed to remove current constraints and to meet forecast demand growth though capacity augmentation and loss reduction. Coal-fired thermal plants account for 27.668 State (MW) Private / JV Central (MP Share) Eastern Region Electricity Board (EREB) TOTAL 733 1.
planned new generation is mostly base. With the advent of nondiscriminatory open access. and historical investment has failed to keep pace with growth. increasing generation levels. GENCO must improve its performance to take on the competition from other players entering into the market. 19. New entrants benefit from considerably more flexibility in choosing and timing their investments to respond to the market’s new and evolving needs. Maharashtra. 22. funded by Department for International Development of the United Kingdom (DFID). merchant plants. TRANSCO has 382 connection points with DISCOMs and 43 connection points with GENCO at the outgoing feeders of power stations. the transmission system served a record maximum demand of 5. However. while transformation capacity has risen 41%. The sector road map targets 100% village electrification by 2008 and 100% household electrification by 2012. (ii) increase its understanding of network technical capacity under normal and contingency conditions. This requirement increases the burden on MP’s DISCOMs to meet forecast demand growth. which would reduce the additional capacity requirement by more than 1. and improve reliability of supply. to (i) improve the reliability and availability of its network. transmission circuit length has increased almost 14%. Rajasthan. Notwithstanding the obvious short. and to move away from being an asset-driven company to one with a commodity and trading focus. The peak demand is expected to grow on average about 9% to 2012. Losses for DISCOMs still exceed 35%. Since 2002. 20. due to continued growth in demand.780 MW.and mid-load thermal plants.000 MW and return to a capacity and energy surplus by 2011. Distribution. 18. (iii) introduce balancing and settlement mechanisms. Transmission. During 2006. and has reasonable levels of losses. GENCO’s past and projected performance is open to the scrutiny of potential competitors. and Uttar Pradesh. including generation companies. power transformer capacity is inadequate to . and availability of the transmission network has exceeded 98% for the past year. The transmission system is connected with all neighboring states: Chhattisgarh. The Electricity Act. maintains acceptable voltage and stability levels most of the time. Gujarat. the transmission capacity is inadequate to serve peak demand. Meeting peak demand is problematic and expensive. many of which could be in a position to cherry-pick the most profitable bilateral power wholesaling opportunities. the transmission system is in good condition. TRANSCO is receiving capacity building assistance. and captive plants in addition to initiatives from the existing plants inside and outside states where they are located to increase their market share. As generation is de-licensed.. to expand their market base. Consequently. given the short duration and nature of the peak. reduce losses. major competition is expected from independent power producers. transmission losses have been reduced to an acceptable level of around 5%. The challenge—and the opportunity—is to ensure that transmission standards do not slip in the face of ramping demand. MP’s power sector investment program is predicated on a significant reduction in technical and commercial losses. and (iv) improve its ability to meter and account for transmission transactions. Consequently. Performance in these areas has been poor. 21. and the additional uncertainty that open access and reduced centralized planning impose on the transmission operator. 2003 enables a competitive power market for all sector players.Appendix 3 43 peak generation and network capacity would need to be added over the next 5 years to serve this demand.and long-term need for investment to increase capacity. 17.
5% in 2004–2005. which constitutes a major impediment to economic development in MP. Energy intensity of output is also relatively low compared to the rest of India.114 7.5% 48. Gross state product grew at 2.2: Demand Projections per Eleventh Plan (GWh) 2007 Forecast demand (including T & D losses) Annual growth CAGR 39. This. the power sector faces the following challenges: (i) generation capacity is insufficient to meet peak demand.183 7. Inadequate maintenance practices and poor installation of equipment have compromised safety on the networks of the three DISCOMs. long Low Voltage (LV) circuits.545 8. 25. and distribution transformer overloading.2 summarizes demand projections through the end of the Eleventh Plan.4% 2012 55. will drive strong growth in electricity demand. GWh = giga watt. while the transmission investment is driven by the requirement to evacuate power from new generating plants. Investments are closely linked—the generation requirement is predicated on loss-reduction targets at the distribution level being achieved. necessitating scheduled and unscheduled load shedding. Table A3. The economic performance of MP has lagged that of India in recent years. (ii) transmission capacity is barely adequate and security of supply is at risk. and (iii) the absence of a framework for long-term distribution planning and a lack of funding has led to significant underinvestment in the distribution network and poor maintenance of equipment.943 7. and distribution failure rates are about 19%. losses are high. To meet this demand growth and to reinforce existing system constraints. 23. However. compared with Indian gross domestic product growth of about 7%. it is essential if targeted systems and corporate performance improvements are to be realized. an investment of approximately Rs248 billion ($5. T & D = Transmission and Distribution Source: ADB estimate 26. 3.142 5. 33 kV and 11 kV feeders are being loaded in excess of thermal limits. and the timing of physical implementation is important if purported benefits are to be delivered. in turn.44 Appendix 3 meet diversified demand on 11 kilovolt (kV) feeders in many areas. In summary.3 billion) will be required.1% 2008 41. Consequently. and reliability and quality of supply is poor. While improving and modernizing these practices will be a challenge. forecasts indicate a significant improvement in MP’s economic performance.0% 2011 52. Losses arising from poorly executed connections at distribution transformers are suspected to be far higher than normal. which is expected to match or exceed that of neighboring states during the Eleventh Plan 2008–2012. investment plan components are interdependent. In this context. the network is overstretched. Power quality is poor due to undersized conductors. .7% Eleventh Plan 2009 2010 44. Investment Program 24.8% CAGR = .808 6. The objective of full household electrification by 2012 is expected to generate further growth in electricity demand. Table A3. and to supply peak capacity to distribution off-take points. The introduction of computerized power systems analysis has underscored the widespread nature of these problems throughout the state.
722 Date Approved 18-Nov-86 29-Sep-88 21-Nov-89 30-Aug-90 04-Apr-91 14-Nov-91 17-Dec-91 26-Mar-92 17-Dec-92 30-Mar-93 07-Dec-93 13-Dec-94 16-Nov-95 26-Sep-96 16-Dec-97 06-Oct-00 13-Dec-00 06-Dec-01 12-Dec-02 10-Dec-03 22-Dec-04 Calcutta Electricity Supply Company Transmission Calcutta Electricity Supply Company Thermal Power Plant Infrastructure Development Finance Company. . Table A4. Public Sector 0798-IND 0907-IND 0988-IND 1029-IND 1081-IND 1117-IND 1148-IND 1161-IND 1212-IND 1222-IND 1285-IND 1343-IND 1405-IND 1465-IND 1591-IND 1764-IND 1803/1804-IND 1868/1869-IND 1968-IND 2036/2037-IND 2152-IND _ Subtotal Private Sector 7058/1036 7082/1142 7138 7183/1991 7192 7227 7242/2249 Subtotal C-19-IND 2193(L)-IND Subtotal Total Project North Madras Thermal Power Unchahar Thermal Power Extension Rayalaseema Thermal Power Second North Madras Thermal Power Special Assistance Gandhar Field Development Hydrocarbon Sector Program Power Efficiency (Sector) Project Energy Conservation and Environment Improvement Gas Flaring Reduction Gas Rehabilitation and Expansion Industrial Energy Efficiency Power Transmission (Sector) Renewable Energy Development LPG Pipeline Power Transmission Improvement (Sector) Gujarat Power Sector Development Program Madhya Pradesh Power Sector Development Program State Power Sector Reform Assam Power Sector Development Program (Program Loan) Power Grid Transmission (Sector) Project Uttaranchal Power Sector Investment Program Amount ($ million) 150 160 230 200 150 267 250 250 147 300 260 150 275 100 150 250 350 350 150 250 400 300 5. Ltd. the Canadian International Development Agency.1. Kreditanstalt für Wiederaufbau of the Government of Germany. the Department for International Development of the United Kingdom. and the World Bank.1: Previous ADB Loans to the Power Sector in India Loan No. Previous ADB loan assistance is listed in Table A4. India’s power sector has received a major portion of its external assistance from the Asian Development Bank (ADB). Tala–Delhi Transmission Project Dahej Liquefied Natural Gas Terminal Project Central Uttar Pradesh Gas Limited (CUGL) Ntpc Capacity Expansion Financing Facility Power Finance Corporation for Tamil Nadu and Andhra Pradesh Energy Efficiency Support 04-Oct-90 13-Dec-91 14-Oct-97 16-Jan-03 13-Jan-04 17-Jan-06 27-Jul-06 13-Nov-90 27-Oct-94 Source: Asian Development Bank assessment.Appendix 4 45 EXTERNAL ASSISTANCE TO THE POWER SECTOR 1. the Japan Bank for International Cooperation. the United States Agency for International Development.089 18 32 30 62 75 3 300 519 111 3 114 5.
2 303.4 6.6 1.0 0.5 1.0 0.2 3.7 76.6 4.0 0.1 176.0 0.0 0. and Insulators Power Transformers Circuit Breakers Current Transformers Solid Core Insulators Isolators Switchyard Structures Control & Protection Equipment Lightning Arrestors Subtotal Equipment B.7 63.8 107.0 0. including erection & stringing C.0 0.0 1. Conductors.8 0.8 7.4 10.0 0.061.0 0.750.2 4.700.0 0.0 0.0 0.0 6.6 3.7 46.0 1.7 46.7 78.7 0.6 87. Resettlement F.0 0.0 1. Environment Mitigation and Monitoring E.7 76.9 1.6 4.0 76.1 2.1 0.4 146.5 5.0 0.6 133.0 390.8 1.9 177.2 178.0 0.5 1.8 250.018.9 0.0 103.2 178.9 36.532.0 940.0 0.1: Detailed Cost Estimates for Transmission Component by Expenditure Category (Rs million) ($ million) Foreign Local Total Foreign Local Exchange Currency Cost Exchange Currency Total Cost % of Total Base Cost A.0 36.0 0.0 20.3 0.2 303.8 31.8 8.1 3.6 3.1 3.0 0.4 32.0 0.3 0.0 500.8 8.4 185.180.0 0.4 185.9 177.000.4 4.0 0.6 96.532. Taxes and Duties Subtotal Base Costs Physical Contingencies Price Contingencies Total Project Costs Commitment Charges Interest During Implementation Total Costs To Be Financed 1.8 123.4 32.9 51.9 51.5 5.2 120.9 1.7 63. Civil Works.4 0.2 36.0 0.0 0.8 1.8 1.0 0.7 2.1 20 34 4 2 2 1 6 1 1 71 19 4 1 2 4 100 5 10 1 11 124 Source: Asian Development Bank estimate .DETAILED COST ESTIMATES 46 Appendix 5 Item Table A5.3 21.1 2.0 20. Project Management and Construction Supervision D.2 1.2 120.1 5. Equipment Tower Parts.0 0.2 1.6 73.9 36.688.0 390.688.0 6.4 0.2 3.0 0.0 103.0 0.6 3.700.7 2.0 3.6 353.018.9 39.0 3.532.4 0.468.5 1.0 0.0 0.9 39.8 1.7 78.491.3 21.1 940.
8 123.0 0. including erection & stringing C.0 0.6 0.0 0.6 133.7 76.8 1.0 0.8 1.0 6. Conductors.8 107.0 8.6 18.0 100 100 100 100 100 100 100 100 100 100 0 40 0 0 0 0 78 0 78 78 0.6 106.0 0.5 0.0 4.7 76. Project Management and Construction Supervision D.0 0.0 0.4 0.0 3.1 2.0 0.0 0.6 4.0 0.0 0.8 8.5 1.0 6.7 2.1 21.7 2.8 8.0 84.0 18.0 0.9 36.Item Table A5.0 0.0 12.0 0.2 1.0 0. Civil Works.0 0. and Insulators Power Transformers Circuit Breakers Current Transformers Solid Core Insulators Isolators Switchyard Structures Control & Protection Equipment Lightning Arrestors Subtotal Equipment B.4 10.5 5.0 0.0 1.0 0.6 0 0 0 0 0 0 0 0 0 0 100 100 100 100 0 7 0 0 100 100 80 0 0 14 0 0 6 Source: Asian Development Bank estimate Appendix 5 47 .8 16.0 0.4 0. Resettlement F.9 36.8 8.0 1. Taxes and Duties Subtotal Base Cost Physical Contingencies Price Contingencies Total Project Costs Commitment Charges Interest During Implementation Total Costs To Be Financed 21.0 8.0 20.4 0.0 0.2 8.6 0. Equipment Tower Parts.0 0.2 0.1 2.4 0.6 0.0 0.7 0.0 0.0 0.8 1.0 0.4 96.6 4.4 0 0 0 0 0 0 0 0 0 0 60 0 0 0 100 15 15 15 0.0 3.0 7.5 1. Environment Mitigation and Monitoring E.0 0.2: Detailed Cost Estimates for Transmission Component by Financier ($ million) ADB PFC Cost Amount % of Cost Amount % of Cost Category Category TRANSCO Amount % of Cost Category A.0 0.2 1.6 3.0 0.2 3.
0 0.969.9 155.0 0.0 0.4 3.2 202.3 0. Resettlement F.5 14.7 1.557.791.5 335.5 129.0 120.082.5 77.0 0.6 33.2 159.0 120.6 0.9 249.0 120.499.0 32.5 0.0 0.6 1.1 1.557.4 2.038.051.557.0 1.5 539.0 124.8 1.7 22.9 22.9 2.0 0.4 2.6 53.9 0.0 0.0 14.9 2.0 0.0 0.6 0.873.0 323.4 3.0 0.Item Table A5.5 19.4 859.8 18.0 0.8 1.4 167.0 0.038.0 113.8 42 1 0 5 4 5 7 62 27 5 1 0 5 100 5 10 0 1 10 122 Source: Asian Development Bank estimate .8 1.0 0.5 19.0 113.0 0. Environment Mitigation and Monitoring E.8 1.5 167.3 89.9 2.2 18.0 0.9 2.9 941.5 129.4 167.6 20.3 0.7 0. Civil works.5 668.7 0.5 47.2 159.4 3.0 0.7 0.0 0.082.0 0.3: Detailed Cost Estimates for Distribution East Component by Expenditure Category (Rs million) ($ million) Foreign Local Total Foreign Local Exchange Currency Cost Exchange Currency 48 Total Cost % of Total Base Cost Appendix 5 A.0 0.2 101.7 268. Project Management and Construction Supervision D.5 0.6 0.0 0.5 323.6 33.0 2.0 2.0 0.4 3.5 863.4 2.0 1.9 0.1 94. Taxes and Duties Subtotal Base Costs Physical Contingencies Price Contingencies Total Project Costs Commitment Charges Interest During Implementation Total Costs To Be Financed 1.8 1.3 89.0 33.6 3.0 32. including erection & stringing C.7 537.4 2.6 0.0 120.0 668.8 0. Equipment High Voltage Distribution Systems (HVDS) Remote Metering Consumer Metering Single Phase Meters Three Phase Meters Cables and Wires Renovation of Substation Protection Systems Subtotal Equipment B.0 535.0 0.9 0.0 0.
6 0.0 0.0 0.0 0.0 0.5 1.8 3.4 2.8 1.6 0.8 1.0 35.4: Detailed Cost Estimates for Distribution East Component by Financier ($ million) Cost ADB DISCOM-E Amount % of Cost Amount % of Cost Category Category 22.4 2.3 0. Civil works.3 0.6 53.9 0.5 2.6 33.4 3. Environment Mitigation and Monitoring E.7 2.5 65.5 40.5 44. Equipment High Voltage Distribution Systems (HVDS) Remote Metering Consumer Metering Single Phase Meters Three Phase Meters Cables and Wires Renovation of Substation Protection Systems Subtotal Equipment B.0 0.8 20.5 14.0 0.0 0.4 2.2 0.7 5. Taxes and Duties Subtotal Base Costs Physical Contingencies Price Contingencies Total Project Costs Commitment Charges Interest During Implementation Total Costs To Be Financed Source: Asian Development Bank estimate Appendix 5 49 .4 3.8 1.0 0.4 61.9 0.8 0.7 0.0 12.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 A.9 2.0 0. Resettlement F.0 20.0 0.Item Table A5.0 2.7 0. Project Management and Construction Supervision D.4 3.6 33.8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 3.6 18.7 22.0 0.0 2.4 2. including erection & stringing C.9 2.
Monitoring & Reporting STATE Energy Division Policy & Planning Overall Sector Investments Due Diligence Evaluation.50 Appendix 6 INVESTMENT PROGRAM IMPLEMENTATION STRUCTURE AND READINESS A. Asian Development Bank Assessment . Monitoring & Reporting MPERC MP Electricity Regulatory Commission Sector Investment Program Coordinating Group Chaired by Secretary Power. Implementation Structure INVESTMENT PROGRAM IMPLEMENTATION STRUCTURE ADB INDIA Policy Planning Evaluation Reporting Monitoring CERC Central Electricity Regulatory Commission Consultant Support Due Diligence Implementation Evaluation. GOMP Investments Program Financing Plan Due Diligence Evaluation. Monitoring & Reporting Non-physcal Invesment Program TRANSCO PMU Project Implementation Technical Financial Procurement Safeguards DISCOM-E PMU Project Implementation Technical Financial Procurement Safeguards DISCOM-C PMU Project Implementation Technical Financial Procurement Safeguards DISCOM-W PMU Project Implementation Technical Financial Procurement Safeguards Source.
Disbursement plan 7. Project administration memorandum Approved Govt Readiness Criteria 19 Feb 2007 Done Done Under preparation EA EA ADB 3. Allocation of counterpart funding 4. Project Management a. Procurement plan b. Request of proposals c. Available Not required EA Sep 2007 Done Not required Issued in Dec 2006 Bid submission on Mar 2007 Done EA EA EA EA EA Done Done EA EA Jul 2007 Undergoing Done Done Not required EA EA EA . Award of contract(s) for first phase 5. Project Performance Management System 9. EA = executing agency Source: Asian Development Bank assessment. Recruitment of consultants a. Project–specific (as appropriate): Land acquisition for first-phase packages Resettlement plan(s) for first-phase packages Environment assessment for first-phase packages Cofinancing ADB = Asian Development Bank. Auditing arrangements c. Government project approval 2. Prequalification (civil works) c. Project Readiness TRANCHE 1 Status as of 31 January 2007 Target Status Responsibility Date and Actions ____________________________________________________________________________________ 1. Financial Management a. Bidding documents d. Governance and Anticorruption Measures 8.Appendix 6 51 B. Procurement a. Award of contract(s) for first phase 6. Staffing c. Financial Management System b. Project Management Unit b. Shortlist b.
EA = executing agency Source: Asian Development Bank assessment. Request of proposals c. Award of contract(s) for first phase 15. Project Management Unit b. Project Performance Management System Available Not required EA Mar 2007 Feb 2008 Done Not required Under preparation EA EA EA EA EA Done Done Done EA EA 18. Bidding documents d. Governance and Anticorruption Measures 17. Shortlist b.52 Appendix 6 TRANCHE 2 Status as of 31 January 2007 Readiness Criteria Target Status Responsibility Date and Actions ____________________________________________________________________________ 10. Staffing c. Disbursement plan 16. Procurement plan b. Project administration memorandum Approved Govt 19 Feb 2007 Done Done Under preparation EA EA ADB 12. Allocation of counterpart funding 13. Project Management a. Not applicable Not applicable Done Not required EA EA EA . Award of contract(s) for first phase 14. Recruitment of consultants a. Financial Management a. Prequalification (civil works) c. Government project approval 11. Financial Management System b. Project–specific (as appropriate): Land acquisition for first-phase packages Resettlement plan(s) for first-phase packages Environment assessment for first-phase packages Cofinancing ADB = Asian Development Bank. Procurement a. Auditing arrangements c.
and Installation Renovation of Substation Protection System Source : Asian Development Bank estimates . Delivery. and Construction Turnkey Contract for selected transmission lines Procurement Construction Construction of substations and transmission lines Distribution East Procurement Supply. Delivery. and Installation Consumer Metering Procurement Supply. and Construction High Voltage Distribution System Procurement Supply.53 Appendix 7 Investment Program Implementation Schedule Tranches and Components First Tranche Transmission Land Acquisition Procurement Supply and Delivery 2007 2008 2009 2010 Supply and Delivery of Equipment Procurement Supply. Delivery. Delivery. Delivery. and Installation Remote Metering Procurement Supply.
Goods and Related Services. Supply and Install Exceptional Methods Limited International Bidding National Competitive Bidding Shopping To be used for contract value > $1. Works.25 million Procurement Thresholds. and Supply and Install Procurement Method International Competitive Bidding (ICB) Goods ICB Design.0 million <$1 million <$1 million <$0.54 PROCUREMENT PLAN (Tranche 1 and Tranche 2) Project Information Country Name of Borrower Investment Program Name Tranche 1 Tranche 2 Loan or TA Reference Date of Effectiveness Total Amount Tranche 1 Tranche 2 Of which committed Executing Agencies Appendix 8 India India Madhya Pradesh Power Sector Investment Program Transmission Capacity Expansion Distribution Efficiency Enhancement $151 million $106 million $45 million Madhya Pradesh Power Transmission Company Limited (TRANSCO) Madhya Pradesh Poorva Kshetra Vidyut Vitran Company Limited (DISCOM-E) Not applicable Not applicable January 2007 18 months Approval Date of Original Procurement Plan Approval of Most Recent Procurement Plan Publication for Local Advertisement Period Covered by This Plan Procurement Threshold.0 million > $1. Consultants Services Procurement Method No consultants will be required Alternative Methods None To be used for contract value .
2 0.8 0.4 Dec 2006 Y 2.7 30.580 units of 220 kV Control and protection equipment Lot I: 5 units of 400 kV 93 units of 220 kV Switchyard structures Lot I: 226 mt for 400 kV Lot II: 4.2 3.5 3. and Consulting Services Ref Contract Description Estimated Cost ($ million) Procurement Method Expected Date of Advertisement Prior Review (Y/N) A.3 1.2 ICB Dec 2006 Y Appendix 8 55 . 160 MVA Lot III: 3 units of 220 kV. 2. 3.Table A8.4 ICB Dec 2006 Y 0. Works.000: Goods.4 0.3 ICB Dec 2006 Y ICB Dec 2006 Y ICB Dec 2006 Y ICB Dec 2006 Y ICB 0.1: List of Contract Packages Exceeding $100. 4. 7.3 6. SF6 Lot II: 93 units of 220 kV. SF6 Current transformers Lot I: 15 units of 400 kV CT Lot II: 279 units of 220 kV CT Isolators Lot I: 19 units of 400 kV Lot II: 364 units of 220 kV Lightning arrestors Lot I: 9 units of 400 kV 231 units of 220 kV Lot II: 495 units of 132 kV 645 units of 33 kV Solid core insulators Lot I: 185 units of 400 kV 4. 1.017 mt for 220 kV 2. 315 MVA Lot II: 18 units of 220 kV.6 0.5 0. 6. 8.2 ICB Dec 2006 Y 1. 5. 100 MVA Circuit breakers Lot I: 5 units of 400 kV. Transmission Component Power transformers: Lot I: 1 unit of 400 kV.
13 2.4 6. 3.58 ICB ICB ICB ICB ICB ICB ICB Mar 2007 Mar 2007 Mar 2007 Mar 2007 Mar 2007 Mar 2007 Mar 2007 Y Y Y Y Y Y Y Y .8 ICB Dec 2006 Y Appendix 8 0. B.5 ICB Dec 2006 Y 56 4.000 nos) Installation of new meters. Turnkey contract for HVDS in Satna (O&M) Dn. 2.5 6. 4. 12 Tower parts Lot I: 76 mt for 400 kV towers 3.84 3.000 nos) Installation and commissioning of 33 kV VCB: 134 nos Installation and commissioning of 11 kV VCB: 401 nos Renovation of 33/11 kV s/s: 100 nos Renovation of 33/11 kV s/s: 100 nos Turnkey contract for HVDS in Gadarwara Dn.58 ICB ICB ICB Mar 2007 Mar 2007 Y Y Y Mar 2007 ICB Mar 2007 0. 10.508 nos) Remote metering of HT connections. 10. 9.373 mt for 220 kV towers Supply and erection of transmission line Lot I: 97 km Bhopal 400-Ashta 200 kV DCDS Lot II: 90 km LILO one circuit Satpura-Itarsi 220 kV DCDS line for Handiya 220 kV Lot III: 135 km Chhindwara-Betul 220 kV DCDS Lot IV: 70 km 400 kV Shujalpur 220 kV Rajgarh 220 kV DCDS Lot V: 75 km Jabalpur-Narsinghpur 220 kV DCDS Lot VI: 110 km Chhegaon-Nimrani 220 kV DCDS Distribution Component Remote metering of 25 HP and above LT industrial connection including installation and commissioning (1.8 3. 4. including shifting of existing meters to accessible location and replacement of single-phase service lines (200.3 9. 1. 8. 5.5 4.78 11.62 ICB Mar 2007 Y 4. 7. Turnkey contract for HVDS in Rewa (O&M) Dn. 6.24 7.0 3.2 4.63 4. Turnkey contract for HVDS in Damoh (S) Dn.9. 11. Turnkey contract for HVDS in Prithivur Dn.000 nos) Three-phase meter (50. Turnkey contract for HVDS in Sihora Dn.1 5.91 6. including installation and commissioning (527 nos) Single-phase meter (200.
3 ICB Jan 2007 Y ICB Jan 2007 Y ICB Jan 2007 Y ICB Jan 2007 Y ICB 0. 6. Works.3 6. 315 MVA Lot II: 18 units of 220 kV. 2. 8.5 3. Transmission Component Power Transformers: Lot I: 1 unit of 400 kV.5 0.4 ICB Jan 2007 Y 0.4 Jan 2007 Y 2.3 1.017 mt for 220 kV 2. SF6 Current transformers Lot I: 15 units of 400 kV CT Lot II: 279 units of 220 kV CT Isolators Lot I: 19 units of 400 kV Lot II: 364 units of 220 kV Lightning Arrestors Lot I: 9 units of 400 kV 231 units of 220 kV Lot II: 495units of 132 kV 645 units of 33 kV Solid Core Insulators Lot I: 185 units of 400 kV 4.6 0. 3.8 0. 7.Table A8.4 0. 100 MVA Circuit Breakers Lot I: 5 units of 400 kV.2 ICB Jan 2007 Y 1.2 3. 4. 160 MVA Lot III: 3 units of 220 kV.2: List of Contract Packages Exceeding $100.2 0.000: Goods.2 ICB Jan 2007 Y Appendix 8 57 .580 units of 220 kV Control & Protection Equipment Lot I: 5 units of 400 kV 93 units of 220 kV Switchyard Structures Lot I: 226 mt for 400 kV Lot II: 4. 5.7 30. and Consulting Services Ref Contract Description Estimated Cost ($ million) Procurement Method Expected Date of Advertisement Prior Review Y/N Comment A. 1. SF6 Lot II: 93 units of 220 kV.
6.63 phase service lines (200. Turnkey contract for HVDS in Sihora Dn. including installation and commissioning (1. Turnkey contract for HVDS in Gadarwara Dn.5 Lot VI: 110 km Chhegaon-Nimrani 220 kV DCDS 4.91 10. Turnkey contract for HVDS in Prithivur Dn.13 3.1 DCDS line for Handiya 220 kV Lot III: 135 km Chhindwara-Betul 220 kV DCDS 5.000 nos) 4.508 nos) 0. Three-phase meter (50. KV DCDS = kV s/s = kV VCB = HVDS = high voltage maintenance Source: Asian Development Bank Assessment . 6.62 Remote metering of HT connections.58 Installation and commissioning of 11 kV VCB: 401 nos Renovation of 33/11 kV s/s: 100 nos 6.8 Lot IV: 70 km 400 kV Shujalpur 220 kV Rajgarh 220 kV 3. including installation and commissioning (527 nos) 2. Supply and erection of transmission line Lot I: 97 km Bhopal 400-Ashta 200 kV DCDS 4. Single-phase meter (200.2 Lot II: 90 km LILO one circuit Satpura-Itarsi 220 kV 4. HP = LILO = MVA = O & M = overhead and . Remote metering of 25 HP and above LT industrial connection. Turnkey contract for HVDS in Damoh (S) Dn. 6.3 12 Turnkey contract for HVDS in Satna (O&M) Dn.0 DCDS Lot V: 75 km Jabalpur-Narsinghpur 220 kV DCDS 3. 7.5 8. Installation and commissioning of 33 kV VCB: 134 nos 4.78 7.24 9. including shifting of existing meters to accessible location and replacement of single3. Installation of new meters.Ref Contract Description Estimated Cost ($ million) Procurement Method Expected Date of Advertisement Prior Review Y/N Comment 58 Tower parts Lot I: 76 mt for 400 kV towers 4. Distribution East Component 1. 11.58 ICB = international competitive bidding.5 3.8 B. ICB Jan 2007 Y Appendix 8 ICB Jan 2007 Y ICB Jun 2007 Y ICB ICB ICB ICB Jun 2007 Jun 2007 Jun 2007 Jun 2007 Y Y Y Y ICB Jun 2007 Y ICB Jun 2007 Y ICB Jun 2007 Y ICB Jun 2007 Y ICB Jun 2007 Y ICB Jun 2007 Y ICB Jun 2007 Y distribution system. Turnkey contract for HVDS in Rewa (O&M) Dn.84 4. Renovation of 33/11 kV s/s: 100 nos 0.000 nos) 5. 9.000 nos) 2.4 11.373 mt for 220 kV towers 10.
repair and maintenance expenses. with the MYT for distribution to be approved by March 2007 for 2008–2010. depreciation. it is entitled to petition MPERC to have assets added to its regulated asset base within the regulatory period. operation and maintenance (O&M). These were compared with the FIRRs to ascertain the financial viability of the subprojects. TRANSCO does not need to wait until the subsequent regulatory period to have revenue-earning assets added to its asset base. interest on working capital. TRANSCO charges a one-part (Rs/Mega Watt/month) uniform tariff for access to its transmission network. Tariff Policy 2. and administration—are those costs of delivering the estimated benefits. C. (O&M) expenses. MPERC has approved the full cost recovery tariff for 2007 (Rs3. Introduction 1. The anticipated capital mix of debt and equity was used for estimating the WACC for each component.Appendix 9 59 FINANCIAL ANALYSIS OF TRANCHE 1 AND TRANCHE 2 A. and distribution cost. return on equity. 4. equipment. Madhya Pradesh Electricity Regulatory Commission (MPERC) promulgated in 2006 a distribution and retail tariff order for 2007. B. TRANSCO is projected to maintain profitability over the years. and income taxes. This tariff is determined based on full cost recovery and an adequate return on investment. Given the proper implementation of the tariff policy. The financial analysis of the proposed subprojects under Tranche 1 and Tranche 2 has been carried out in accordance with the Asian Development Bank’s (ADB) Financial Management and Analysis of Projects. MPERC requires TRANSCO to base its tariff on full cost recovery of the loan interest costs.49 per unit on average). allowing it to earn revenue immediately on the new assets. capital investment. Based on this analysis. In compliance with the National Electricity Policy (NEP). financial analysis for TRANSCO was carried out on a pre-tax basis. Therefore. the projected financial benefit stream for TRANSCO is simply the recovery of allowable expenses—primarily additions to its asset base. 1 Since tax is a tariff pass-through item.. administrative and general expenses. civil works. while DISCOM-E will achieve profitability by 2008. Incremental costs and benefits were computed based on “with” and “without” project scenarios for each of the components. . 1 Although TRANSCO is subject to MYT for FY2007–2009. For distribution. the investment program under Tranche 1 and Tranche 2 is financially viable. as well as the first multiyear tariff (MYT) order for generation and transmission covering 2007–2009. In other words. incremental operating and maintenance costs. Methodology and Assumptions 3. The costs of each component include land acquisition. The financial evaluation covers Madhya Pradesh Power Transmission Company Limited (TRANSCO) and Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (DISCOM-E). All financial costs and benefits have been expressed in constant 2006 prices. The weighted average costs of capital (WACC) of TRANSCO for the proposed subprojects under Tranche 1 and of DISCOM-E for the proposed subprojects under Tranche 2 also were calculated. while price contingencies and interest during construction were excluded. MPERC fee. Cost streams used for the purposes of determining the financial internal rate of return (FIRR)—i.e. The sensitivity of the FIRR to adverse movements in the underlying assumptions also was assessed. Taxes and duties were included.
Weighted Average Cost of Capital 7.0 100. which would onlend to TRANSCO at 6. ADB = Asian Development Bank. Nominal Cost (%) 4.2 100. Income tax is a pass-through item based on actual tax payments.5%.19 Composite Cost (%) 0. In some cases.5%–2.4 30.0 11.8 10.5 14.87 8.0 30.72 3.1 and A9. Source: ADB staff estimates . = adjusted. Adj. subprojects were ascribed more specific benefits. The pretax WACC for TRANSCO.43 2.5 14.4%.0 Nominal Cost (%) 6.2: Weighted Average Cost of Capital for DISCOM-E Item Amount ($ million) 45. Adj. Source: ADB staff estimates Table A9. In the case of DISCOM-E.9 17.19 Composite Cost (%) (0.34 14. both of which arise from decreased losses. An allowance of 10% for physical contingencies was added.0% of capital costs. the incremental financial benefits are the additional electricity sold and reduced electricity purchased.35) 0.0 24.9 19. Nominal Cost (%) — — — Real Cost (%) 1.8%.0 Tax Adj. The Government would onlend the funds with the same duration. based on estimated remaining physical life of assets. including reduction in (O&M) costs.0 80.6 13. internal funds.60) 1. increased distribution capacity.1: Weighted Average Cost of Capital for TRANSCO Item Amount ($ million) 106.35 ADB Loan Domestic Loan Equity Contribution Total — = no data available.3% Table A9. For estimating WACC. The balance will be financed through Power Finance Corporation at an interest rate of 10. 6.32 4.2). D. Cost of energy purchased and end-use tariffs. The cost of equity is assumed as per MPERC allowance of 14% in the case of TRANSCO and DISCOM-E.0 32.0 Weigh (%) 62. ADB = Asian Development Bank. were used to value benefits. O&M costs were estimated at 1. as set by MPERC in its determination for 2007 and those projected for 2008–2016. and GOMP equity. 20 years with a 5-year grace period. and improved reliability.4% also is assumed.0 Nominal Cost (%) 6.86 8. ADB is assumed to finance 63% of TRANSCO and 57% of DISCOM-E subprojects costs through proposed Tranche 1 and Tranche 2.60 Appendix 9 5 For the distribution subprojects.80 1. although for some subprojects an expected reduction in O&M costs was included as a benefit.0 Weigh (%) 56. is estimated at 3. the after-tax WACC assuming a corporate income rate of 30% is 2.83 0.0 168. therefore. Capital costs were estimated in Indian rupees using a basket of tender prices submitted during 2005 and 2006. in rupees to GOMP.34 ADB Loan Government Loan Equity Contribution Total ( ) = negative. = adjusted.8 10. TRANSCO and DISCOM-E will bear the foreign exchange risk. A domestic inflation rate of 5. The evaluation was undertaken over 20 years following commissioning with residual value assumed at year 20. The WACC is calculated for the ADB projects in Tranche 1 and Tranche 2 during 2007– 2012 (Tables A9.0 Tax Adj.0 Real Cost (%) (0.26 2.74 7.
-1246 -1208 -823 325 351 331 363 363 363 363 331 363 363 363 363 331 363 363 363 363 331 363 363 363 363 789 8. The current tariff has taken the investment plan into account.3% for TRANSCO.C. These returns compare favorably with the estimated value of WACC (3. Incremental cash flows attributable to the proposed investments in TRANSCO and DISCOM-E were estimated based on the methodology and assumptions described on Tables A9. RV = remaining value. Financial Internal Rate of Return and Net Present Value Calculation 8. Risk Assessment 1.8% for TRANSCO and 8. FIRR = financial internal rate of return. NCF = net cash flow. If necessary.Appendix 9 61 E. Source: Asian Development Bank estimates.1 and 9.769) Operating 0 17 64 107 187 197 197 197 197 197 197 197 197 197 197 197 197 197 197 197 197 197 197 197 197 Benefits 0 38 136 221 373 1425 1369 1315 1289 1263 1237 1213 1188 1174 1160 1146 1133 1119 1106 1093 1080 1067 1055 1042 1042 FIRR N. -1154 -3075 -2814 -5187 -495 1228 1172 1118 1092 1066 1041 1016 991 977 963 950 936 923 909 896 883 870 858 845 845 3. 2.F.3% ( ) = negative. Regulatory or tariff revisions risk for Tranche 1 and Tranche 2 are minimal.8% Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 RV Capital 1246 1204 468 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (789) DISCOM-E Operating 0 19 485 640 689 705 673 673 673 673 705 673 673 673 673 705 673 673 673 673 705 673 673 673 673 0 Benefits 0 15 131 966 1039 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 1036 0 FIRR N.2. and MPERC will adjust the determination accordingly.769 4.3% for DISCOM-E).3: Calculation of Financial Rate of Return (Rs million) TRANSCO Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 RV Capital 1154 3096 2886 5301 682 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (3. F. Table A9. because they will not be changed .F. The FIRRs are calculated at 4. regulated entities can submit revised asset capitalization and financing plans.C. substantiating the financial viability of the Tranche 1 and Tranche 2 investments.3% for DISCOM-E. The risk of tariffs being lowered does not exit. External Risks 9.
and (v) no allowance for residual values. delays in project implementation. Separate analyses were carried out for TRANSCO and DISCOM-E to examine the sensitivity of the FIRR and net present value to adverse changes in key variables. are realistic as long as the proposed investment program proceeds.7 3. and their geographical spread.9 22. Therefore. (iii) 10% decrease in revenues (allowable costs).6 3. Financial risks at the subproject level include increases in prices of equipment.9 2. These risks are considered low for the following reasons: (i) the cost estimates were based on recent tenders received. 2.5 3. and failure to gain access to necessary counterpart funds. the overall risk to the financial sustainability of TRANSCO and DISCOM-E is deemed to be minimal. (ii) TRANSCO’s implementation capacity is proven based on the past ADB project.3 TRANSCO SI 16..4 6. (ii) 10% increase in O&M costs.62 Appendix 9 unless MPERC is petitioned by the regulated entities to do so. The variables considered for the sensitivity analyses were (i) 10% increase in capital costs.3 DISCOM-E SI 10.e.5 4. the number and nature of investments. and advanced procurement will lessen the time between loan effectiveness and disbursement. Sensitivity Analysis 11. Loss-reduction targets.5 FIRR = Finance Internal Rate of Return. the financial projections demonstrate satisfactory cash flows from 2008 to meet the repayment of debt associated with the investment.4: Financial Results of Sensitivity Analyses (%) Sensitivity Analyses Base Case (FIRR) Capital +10 Operating +10 Benefits -10 2-year delay plus 20% cost increase No residual value WACC 4.4 demonstrates that the results are robust with the sensitivities exceeding the WACC. (iv) 2-year implementation delay with a 20% increase in costs.9 3. (iii) although TRANSCO and DISCOM-E have not become fully independent in terms of cash flow management. Project-Specific Risks 10.0 33.5 21. G.6 3. diversifies this risk.0 4. while DISCOM-E’s implementation capacity might require support as the staff have limited experience implementing ADB projects. Table A9. WACC = Weighted Average Cost of Capital Source: Asian Development Bank estimate::: .5 5. However. Geopolitical and political risks are present for all projects in India. Volume (i. demand) risk is minimal since the current system is peak-constrained and energy-constrained.3 7.2 8.2 7.8 4. Table A9. while aggressive.
As such. and (v) regulatory support with tariff filing applications. DFID is providing £18. which identified technical. Capacity development covers (i) financial management through financial policies. and appropriate network infrastructure and support. and most recently for trading. Assets were transferred. materials management. metering data management and management information systems. they must prepare the annual financial statements an accrual basis and file audited accounts within 6 months of the financial year. opening balance sheets for each new company were established. Also under the ESAAR system. The companies are still operating under the accounting system inherited from MPSEB. 2 complementing ADB’s proposed physical investments. the executing agencies’ accounts. The proposed short-term initiatives are adequate. 3 The respective executing agencies have well-staffed project management offices. including recruitment procedures and supporting mechanisms. human resources and e-mail solutions. transmission. (iv) materials and asset maintenance management. the new companies are required to comply with the Indian Accounting Standards. 1985 (ESAAR). cost and revenue centers. The financial management arrangements proposed by GOMP for the sector companies are considered appropriate for proper project financial management. controls. Reforms in the Madhya Pradesh (MP) power sector have been undertaken. commercial. In 2003. which will allow the companies to be ready for the proposed ADB investments. while commercial and contractual mechanisms were set up. and the companies started to operate independently. and management constraints in the power sector. and annual statement of accounts are prepared following the Electricity Supply Annual Account Rules. finance and accounting. The Madhya Pradesh State Electricity Board (MPSEB) has been unbundled into six new power sector companies for generation. and technical applications. After the sector reforms.5 million in technical assistance (£14. GOMP restructured the sector by injecting equity and taking over loan arrears and in lieu of rural electrification loans and subsidy arrears. 1 2 Tenders are being prepared with expected approval in January 2007. planning. modeling. (ii) accounting systems. . and reporting.5 million) and financial assistance (£4 million) from 2006 to 2010. The Asian Development Bank (ADB) verified the needs assessment with financial management assessment questionnaires completed by each sector company. financial. project management. Per the Companies Act 1956. TRANSCO implemented the previous ADB loan in a timely and efficient manner. (iii) human resource strategies. 2. accounting. and management information systems typical for commercial power utilities operations. In June 2005. GOMP undertook a diagnostic needs assessment of the financial management structure capability of the companies. GOMP has requested assistance from the Department for International Development of the United Kingdom (DFID) to address the identified weaknesses. including specification of long-term requirements and chart of accounts.Appendix 10 63 FINANCIAL MANAGEMENT 1. The sector companies are still in transition. Government of Madhya Pradesh (GOMP) prepared a financial restructuring plan to make the sector financially healthy. and implementation of the multitranche financing facility. moving from reporting under ESAAR to complying with new requirements. Key areas recognized included the design and implementation of a “backbone” enterprise resource planning system covering billing and collection. distribution. reporting. projects accounts. 1948. ADB supports short-term initiatives undertaken by the companies: the request 1 of new billing. and audit opinion have been complied with. as required by the Electricity Supply Act. project systems. A nonphysical investment component for capacity development is being provided.
67% of the revenue base. (ii) non-remunerative investments in rural electrification schemes for the purpose of serving the social obligations of GOMP. while non-projectrelated liabilities were distributed base on the population. as required by the Electricity Supply Act. Past Financial Performance 2. .492 billion compared with Rs23. operated the Madhya Pradesh (MP) power sector.614 billion in 2004. B. In 2005.119 billion resulted in a substantial increase in cash in 2005.680 billion in 2005. retirement of Rs35.71 million in 2002 to Rs2.1. and (v) lower plant load factor and high station heat rate of its generating plants.125 billion allowed reduction of debt and significant strengthening of the balance sheet before transfer of assets and liabilities to the new sector companies. In 2000. This imbalanced allocation worsened MPSEB’s financial position as follows: (i) estimated transmission and distribution losses reached about 49% in 2001. The MP power sector has reduced financial losses from Rs13. the Madhya Pradesh Electricity Board (MPEB). resulted. and the debt to debt-plus-equity ratio declined from 103% in 2001 to 57% in 2005. The forecasted loss level in 2002 was much lower than projected. 1948. MPSEB has not been able to achieve profitability because of (i) insufficient tariff to cover the cost of supply. MPSEB assumed about 79% of the long-term debt. The past performance of MPSEB is in Table A11. Since 1992. (ii) per unit cost of generation increased. Even with an improvement in the financial situation over this period.64 Appendix 11 PAST FINANCIAL PERFORMANCE AND PROJECTIONS FOR SECTOR COMPANIES A. the MP State Electricity Board (MPSEB) was created. and 94% of agricultural consumers. aggravating the poor cash flow. helped to improve the financial position of the MP power sector. and of a decline in interest charges as a result of the positive impact of the power sector financial restructuring. The improvement of the financial situation is attributable to an increase in sales in 2001–2005. with excess power generation allocated to the Chhattisgarh state. The series of the power sector reforms by the government of Madhya Pradesh (GOMP).149 billion of capital arrears and an equity injection by GOMP of Rs44. and poor quality of power supply. power shortages. Introduction 1. In the early 1990s. when the state of Chhattisgarh was carved out of Madhya Pradesh. allowing a decline in accumulated losses to Rs9. MPEB assets and project-related liabilities were allocated geographically. A vertically integrated monopoly. and consequently lower average realization per unit compared to the Chhattisgarh State Electricity Board. and (iii) unfavorable consumer mix. Prior period adjustments of Rs15. (iv) high commercial and technical losses in distribution. it was unable to reach the minimum return of 3% on fixed assets. supported by the Asian Development Bank’s (ADB) Madhya Pradesh Power Sector Development Program (MPPSDP). MPEB faced negative balance sheets. (iii) tariff subsidy from GOMP was received mostly through adjustments than cash in the early years. The financial improvements were demonstrated by actual results compared with those forecasted in the 2001 report and recommendation of the President for the Madhya Pradesh Power Sector Development Program. increases in transmission and distribution losses.
with the progressive tariff increases approved by MPERC.089 billion in 2008 to Rs4. spread equally among the companies.342 billion in 2016.2% from 2008 on. except that MPSEB-allocated loans might increase by Rs500 million. and then to 24. ADB would fund about 56% of the proposed projects.5% interest repayable over 10 years. Cash available from operations more than doubles from Rs2. Madhya Pradesh DISCOM East Company Limited (DISCOM-E).1% from 2009 on. the debt service coverage ratio will exceed 1. Financial Projections of Executing Agencies 4. while return on average net fixed assets will increases to 13. indicating TRANSCO’s capacity to meet at least 20% of capital expenditures from internal sources from 2013 onward. with debt service increasing from Rs1.6% for 2006. 2. The inflation and exchange rate assumptions are ADB estimates. The self-financing capacity exceeds 20% from 2009.6% by 2012. The summary of TRANSCO’s financial projections is in Table A11. and 1. cash flow is strong. with the balance to be funded by internal funds. MPSEB allocated assets and liabilities to the individual companies as of 31 May 2005. 6. Domestic inflation is projected at 5. moving toward the return on equity ceiling of 14% allowed under the current regulations.2.8% for 2007. while the debt to debt-plus-equity ratio declines from 67% in 2007 to 45% by 2016. profitability will be achieved by 2008. DISCOM-E’s return on equity will be positive from 2008 on.5% for 2006. Assuming all other assumptions do not change.7% in 2008 and remain above 16% thereafter. equity injections by GOMP. Opening Balance Sheets of the Companies 3. Self-financing capacity improves toward the end of the forecast period. on the MPSEB/ Chhattisgarh State Electricity Board split as it is being contested by MPSEB and GOMP in the Supreme Court. the companies claim that assets at that date have been put into service and should be allowed to expense rather than capitalize interest and claim a return to equity. Madhya Pradesh Electricity Regulatory Commission has used the companies’ opening fixed assets and work in progress (as of 31 May 2005) to determine the allocation of equity and loans between fixed assets in operation and work in progress. however. 4.3% in 2006 to 39. With the proposed tariffs. 5.4% by 2016. they were not based on the year-end balance sheets of MPSEB as at 31 March 2005. and the debt service ratio is expected to exceed 1. Debt to debt-plus-equity ratio is forecasted to fall from 68. and Power Finance Corporation at 10. This section sets out the financial projections for the executing agencies. Foreign exchange costs are forecasted to decline by the international and domestic inflation differential 2 to maintain purchasing power parity. DISCOM-E’s financial projections show that. International inflation is assumed at 1.3% for 2008.3 in all years. dated 4 November 2004. and 4. The project funding will enable TRANSCO to undertake the planned investment. In some instances.2 in all years. MPSEB has undertaken to provide the operating companies a final balance sheet by 30 November 2006. Projected financial performance indicators improve over the forecast period and show adequate debt service coverage throughout the project. From 2008 on. The company’s profitability is expected to grow in line with improvements in the efficiency and effectiveness of its operational performance. 4. The Corporate Planning Group of MPSEB anticipated little change in the opening balance sheets. Madhya Pradesh Transmission Company Limited (TRANSCO).5% for 2007. 1 As these balance sheets were only provisional.Appendix 11 65 C. and are converted to the Indian rupees by the exchange rate of the draw year. .593 1 2 This balance sheet is without considering the impact of the Government order. D.
Note: FY 2001 accounts are for period 15 April 2000 to 31 March 2001 (as per 2002 audited accounts) GWh = gigawatt-hour.22 1.38 20 128.2: Summary of TRANSCO Financial Projections (Rs million) Financial Year Ended 31 March 2006 2007 2008 2009 Available Transmission Capacity (MW) 5.474 3.60 0.05 68.262 0 26.171 57.276 61.26 Note: For 2001 Income and expenses accumulated 69% of the MPEB before the splitting in two states.11 2.5 (6.011 7.049) (13) 59.91 54.324) (9) 80.1: Past Financial Performance of MPSEB (Rs million) Financial Year Ended 31 March Generation and Purchases GWh Losses (%) Sales Average Revenue (Rs/kWh) Income Expenditure Actual Profit after tax Return on average NFA (%) 2001 RRP Profit after tax Return on average NFA (%) Long Term Loans Total Current Liabilities Total Liabilities and Equity Debt/Debt plus Equity (%) CA/CL (ratio) 2001 Estimate 26.300 293 20593 4.939 5.273 Average Tariff (Rs/MW/day) 4.00% 13.2 1.90% 15.168 Other Income 34 40 48 105 Total Revenue 4.401 116.69 2005 Provisional 30.996 3.362) (61) 73.535 43.106 9.690 143.66 Appendix 11 billion to Rs3.1 65.025 43.953 3.625 56.662 Return on Average Net Fixed Assets (%) (3) 15 14 15 Return on Average Equity (%) (26) 14 11 11 Debt Service Coverage Ratio (%) 1.745 Increase in Tariff (%) (12) (5) Net Profit After Tax (1.9 (4.417 11.429 6 5.726 2.58 62 2013 12.455 154.147 2.61 2003 Audited 27.885 10 20.208 51.654 (2) 2.037 billion over the same period.269 2. The decline in capital expenditure is the result of the completion of the national rural electrification program with 100% rural electrification achieved by 2009 and the bulk of the states distribution network in place.340 170 13.548 129.53 51.202 119.34 75 142.140 9. The summary of DISCOM-E’s financial projections is in Table A11. Capital expenditures decline from Rs8.668) 5.465 11.325 14 13 1.2 (5. Table A11.50% 15.280 2.660 5.60 0.770 71.513 555 7.1) (25.3.494 43.352 50.342 billion in 2016.293 (1.509 3.34 Self Financing Ratio (%) (5) 16 16 Total Assets 62.170 % increase 8 20 13 Transmission Revenues 4.627 43.80% 14.892) (38) 64.068 64.304 69.050 Current Ratio. RRP = Report and Recommendation to the President Source: ADB estimate Table A11.7) (14.018 49.557 75.66 2004 Audited 28.282 378 26.768) 1.757 84.680) 4.02 2002 Audited 26.963 12 11 1.36 45 . LT = long term.68 1.310 3.308) (6.160 14 12 1.001 22 13. NFA = Net Fixed Assets.8 58 2016 13.753 billion in 2008 to Rs4.220 8. CA/CL 0.380 1.5 2.043 128. MW = megawatt Source: ADB estimate 2010 10.70 1.918 78.513 (13. CL = Current Liabilities.800 65.30 1.316 22 4.49 LT Debt /LT Debt plus Equity (%) 68 67 61 61 CA = Current Assets.713) (4.699 48.935 102.50% 17.938 (9.858 10.563 6.451 (2.49 15 93.853 57.077 119.50 0.905 2.817 10.025 106.266 1.77 41. kWh = kilowatt-hour.580) (14) 70.
87 3.95 4.50 5.141 129 2.635 223 4.777 1.01 48.70 1.240 0.270 3.62 4.688 209 1.20 6.85 4.082 1.482 185 3.30 CA = current assets.46 (40) 4.91 320 18.131 169 3.300 3.10 2008 2.50 1.80) 1.64 27.30) 3.56 147 18.00 67.81 21.78 2.50 3.37 24.00 (4.30 4.13 35.10 2.99 57.668 4.367 286 6.868 1.80 4. CL = current liabilities.587 4.40 2013 4.59 4.71 5.766 3.30 2. CA/CL Debt / Debt plus Equity (%) 2006 1.006 1.60 3.30 1.53 106 19.60 2016 6.30 4.40 2009 3. HT = high tension.31 5.70 5.200 1.50 12 13.80 12.561 1.13 3.80 3.60 2010 3.Appendix 11 67 Table A11.95 3.20) (3.01 68.00 6.40 8.653 5.617 149 2.78 194.70 0.00 53.3: Summary of DISCOM-E Financial Projections (Rs 10 million) Financial Year Ended 31 March Tariff Revenue Non-Tariff Income Total Revenue Average Cost of Supply Average Tariff LT Consumers Average Tariff HT Consumers Net Profit After Tax Return on Average Net Fixed Assets (%) Return on Equity (%) Debt Service Coverage Ratio Self Financing Ratio (%) Total Assets Current Ratio.2 6.80 646 17. LT = low tension Source : ADB estimate .60 1.88 61.40 (42) (1.897 2007 2.
Manila . and improved reliability of supply. All costs and benefits have been expressed at a constant 2006 prices. This compares to the long-run marginal cost of the equivalent peak and off-peak plant (on a weighted average basis) of Rs3. The distribution component focuses on making delivery more efficient on an isolated subproject basis. 1 ADB. were based on projections of historical sales data. and HVDS has been identified as least-cost. Project Benefits 2. Capital costs included physical contingencies. Analysis of the electrical capacity and energy demand and supply balance in MP demonstrates that (i) any reduction in peak losses will result in incremental demand being served in most years. A domestic price numeraire was used. is the leastcost means of removing the peak constraints on the transmission network and reducing losses. removal of network constraints. substation projection upgrading.e. It confirmed that the transmission component was overall least-cost by comparing the discounted cost with an equivalent generation project—i. therefore. Detailed analysis by TRANSCO confirmed that the transmission component is the leastcost transmission solution to achieve the desired outcomes. Benefits were quantified through load flow analyses and from pilot studies in other states. Non-incremental outputs from transmission and distribution components were valued at the resource cost savings that would accrue if the project was to proceed. they were analyzed separately rather than using the systems approach.3 per kWh. and will result in a resource cost saving.68 Appendix 12 ECONOMIC ANALYSIS OF TRANCHE 1 AND TRANCHE 2 A. tradable inputs were valued at their border price equivalent and converted into domestic equivalents using an estimated standard exchange rate factor (SERF) of 1. Demand forecasts. In the case of High Voltage Distribution System (HVDS). built at or close to the load center. price contingencies. These benefits arise from a reduction in technical and non technical losses. the impact of real tariff increases.. The transmission component is concerned primarily with relieving transmission constraints. that would be capable of producing the same level of output as the savings in losses and incremental demand served that the transmission component of the Project delivers. 4. and (ii) any reduction in off-peak load will mean that less generation will be required to serve the same level of demand. No viable alternatives are available for 100% consumer metering. The main economic benefits of the subprojects in Madhya Pradesh (MP) are displaced thermal electricity generation and incremental consumption. as the two components are largely independent. B. Project Cost 1. DISCOM-E has confirmed that other means to achieve similar reductions in technical and commercial losses have been explored. At a 12% discount rate. Therefore. 3. the leveled cost of the transmission project is approximately Rs1. modified by population growth.1 per kWh. an electricity generation plant or plants. The economic analysis of the proposed subprojects has been carried out in accordance with the Asian Development Bank’s (ADB) Guidelines for Economic Analysis of Projects 1 . and remote metering. Transmission reinforcement. prepared by TRANSCO with input from DISCOMs. The evaluation covers Tranche 1 for Madhya Pradesh Power Transmission Company Limited (TRANSCO). and financial charges during construction. but excluded taxes.05. 1997 Guidelines for Economic Analysis of Projects. and Tranche 2 for Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (DISCOM-E). and the impact of real increases in household income.
Marginal costs of existing coal plants were estimated based on actual historical operating parameters contained in generating company’s most recent tariff petition. 7. 2004. In practice. The weighted average willingness to pay for all MP consumers supplied at Low Voltage is Rs3. Ideally. including 3 years for construction.2 per kWh on this basis. the long lead times for hydropower coupled with the additional development risk it poses. The Cost of Generation Electricity. The marginal cost of electricity from coal-fired thermal plants represents the short-run marginal cost of off-peak energy in MP. Instead. based on the World Bank’s coal price forecast and adjusted for the generally lower quality of coal used for power generation in India. Economic cost and benefit flows are in Table A12. Project Costs of Generation Electricity–2005 Update. have meant that few new peaking plants are planned. A period of 25 years has been used for economic evaluation. it has been assumed that the short-run marginal cost of peak energy is set by the marginal cost of coal-fired thermal plant and the long-run marginal cost of peak energy by the life cycle cost of coal-fired thermal plant. . Estimation of Economic Internal Rate of Return 8. A discounted average marginal generating cost of Rs1. C.03 per kWh. Therefore. Suppressed demand is around 13% of energy demand. 3 “Measuring Willingness to Pay for Electricity. as well as the difficulties in securing long-term gas supply. the benefits of TRANCO’s proposed total investment under Tranches 1 and 2 have been prorated to give a notional EIRR of Tranche 1 only. additional thermal base load plant is being added. moving hydropower from mid-load and peakload duty into dedicated peaking. For Medium Voltage customers the figure is Rs4. additional hydropower capacity or open cycle gas turbines would be added in the longer term to cope with the growth in peak demand. The project evaluation is based on a comparison of benefits and costs between the project (base) case and the without project (alternative) case. Loading and transport costs excluding were added to base coal prices to derive a 2007 BPEV of Rs2.1 for the transmission and distribution components. International Energy Association 2 and Royal Academy of Engineering 3 data were used to establish international benchmarks for the performance and costs of modern thermal plant. the marginal tariff was taken as a conservative proxy for their willingness to pay. Detailed benefit-cost analysis at the subproject level is discussed in Supplementary Appendix N. discretely and separately identifying the benefits of the two tranches is not possible. 4 and the combined distribution component an estimated EIRR of 14.0%. For other consumer categories. The Royal Academy of Engineering. 2 3 4 International Energy Agency (IEA). a semi-log demand function was estimated. Therefore. Coal fuel was initially valued at its border price equivalent value (BPEV).7%.3 per kWh. The transmission component has an estimated Economic Internal Rate of Return (EIRR) of 15. 6. Incremental outputs were valued using consumers’ estimated willingness to pay for incremental consumption.0 per kWh. however.Appendix 12 69 5. 2005.400 per ton.” The demand function then was tested against MP data from earlier years and found to be a reasonable fit. following the methodology outlined in ADB’s Economic Relations Division Technical Note No. Solving the demand function for q = 804 kWh gives a willingness to pay for additional units of consumption of Rs3. For domestic consumption. Leveled life cycle cost of a new coal-fired plant was estimated to be Rs2. In practice. The detailed benefit-cost calculations show that the transmission and distribution components are expected to be economically viable.9 per kWh for electricity delivered at the power station gate was calculated.
5 24.3 672.2 83.0 463.1 891.5 24.0 0.5 24.2 28.6 45.1 416.0 7.3 672.0 0. As such. However. Care was taken to avoid “double counting” of benefits across the transmission and distribution components.0 0.0 0.6 88.5 97.5 24.2 83.1 470.2 483.5 443.0 0.5 24.0 0. O&M = operation and maintenance Source: Staff estimates 9.2 83.5 24.0 -487.1 648.3 672. and through reduced requirements for load shedding.5 443.2 483. demand growth beyond the end of construction of the transmission component has not been included in benefit quantification.0 0.2 483.0 0.3 672.3 672.237.0 718.3 672.2 28.1 891.5 443.0 718. .7% Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 0.2 483.1 891.0 718.2 483.0 718.3 416.269.218. The transmission component is focused primarily on relieving transmission network constraints.0 0.1 416.0 718.1 891.9 28.0 0.1 416.0 718.0 0.5 EIRR Net Benefits 0.0 718.5 Costs (Rs million) Electricity Capital Generation O & M 0.1 416.1 416. general expansion of distribution networks will occur in both “with (transmission) project” and “without (transmission) project” cases.0 0.5 443.306.2 483.2 83.0 0.0 0.0 86.2 14.5 443.1 416.5 443.7 0.1 891.1 416.8 648.2 28.6 437.2 28. Furthermore.8 415.4 92.0 0.3 Costs (Rs million) Electricity Capital Generation O & M 0.0 0.9 451.1 92.2 483.0 718.0 0.0 0.7 534.0 0.3 -1.6 42.2 28.2 28.0 -1.0 1.4 92.0 0.0 434.3 672.4 423.2 0.5 443.0 54.4 92.5 24.2 28.1 416.2 483.9 26.9% EIRR = economic internal rate of return.4 24.0 718.0 0. Moreover. the assumption of coal-fired thermal power stations as the displaced peaking plant does not reflect the need in the longer term to construct gas or hydropower peaking plants to load-following duties during peak supply periods. The estimated EIRRs are conservative.0 0.127.0 24.9 -947. reduced harmonic content.4 387.2 483.5 24.6 583.0 0.1 891.0 1.3 2.0 0.5 24.1 891.5 387.4 92.2 483.2 28. Subprojects will improve significantly the quality of supply to consumers through improved voltage. Moreover.7 83.0 -974.8 189.2 83.0 0.4 92.2 483. In this context.4 0.0 0.2 83.9 29.0 0.3 252.0 718.0 0.5 -112.0 12.5 443.4 92. a valuation of the improvement that supply quality and reliability would have on consumers’ willingness to pay for incremental consumption was not attempted.5 36.7 799.0 0.5 24.4 92.3 83.0 0.1 416.8 78.1 867.4 672.2 483.2 28.2 -1. the EIRR for the transmission component is a conservative estimate.7 416.9 83.2 28.70 Appendix 12 Table A12.0 718.4 92.4 92.0 718.1 416.3 672. it was conservatively assumed that consumers’ demand functions would not change.2 28.1 891.5 443.0 0.1 891.5 83.0 0.782.4 92.0 0.3 672. despite a significant improvement in the overall quality of electricity that they receive.5 443.2 413.4 92.0 0.7 77.1 835. Reliability will be improved through a reduction in nuisance tripping of lines and substations.0 718.4 615.0 0.0 1.5 24.0 487.0 0.9 680.6 30.2 28.5 443.4 92.0 718.1 Distribution Benefits (Rs million) NonNet Incremental Incremental Benefits Output Output 0.1 891. and more consistent frequency.3 672.0 0.1 891.3 351.8 84.0 0.4 287.5 24.5 27.2 83.1 891.0 718.0 718.5 24.1 416.2 483.0 259.269.3 672.5 24.1 891.233.2 28.4 92.8 1.2 83.4 718.2 28.5 24.3 672.0 0.0 0.1 891.0 0.3 483.0 0.1 416.0 0.2 83.5 24.5 24.0 69.1 416.1 416.8 107.1 416.0 160.2 28. benefits are largely independent of work on removing distribution constraints. In other words.0 0.1 867.2 EIRR 14.0 43.5 24.5 443.0 0.5 24.0 0.5 420.0 18.3 46.0 0.2 83.9 0.0 718.5 443.2 483.3 672.0 0.5 24.5 24.0 317.1 891.4 92.1 278.4 395.2 83.2 83.5 443.0 0.2 83.3 672.1: Economic Analysis Transmission Benefits (Rs million) NonIncremental Incremental Output Output 0.6 150.1 382.5 443.2 83.4 92.1 416.3 672.1 891.2 83. 10.2 483.0 0.5 443.
7 13. enhancing production and output and leading to fewer equipment failures. delivering expected EIRRs of 14.7 .6 1.0 + 10 13. the investment program will create short-term and long-term employment opportunities and tax revenues.Appendix 12 71 11. The IRR for the transmission and distribution components increases with increasing cost of generation as the resource cost saving benefit outweighs the additional generation cost to serve incremental consumption. and will open up opportunities for energy-dependent rural enterprise. 12. 3. For the transmission and distribution components. Rural consumers particularly will see a significantly improved electricity supply. The distribution of costs and benefits among stakeholders was assessed by comparing financial costs and benefits to economic costs and benefits.7% for transmission components and 14. .4 -70. Details are in Supplementary Appendix H. A secure and predictable electricity supply will enable social and economic benefits to materialize.5 Variation (%) Distribution EIRR Switching Value (%) (%) 14. This will have positive outcomes for educational and social activities. 2. as well as ensure improved conditions for schools. To complement this deterministic analysis.5% for distribution components.9 1 year 12. 7 As TRANSCO’s WACC is less 5 6 7 Financial sustainability and tariff setting are discussed in detail in Appendix 11 and Supplementary Appendix A. In addition.3 . Sensitivity and Risk Analysis 13.9 + 10 25. except for the combined downside scenario for the transmission component. respectively.8 10.7 + 10 13.6 -21. A transparent tariff-setting regime that permits full recovery of efficient costs supports the financial sustainability of the executing agencies (EAs). and with minimal scheduled and unscheduled outages.2: Sensitivity Analysis Sensitivity Parameter Base case Capital Cost Increase WTP Reduces Cost of Generation Increase O&M Increase Delay Combined Transmission Variation EIRR Switching Value (%) (%) (%) 15. Industrial and commercial consumers also will benefit from improved supply reliability and quality. 5 D. EIRRs exceed the assumed hurdle rate of 12% for all sensitivities tested. The results are in Table 12.4 18. 5.2. risk analysis was undertaken using a probabilistic.10 13. 4. unaffected by the lengthy scheduled outages that are experienced currently. Source. Monte Carlo simulation approach. The sensitivity of the EIRR to various input assumptions also was tested. 15. Details are in Supplementary Appendix H. The project would be effective in reducing poverty. subprojects appear to be economically robust.6 281.2 18.6 + 10 14. and other social services.5 -20. Table A12.4 + 10 14. hospitals. Based on these results. The investment program will enable urban and rural domestic consumers to receive a supply of electricity at an acceptable voltage level.9 182. 6. ADB estimate 14.1 + 10 13.2 1 year 12. 6 This analysis underscored the economic viability of both project components.4 -80.10 14.
and the difference between the financial net present value and economic net present value is distributed between electricity consumers and the Government. 16. The Government also is a net beneficiary of the incremental income tax that would be generated. The benefit of resource cost savings also accrue to consumers through lower electricity prices. Therefore. benefits accrue to consumers as energy is consumed incrementally based on consumers’ willingness to pay for this consumption. Financial benefits accrue to DISCOM-E as soon as new assets are brought into service. they would benefit the most from the project. A SERF of 1. as DISCOM-E’s WACC is less than 12%. consumers are net beneficiaries. E. The Government is a net beneficiary of the difference between the financial and economic capital costs of the project. it suffers a loss when its net financial benefit streams are discounted at 12%. A SERF of 1.0% for the transmission components and 14.7% for the distribution components. consumers are net beneficiaries.05 has been estimated for India.72 Appendix 12 than 12%. The economic analysis confirms that Tranche 1 and Tranche 2 subprojects are least-cost and economically viable. The economy gains overall from the project. Therefore. implying that foreign exchange costs have a higher economic than financial cost to the economy. Conclusion 17. However.05 has been estimated for India. implying that foreign exchange costs have a higher economic than financial cost to the economy. taxes and duties collected on the foreign component of equipment purchases offset the loss accruing from the overvalued currency. From an economic perspective. it suffers a loss when its net financial benefit streams are discounted at 12%. As such. The economy gains overall from the project. . The economic price of foreign exchange and the official exchange rate differ. The sum of these benefits is greater than the incremental transmission charges that would appear in consumers’ electricity bills. The economic price of foreign exchange and the official exchange rate differ. From an economic perspective. Small gains and losses to labor have been excluded from the analysis. Small gains and losses to labor have been excluded from the analysis. principally through increased electricity sales and reduced losses. Sensitivity and risk analysis demonstrates that the expected economic performance is robust. benefits accrue to consumers as energy is consumed incrementally based on consumers’ willingness to pay for this consumption. From an economic perspective. taxes and duties collected on the foreign component of equipment purchases offset the loss accruing from the overvalued currency. The benefit of resource cost savings also accrue to consumers through lower electricity prices. However. The sum of these benefits is greater than incremental distribution and retail charges that would appear in consumers electricity bills. Residential and agricultural consumers are the two consumers that suffer most from poor quality and unreliable electricity supply. However. and the difference between the financial net present value and economic net present value is distributed between electricity consumers and the Government. The Government is a net beneficiary of the difference between the financial and economic capital costs of the project. Tranche 1 and Tranche 2 subprojects should proceed. The analysis yields EIRRs of 15.
(v) improve energy efficiency. and the Government’s environmental assessment regulations and guidelines. (b) eight new 220/132 kV substations. Electricity Transmission Capacity Strengthening. and as such do not require environmental assessments or prior regulatory approval from Ministry of Environment and Forests. The executing agencies (EAs). A generic EMP in matrix form that will apply to additional subprojects has been prepared. 2003 Environmental Assessment Guidelines. expand renewable energy capacity. 5 as well as a review of environmental impacts of typical power transmission and distribution projects. (iv) facilitate a reduction in overall system losses. The EARF outlines the policy. and is expected to help to attract other long-term financiers to the sector. (i) Tranche 1. Introduction 1. and capitalize related carbon market opportunities. 2 The first and second tranche investments are classified as category B according to ADB’s Environmental Assessment Guidelines. and preliminary environmental management plan (EMP). 3. Description of the Madhya Pradesh Power Sector Investment Program 4. This summary IEE outlines key aspects of the proposed investment program. 5. The investments to be supported by ADB will (i) improve the quality and reliability of power. (ii) remove transmission bottlenecks. The EAs are responsible for preparing the required environmental assessments and obtaining ADB concurrence before implementation.Appendix 13 73 SUMMARY INITIAL ENVIRONMENTAL EXAMINATION A. Transmission Capacity Expansion. The mitigation measures for the additional subprojects will be developed in the spirit of the principles agreed upon in this EMP framework. procedures. Environmental assessment also will be prepared in due course for the remaining components in future tranches. This component includes construction of (a) 2 circuit kilometers (cct-km) of 400 kV and 1. B. and (vi) improve utility operational and financial performance. have prepared initial environmental examinations (IEE) for the first and second tranche components. . 4 The matrix is developed based on environmental analysis of the proposed Tranche 1 and Tranche 2 components and subprojects. Environmental assessment of the proposed investments is being carried out following the Asian Development Bank’s (ADB) Environment Policy (2002). environmental benefits and negative impacts. and institutional requirements for preparing subsequent projects. TRANSCO and DISCOM. These approvals must be in place before contracts are finalized and work begins. and particularly to projects included in subsequent tranches that have not been fully defined. Environmental Assessment Guidelines (2003) 1 . 2. Manila Government of India regulations consider transmission and distribution systems to be non-polluting activities.435 cct-km of 220 kV transmission lines across MP. The proposed Program will sustain the reform agenda established with earlier ADB support. proposed mitigation measures. (iii) facilitate in-state and interregional power transfers. 3 EARF is in Supplementary Appendix K 4 EMP is provided in Supplementary Appendix L 5 An IEE with EMP has been prepared for the proposed Tranche 1 and Tranche 2. The environmental assessment and review framework (EARF) 3 is applicable to all investments funded by the multitranche financing facility. 1 2 ADB.
interspersed with mountains of the Satpura and the Vindhya ranges. keekar. Ecological Resources. Physical Resources. and 14% unclassified forest. threatened.000 millimeter (mm) in the west to 2. The total forest area in the state is about 9. Average population density is about 196 persons per km2. or endangered species. copper. etc.7% of total land area of MP. neem.000 million cubic meters (m3). limestone. of which approximately 56. MP has nine national parks and 25 wildlife sanctuaries. none of the physical investment components is in these sensitive areas. Sone. dolomite. chhola. Bundel Khand. MP has two agro-climatic zones: (i) Central Plateau & Hill Region. In addition to high reserves of coal. (b) remote metering of about 2. The monsoon season runs from June to September. covering about 10. 6 constituting about 5.5% of the geographic area of the state. (c) metering of about 250. (ii) Tranche 2. Narmada.800 square kilometers (km2) or about 3. including conversion of about 7. The area is geologically stable and not prone to earthquakes. 7. ranging from shallow to deep black. The project area is part of a peninsular plateau consisting of sedimentary and metamorphic rocks. Average air quality in the state is good. groundwater use is also common. The population of state exceeds 60 million. Socioeconomic Conditions.000 consumers. where air quality is deteriorated due to industrial activities and transport sources. Malwa and Nimar regions. and is structurally part of the peninsular block. The state has a tropical climate varying from dry subumid to semiarid. and reptiles. squirrel.000 industrial consumers.400 km of low-voltage lines to high-voltage lines. jaria. 22% protected forest. Summers are hot (maximum temperature between 330C and 440C) and at some places it remains humid. The Narmada is an MP lifeline. Census of India. The project components are in various geographic regions of the state. and (c) one new 400/220/132 kV substation with 315 MVA transformer capacity. diamonds etc. wolf. and (d) renovation of protection system at about 100 substations. Distribution Efficiency Enhancement. Availability of water in the state is more than 81. which constitutes 31. Surface water commonly is used for all purposes. except in a few urban and industrial centers. Mahakaushal. Soil in the region is mainly black soil. covering Bagel Khand. . and (ii) Western Plateau and Hill Region.77 million hectares. Except for the Narmada river valley. while winters are reasonably comfortable (between 270C and 100C). bauxite.000 mm in the eastern part of state.9 % of country’s population. with the average area reported under forest cover at about 28%. The literacy rate is nearly 65%. However. monkey. Description of the Environment 6.857 million m3 (70%) had been utilized. **Place of publication: Publisher**—the latest authentic document published by Government of India and revised by every 10 years. **Year of publication**. manganese. the state consists of a plateau with mean elevation of about 500 meters above mean sea level. rock phosphate. The soil of the region is rich and fertile. Four major rivers crisscross MP: Mahanadi. Of the forested area. 2001. The areas directly impacted by the investment components do not have any sensitive. The common flora species are babul. C. The notable wildlife species reported are jackal. However. Agriculture dominates land use.74 Appendix 13 with transformer capacity of 160 MVA each. which runs from east to west between Vindhya and Satpura ranges. Chambal. About 73% of the population lives in rural areas. 64% is legally reserved forest. the state’s other mineral resources include iron ore. and Tapti. 8. The distribution component will undertake (a) construction of HVDS in six distribution circles in the eastern distribution zone of MP. reonjha. with average rainfall of 1. The economy 6 Statistics are taken from **Author**. fox.
Escape of polluting material. nearly 24% villages have all-weather road connectivity. with predominant crops of millet. Construction will generate noise for a short duration in predominantly rural locations. Environmental Problems Due to Project Location and Design 9. reserve forests etc. (vii) selection new equipment (i. (iv) do not affect any public utility services such as playgrounds. In addition. (v) do not pass through any sanctuaries. Per capacity income at current prices is about Rs5. 2. maize (corn). and for new substations is about 76. The land required is mostly government and/or agricultural land. Anticipated Impacts and Mitigation Measures 1. from construction .926 per year. Minor disruption to farming activities. The following principles were adopted for selection of optimum sites for project components: (i) minimize disturbance of human settlements. installation of additional transformers and circuit breakers. and is considered insignificant.572 crores (annual basis). topsoil will be protected and reinstated after construction is completed. schools etc. The total cultivable area is 18. and extension of feeder bays. national parks. ground-nuts. No land acquisition will be required for augmentation of substation capacity. In all project areas. the contractors will be required to limit the load of trucks in transporting construction equipment and materials. They generally traverse barren land with minimum vegetative cover and agricultural areas. Mineral resources and tourism also are contributing significantly to the state’s economy. (vi) minimize damage to forest resources. Site selection for individual lines and substations is undertaken carefully. cotton. and the net domestic product at current prices is about Rs41.) that comply with international standards.704 hectares and the net area sown is about 14. D. About 95% of villages are electrified. capacitors. The environmental impacts associated with the establishment of temporary access roads will include compaction of soil structure and disruption of stream or other water bodies. the project components do not encroach upon ecologically important areas. compensation will be paid for temporary loss in agricultural production in accordance with the resettlement action plan. gram.975 hectares.. Preliminary route selection was based on the topographic sheets and forest atlas (forest maps). To minimize such impacts. The proposed project components do not pose any threat to other public utilities or wildlife. Other nuisances from construction activities will be mitigated through contract clauses specifying careful construct practices and compensation paid for any losses in agricultural production. To minimize the impact.Appendix 13 75 is based primarily on agriculture. (ii) avoid monuments of cultural or historical importance. and damaged bunds and irrigation facilities will be maintained in working condition throughout project implementation. Uncontrolled soil erosion and silt runoff are likely to be minor due to the limited amount of excavation required for towers and the dry climate. established roads and tracks will be used wherever possible. could occur during construction and line maintenance. and about one third of the population has access to improved water supply. rice. Environmental Effects During Construction 10. transformers. Alternative alignments and/or locations were considered to ensure that the disruption to environmentally sensitive areas would be avoided or minimal. Substations will be sited and designed to ensure noise level from fence will not exceed 70 dB(A) at any time. etc. soybean.3 hectares. wheat.e. pulses etc. such as oil and sewage. measures to minimize erosion and silt runoff will be incorporated into contract documents. particularly with respect to avoiding use of PCBs. as well as disturbance of crops.. Temporary access roads might be needed in some locations. canals. etc. and drains. The land required for placing new transmission towers is about 0.. and will be compensated per existing norms. (iii) do not create a threat to the survival of any community with special reference to tribal communities.5 hectares. bunds.
and accidents to staff and the public will be minimized through implementation of measures such as (i) careful designs using appropriate technologies to minimize hazards. Trees will be trimmed with the assistance of the state forest department to ensure that the required vertical clearances from the top of tree to the conductor are maintained throughout the transmission corridor. (ii) safety awareness raising for construction and operational staff and the public. (v) provision of adequate staff training in operations and maintenance. Overall. electric shocks. fecal coliform Petroleum and detergent 7 SF6 is one of the six greenhouse gases covered by the Kyoto Protocol. COD. During construction. . no technological substitute for SF6 circuit breakers is ready. This will reduce the chances of forest fires due to electric sparks. Table A13. use of appropriate equipment for recycling. fencing. 3-meter wide strips of land under each conductor will be cleared. 7 While MPPTCL has investigated phasing out SF6. and access roads Outdoor Switchyards Pollutant or Parameter 70 dB(A) at site boundary Treatment Measures Equipment to meet local noise standards. and/or greenbelt to provide partial sound barrier Primary treatment if needed by larger camps Sedimentation and biological treatment if necessary Noise: Operational Period 70 dB(A) at site boundary Wastewater: Construction Period Domestic wastewater Industrial wastewater from construction equipment maintenance Work site and construction camps Equipment maintenance yards BOD. are a concern. Health hazards from potential explosions or fire. one of which will be kept clear as a maintenance right-of-way. and have been evaluated in the context of possible opportunities under the Clean Development Mechanism (CDM). Hazardous waste generated from phased out equipment and/or batteries will be disposed off according to the norms of Ministry of Environment and Forests. 3. construction scheduling to avoid evening and nighttime disruption Locate facility 70–100 m from nearest receptor. Table A13. maintenance yard. (iv) provision of adequate water supply and sanitation facilities for substations and construction camps. walls. (iii) substations equipped with modern fire control systems. including leak detection and repair. houses will not be allowed within the right-of-way. which use sulphur hexafluoride (SF6). the project’s minimal negative impacts can be mitigated cost effectively. and orientation and training of employees. Emissions of SF6 will be controlled by applying sound engineering and management practices. Environmental Effects During Operation 11.1: Project Impacts and Mitigation Measures Types of Impacts Noise: Construction Period Impact Sources Construction equipment and equipment repairing and maintenance Transmission line and associated substations Location of Sources Construction sites. Emissions from circuit breakers. General awareness among people about potential risks due to high-voltage lines and safety aspects should be raised.76 Appendix 13 camps and substations will be prevented through design and installation of appropriate oil containment and sewerage systems. The other strips will be allowed to be afforested. but India is not subject to Kyoto emissions caps and SF6 is not regulated by the Government of India as a pollutant.1 summarizes the anticipated impacts during construction and operations. To minimize the risk of accidents and exposure to electric fields. and (vi) security fences and barriers around substations and transmission towers in populated areas.
health. SO2 levels at construction sites. and sanitation. to meet CPCB standards for industrial wastewater Mineral oil. etc. GHG = greenhouse gases. SO2 = sulfur dioxide. and dispose off in manner consistent with the requirements of the Government Spoils to be used as base material for substations and greenbelts Dispose of in a manner consistent with the Government‘s requirements Solid Garbage from Substations and Domestic solid Disposed at facilities Wastes: substations and storage yards waste and/or approved by local Operational storage yards process waste or government pollution Period scrap waste control agencies BOD = biochemical oxygen demand.200 giga watt per hour (GWh) per year. TSP = total suspended particles. CFC = chlorofluorocarbons. which are considered largely positive. COD = chemical oxygen demand. Distribution and transmission system efficiency improvements will result in energy savings of at least 1.Appendix 13 77 Types of Impacts Impact Sources Waste oil from phased out transformers and other equipment Domestic wastewater Industrial wastewater and oils from transformer replacement Wastewater: Operational Period Location of Sources Construction sites and maintenance yards Substations and storage yard Storage and maintenance yard Transformers being taken out of service Pollutant or Parameter Mineral oil. with equivalent Carbon Dioxide (CO2) reduction of more than 1 million tons per year. and surrounding areas GHGs in atmosphere Treatment Measures Reuse after filtration. (ii) increased investment in energy efficiency and renewable energy. NOx = nitrogen oxides. water supply. construction debris Replaced equipment Construction sites and workers’ camps Storage yard Earth and domestic solid waste Replace equipment or process or system using CFCs. Direct impacts result from acquisition of additional RoWs and land for transmission lines and substations. The application of advanced power generation technologies and renovation of . Potential Cumulative and Induced Impacts 12. fecal coliform Temperature. BOD. and improvements in power system efficiency. dB(A) = decibel acoustic. Indirect impacts include: (i) expansion of thermal power generation base (facilitated by the transmission and distribution system investments). including halon. NO2. or alternate on-site treatment as approved by pollution control board Air Quality: Construction Period Air Quality: Operational Period Dust during construction and exhaust gases from construction machinery and vehicles Release of gases in receptors from process. equipment Construction sites access roads and surrounding areas Equipment or process using CFCs and halons Continuous management measures to be imposed at the construction sites Solid Wastes: Construction Period Spoils from earth moving. (iii) economic growth related to improved power supplies. NO2 = nitrogen dioxide. COD. Dispose off-site to registered vendors Primary treatment if needed Off-site disposal at licensed treatment facility. PCB = polychlorinated biphenyl. Source: Asian Development Bank assessment Pieces of phased out equipment 4. and (iv) reallocation of government funding away from lossincurring utility operations and toward social investment in education. possible oil with PCBs BOD. pH. possible oil with PCBs Increase TSP. The proposed investment program does have potential cumulative and induced impacts.
The environmental engineer of the environmental and social management unit will ensure inclusion of environmental mitigation measures in contract documents. (vi) advising the project planning cell on environmental and social issues.2 presents These safeguard compliance activities can be supported under DFID assistance for MP power sector reform component. (vi) reporting and review procedures. and Pollution Control Board. However. and EHT-wing. as and if required services of external agencies could be taken for monitoring and implementation of mitigation measures. 2005 Public Communications Policy. New Delhi. A chief engineer (T&P) heads the ESMC cell. While the EAs have engineering and support staff. and seeking their help to solve the environment-related issues of project implementation.000 GWh per year and more than 2 million tons per year of CO2 equivalent. The EHS program should include accounting for environmental benefits resulting from the investment components. 5. its capacity needs to be strengthened by providing orientation and training on monitoring and implementation of environmental good practices. Institutional Requirements and Environmental Management Plan 13. (iv) public consultation processes. civil office. (v) liaising with the Ministry of Environment Forest. The contractor will be responsible for implementation of mitigation measures during the construction stage. An environmental and social management unit. Need for additional staff is not envisaged. and (x) mechanisms for feedback and adjustment. (vii) work plan (including staffing and schedules of assigned personnel. The field organizations of MPPTCL and DFO of the concerned district are conducting the EIA studies jointly. The field organizations of EHT: C&M cell are carrying out the field studies. responsible for environment. and safety (EHS) program consistent with international best practices. while selecting routes for the alignment at the planning stage to avoid negative environmental impacts. health. ADB will (i) review and approve IEEs and EMPs before contracts are finalized and work begins. However. and any other social development obligations. Manila 8 . they have varying levels of dedicated staff and/or full-time qualified personnel with environment and resettlement expertise. 14. 8 All the EAs will assume primary responsibility for the environmental assessment and implementation of EMPs for their respective components. the potential savings are more than 2. (iii) environmental monitoring. activities. 15. TRANSCO has an environmental and social management cell (ESMC) within its organization structure to deal with environmental and social issues. (v) outline of responsibilities and authorities for implementing the proposed monitoring and mitigation activities. Table A13. The duties of the environmental and social management unit will include at least: (i) monitoring and implementing mitigation measures. ADB advises that all EAs develop in-house capability for environmental.78 Appendix 13 existing power stations will offset partially thermal power expansion. ESMC at TRANSCO will have overall responsibility for implementation and monitoring of EMPs. 9 ADB. resettlement. (ix) cost estimates. (iii) advising and coordinating effective environment management. (ii) review monitoring reports. If the full spectrum of energy efficiency and renewable energy investments materialize. (ii) mitigation measures. will be established at each EA. and inputs of other government agencies and stakeholders). (ii) preparing and implementing environment policy guidelines and environmental good practices. The ESMC is self-sufficient for monitoring the program and submission of progress reports. and (iii) officially disclose the IEEs on its Web site in accordance with the ADB Public Communications Policy (2005) 9 . The IEEs include EMPs that cover (i) summary of potential impacts. (viii) environmentally responsible procurement plan. (iv) preparing an environment and safety manual for substation operation. which has seven officers from T&P office. (vii) providing training and awareness on environmental and social issues related to power transmission projects to the project staff.
Construction Phase Monitoring and report regularly on contractor’s compliance with contractual environmental mitigation measures Operation and Maintenance Phase Observe routine maintenance inspections of substations and transmission line RoWs and phased out equipment management. Affected people are aware of and fully support the proposed 10 Monitoring of issues related to compensation of landowners for land acquisition and loss of production. and Grievances 16. EAs. Implementation Responsibility EAs through project management office and implementation units EAs through project management office and implementation units EAs through project management office and implementation units Implementation Schedule Before issuing bidding documents Before EA’s approval of contractor’s detailed alignment survey Before EA’s approval of contractor’s detailed designs EAs through project management office and implementation units EAs Continuous throughout construction period Per EA’s inspection schedules Table A13. etc. Table A13. Estimated costs for mitigation and monitoring measures are provided in Table A14.069 3. will be included in the resettlement plan. Audit detailed designs of transmission lines and associated substations.4.333 110.2: Minimum Provisions for Environmental Monitoring Environmental Monitoring Tasks 10 Pre Construction Phase Audit project bidding documents to ensure EMP is included. some officials from state authorities (e. . Source: ADB estimate.924. as electricity service is expected to improve and some employment opportunities will be created. In addition. The communities generally support the proposed investment components. Monitor contractor’s detailed alignment survey to ensure relevant environmental mitigation measures in EMP have been included. Information Disclosure.) were consulted during the fact-finding visit. Details of public consultations are incorporated in the IEEs. Detailed design work for each subproject will follow the recommendations of the IEE and EMP. pollution control board. The consultation undertaken during fact-finding field visits are in Table A13.111 2.024 E. EA = executing agency Source: Asian Development assessment.511 33. Inspections will include monitoring implementation status of mitigation measures specified in EMP. forest department.2 3% contingency Total Costa ($) 711. Sub Item As detailed under EMP As prescribed under EMP and IEE As described in Table A13.Appendix 13 79 minimum provisions for environmental monitoring related to procurement and construction for the respective components.3: Summary of Estimated Costs for EMP Implementation Item Monitoring activities Mitigation measures Independent audit and monitoring agencies Contingency Total a Estimated costs are indicative only. and distribution system expansion to ensure environmental safeguards and mitigation measures have been included..3. Public Consultation.g. etc. Affected communities have been consulted during preparation of the project in general and during the IEEs in particular.779. The EAs will certify that the detailed designs comply with IEE recommendations (including EMP) before contracts can be made effective.
and suggest suitable recommendations and remedial measures for midterm correction and improvement. The reports will cover EMP implementation with attention to compliance and any needed corrective actions. including EMPs. The EMPs will include provisions for internal and external monitoring. are considered sufficient to meet the environmental assessment requirements of ADB and India. as mutually agreed with the local authorities and affected persons. or more frequently if required. The EAs will be responsible for disseminating information about the functional norms of the GRC. of Issues discussed/remarks 11 participants Sukhi Sevenia • Awareness about the project and environmental village / 10 pollution Vidisha / 15 • Benefits of the projects • Likely impact on direct/indirect development • Environmental problems in the region • Presence of environmental sensitive areas in the region • Health and safety issues • Compensation payment mechanism initiatives for minimal environmental/social impacts 21 Aug 22 Aug 23 Aug 23 Aug Jorkheda. and will not result in any significant adverse impacts. F. mostly during construction. Proposed 220 kV DCDS line between Bhopal – Aastha – starting point 220 kV substation at Vidisha and associated 220 kV DCDS line from Vidisha substation to location No. 17. as the projects will benefit the area in terms of improved electricity supply and some employment opportunities. Further. The committee will meet at least twice per year. it will provide them with a public forum to raise their concern or objections. with ADB concurrence. Environmental and social benefits of the investment components and long-term program objectives outweigh the negative impacts. 292 of Bhopal – Bina 220 kV DCDS Bhopal 400 kV – Ashta 220 kV DCDS line – 105 km 132 kV substation at Baora 220 kV substation at Rajgarh Venue/No. or after the revenue department fixed the amount. The GRC will comprise representatives from project proponent. A grievance redressal committee (GRC) will be established to address the concerns and grievances of the local communities and affected parties. and a senior official from each EA. Conclusion 18. to undertake external monitoring of the project. A full environmental impact assessment study is not required. The external monitoring agency will be selected within 3 months of approval of each loan approval. . Based on environmental assessment activities conducted to date. local authorities. The EAs will be responsible for internal monitoring of EMP implementation. and will forward semiannual progress reports to the Government and ADB. It was assured that compensation for any loss would be paid in a timely manner on mutually agreed terms. Minimal negative environmental impacts are anticipated.80 Appendix 13 projects. and the summary IEE for the investment components. 11 Queries raised by people were answered to their satisfaction. The GRC will be established in a manner that ensures easy access to communities and affected parties. The EAs will hire an independent monitoring agency. Table A13. and other stakeholders. affected parties. the Tranche 1 and Tranche 2 projects are confirmed as environmental category B and the IEEs. None of the Tranche 1 and Tranch2 2 investment components are in environmentally sensitive areas. and will report semiannually directly to ADB. Each IEE and EMP. Shyampur village / 20 Baora / 16 Rajgarh / 18 Source: ADB assessment. It will determine whether sound environmental management practices have been achieved.4: Summary of Public Consultations Date 21 Aug Project component 400 kV substation. These can be mitigated successfully by implementing component-specific EMPs. will be translated into local language(s) and made available to the public.
raising the level of awareness. which will help increase yields. The literacy rate is 64. It also has a direct bearing on poverty reduction as electricity access is central to the basic human needs of health and education. and other manual works.43% of the population in the state lives in poverty. The participatory approach will be continued during . 76. As a part of the social assessment. Electricity is a key input for socioeconomic development process. Poverty Analysis Proposed Classification: General intervention The poverty level in Madhya Pradesh is. better supply of electricity will enable farmers to set up high-powered pump sets for their agricultural use. the national and the state poverty lines are well below the internationally accepted $1 a day poverty line. In addition. as per the head count ratio in Madhya Pradesh.28% is female. 57% is classified as nonworkers and 32% are main workers. substations.65 per capita per month for urban areas. whereas 11% is marginal workers. Of the total population. on average. especially for maintenance C. and providing better integration and social welfare. 74% are in rural areas and 26% in urban areas. Unskilled labor will be employed directly for the construction of transmission lines. stakeholders’ consultations in the project areas were carried out with the broad objective of ensuring extensive participation of all types of stakeholders.66 per month. The sample subprojects will create significant employment opportunities for skilled and unskilled labor during implementation.1% in 1999–2000. building local support. Poor and vulnerable consumers. The poverty line in the state is set at Rs311. The proposed project is expected to generate considerable employment for skilled and unskilled labor during the construction. they will benefit directly from the project. Of the literate population.11 per month.Appendix 14 81 SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY (SPRSS) A. and other vulnerable groups were considered carefully in conducting participatory activities. and enabling affected people to voice opinions and suggestions for project design and implementation. Of the total households. According to the Human Development Report. but lower for urban areas at Rs454. as well as social utilities such as hospitals and schools. are often particularly disadvantaged by inadequate power supply. higher than in the rest of India. This is indicative of the degree of vulnerability and marginalization of the population. and forest land covers about 28% of the geographic area. Direct positive economic and social benefits will result from the investment program. The power sector investment program in Madhya Pradesh will have intrinsic scope for poverty reduction. Net sown area under agriculture is 49%. women. The investment program will bring direct and indirect positive social impacts. and poor power quality. Therefore. 37.80% is male and 50. Links to the Country Poverty Analysis Yes Sector identified as a National Priority in Country Poverty Partnership Agreement Yes Sector identified as a National Priority in Country Poverty Analysis? Contribution of the sector or subsector to poverty reduction in India Infrastructure development is critical as a catalyst for generating economic activity and employment. Participation Process X Is there a stake holder analysis? Yes No Participation during project preparation: The executing agencies consulted with local officials and village leaders. However.6% in 1993–1994 to 37. load shedding. which will result in socioeconomic growth. highlighting the vulnerability of population. B. The national poverty line is slightly higher for rural areas at Rs327. The poor. the poverty level in the rural areas has fallen from 40.34 per capita per month for rural areas and Rs481. This will benefit specifically the people living in the remote areas through improved frequency and voltage levels for various uses. The post-construction phase also will offer opportunities for employment. Efficient and reliable provision of electricity contributes indirectly to poverty reduction through economic growth. accelerating growth.11% of the total population. According to the National Sample Survey 55th round.
Public consultations were carried out as an integral component of project preparation to ensure that the community supports the project and the project supports the needs of the people. D. and clean environment. However. and the acquisition is considered permanent and private. monitoring.30 hectares of private agricultural land will be acquired temporarily due to the construction of transmission lines.82 Appendix 14 implementation. The stakeholders and the affected community were continuously involved.528 temporarily affected households. and participate in any grievance redress. Participation. which will have no resettlement impact. which will result in better services such as health. interaction with people and their feedback allows affected populations to influence the decision-making process by raising issues that should be considered in design. and (iv) the M&E process during implementation of the resettlement plan. According to the assessment for Tranch1 and Tranche 2. the remaining substations. Therefore. and their feedback has led to substantial inputs into project preparation. The losses will be compensated suitably per the entitlement provision in the short resettlement plan and in the Plan required (Full/ Short/ None) Short resettlement plan and resettlement framework for the future tranches Resettlement . consultation. Attempts have been made to ensure that most of the construction is done on the government land. Is there participatory Strategy? Yes No Participation and consultation are based on a two-way information flow—from project authorities to people and from people to project authorities. and the necessary mitigations have been suggested to avoid any discrimination against women during the project implementation. 611. Women have been consulted during the project preparation. Similarly. education. While the project authority retains the decision-making authority. 162 hectares of government land will be acquired for construction of 18 substations. Additionally. mitigation. Has an out put been prepared? Yes No X E. although impacts on individual households are limited. which will result in 1. some land acquisition is required. have been assessed. Item Social Safeguards and other Social Risks Significant/ Non-Significant/ None Not Significant Strategy to Address Issues The proposed subprojects involve the construction of transmission lines and substations. as well as the analysis of alternatives. Gender and Development X Strategy to Maximize Impacts on Women: Women will benefit from the project through improved access to electricity. and information dissemination were incorporated at several levels during the planning of subprojects. a maximum of three households are assumed to lose part of their land in the worst case scenario. the assessment of land requirement and subsequent number of affected households has been done on the basis of these assumptions. For the remaining substations. The executing agencies (EA)will ensure that during implementation local groups will remain involved in (i) preparing final compensation listings and individual claim files and in the payment of compensation for acquired land and loss of assets and livelihood. whose sites have not been finalized. and management plans.
(ii) to disseminate information at worksites on risks of sexually transmitted diseases and HIV/AIDS as part of health and safety measures for those employed during construction. NO (Not Required) Affordability None NO (Not Required) Other Risks/or Vulnerabilities Not Significant NO (Not Required) . The subprojects are unlikely to increase prices of goods and services accessed by the poor. However. sanitation. The subprojects identified do not pass through areas of significant settlement or use by indigenous peoples. Considering the possible presence of laborers not from the immediate project area for construction work. The investments will support the Government’s goal of affordable power for all by 2012. which is considered a pro-poor initiative. Plan required (Full/ Short/ None) Indigenous People Not Signifiant As the project will benefit all population groups. Labor None No job will be lost. EAs will take proper care during construction supervision to conduct information and education campaigns on the risks of HIV/AIDS and human trafficking. EAs will ensure that the contracts for civil works require contractors (i) not to employ or use children for labor. an indigenous peoples development framework has been prepared to cover any impact on indigenous people in the subprojects to be implemented under future tranches. The project is expected to generate employment opportunities for local communities during the construction and maintenance phases. and working conditions.Appendix 14 83 Item Significant/ Non-Significant/ None Strategy to Address Issues resettlement framework. it will not differentially or adversely affect any groups. safety. Also. Indigenous Peoples Development Framework (IPDF) for the future tranches. and (iii) to follow and implement legally mandated provisions on labor (including equal pay for equal work). No Indigenous Peoples Development Paper required for Tranche 1 and Tranche 2. health. targeting construction workers at campsites. which include lifeline tariffs for poor consumers. The Government regulates electricity tariffs.
substation SCADA. and 132 kV). Tranche 1 transmission subprojects including 19 proposed new substations and 2.84 Appendix 15 SUMMARY RESETTLEMENT PLAN A. (metering of unmetered consumers. distribution transformers metering. The scope of transmission work will comprise construction of (a) 2 cct-km of 400 kV and about 1.435 cct-km of 220 kV transmission lines across the state. Nonphysical investments. substations.. 2. Time-critical transmission lines. Various targeted capital works designed to improve efficiency through loss reduction and to enhance supply reliability in all DISCOMs will be undertaken. and (c) one new 400/220/132 kV substation with 315 MVA transformer capacity. The proposed Investment Program will be provided under a multitranche financing facility (MFF) over 8 years. Some nonphysical investments will complement physical investments. (b) eight new 220/132 kV substations. development of a trading and settlements support system for TRADECO. Tranche 2 will comprise of distribution subprojects for which due diligence was conducted. (ii) (iii) 2.068 kilometers of transmission lines (400. TRANSCO prepared a resettlement plan (RP) for the implementation of the transmission component. facilitation of strategic public-private partnerships. Clean Development Mechanism). Each tranche will be structured as a project loan that can be implemented fully within 3 to 4 years. This RP is based on the project impacts on land acquisition and resettlement per the components designed so far in the DPRs of TRANSCO. Only the transmission component will have resettlement impacts. renovation of substation protection and modernization of substations. 220. The executing agencies (EA) will be Madhya Pradesh Power Transmission Company Limited (TRANSCO) for the transmission component and DISCOM-E for the distribution component.g. This RP is prepared based on the components of the Tranche 1 and the transmission component of Tranche 3 for which an update will be provided during 48 Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (DISCOM-E) . The Investment Program will cover the following three areas: (i) Transmission capacity expansion. remote metering of high-value customers. with transformer capacity of 160 MVA each. Distribution efficiency enhancement. and the expansion of the village lighting scheme (feeder separation scheme). Subprojects include the rollout of a HVDS. Subprojects under the Tranche 1 have been appraised in detail as a requirement for loan processing and approval. No resettlement and/or other social impacts are expected. Project Background and Scope of Land Acquisition & Resettlement 1. and establishment of ECF and other energy efficiency initiatives (e. The proposed Investment Program will involve land acquisition for the construction of transmission lines and substations. and auxiliary equipment will be constructed to evacuate and transmit power from new power stations and substations to consumers. including: implementation of SCADA systems in DISCOM-E 48 .
appraisal. Therefore, it deals with aspects of TRANSCO. However, a resettlement framework is prepared as a guideline for the future subprojects in case of future resettlement impacts. The details of schemes included in Tranche 1 for transmission components are in Table A15.1.
Table A15.1: Transmission Schemes in Tranche 1
No. A. 1. 2. B. 1. 2. 3. 4. 5. 6. 7. 8. 9. C. 1. 2. 3. 4. 5. 6. 7. 8. Description 400 kV Works 400 kV DCDS line 400 kV 315 MVA new substation with two 400 kV feeder 200 kV Works 220 kV DCDS line 220 kV DCSS line 220 kV 2nd circuit line 220/132 kV 160 MVA with 4 no. 132 kV feeder bay new substation 220/132 kV 160 MVA with 2 no. 132 kV feeder bay new substation 220/132 kV 160 MVA and 220/33 kV 100 MVA new substation with 2 no. of 132 kV feeder bay 220/132 kV 160 MVA additional transformer 220/33 kV 100 MVA additional transformer 220 kV feeder bays at existing substations 132 kV Works 132 kV DCDS line 132 kV DCSS line 132 kV 2nd circuit line 132 kV with 40 MVA and 2 no. of 132 kV feeder bay new substation 132 kV with 40 MVA and 1 no. of 132 kV feeder bay new substation 132/33 kV additional transformer 132/33 kV augmentation of transformer 132 kV feeder bays at existing substation Unit km No. km km km No. No. No. No. No. No. km km km No. No. No. No. No. Quantity 1 1 682 7 135 2 4 2 10 1 40 302 493 448 8 2 13 20 108
kV = kilo volt; MVA = mega volt ampere Note: The transmission component consists of 77 individual transmission lines covering about 2,068 km of overhead transmission lines and 19 new substations spread across state. Source: TRANSCO.
3. The major impacts will involve temporary land acquisition for the transmission lines, which will affect some private land. Per the detailed project report (DPR), 18 of the 19 proposed substations will be built in the government land. The remaining substation (Chicholi) will require minimal private land acquisition. The assessment has been done for the transmission lines for Tranche 1. Land acquisition and resettlement impacts have been assessed and documented in the RP for the transmission lines and substations under Tranche 1. The construction of transmission lines will require the temporary acquisition of 611.30 49 hectares of private agricultural land, which will result in 1,528 50 temporarily affected households. Similarly, 162.46 hectares of government land will be
Temporary acquisition for transmission routes have been calculated based on the amount of land required for footings, towers, and rights-of-way. In Madhya Pradesh, about 49% of the land is used for private cultivation. Therefore, assessment of private land is done by applying 49% to the total land to be affected by the transmission components. 50 The average land holding size in Madhya Pradesh is 0.4 hectare, and the temporarily affected household is calculated applying 0.4 hectare average to the total affected agricultural land.
acquired for construction of 18 substations (sites have been selected), which will have no resettlement impact. Only 3 hectares of private land will be acquired for one substation (Chicholi), which will affect three households and 15 persons. Details are in Table A15.2. No informal land users are expected in the existing facilities since they are mainly fenced. Table A15.2: Land Acquisition and Affected Households by Subproject
Permanent Acquisition Permanent Land Affected Acquisition (ha) Households and APs Temporary Acquisition Temporary Affected Land Households Acquisitionand APs Private Agricultural (ha)
Private I. Transmission Component A. Transmission lines and Towers B. Substations
Government Land 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 (15) 0 NA 3 (15) 611.3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 1528 (8405) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3.00 0 NA 3.00
1. Katni 2. Rajgarh 3. Vidisha 4. Hoshangabad 5. Badod 6. Ghosla 7. Badgaon 8. Kasrawad 9. Chanera 10. Bhanegaon 11. Chhegaon 12. Betul 13. Sagar 14. Ashta 15. Bagdi 16. Betma 17. Vijaypur 18. Chicholi 19. Berchha
II. Distribution Total
5.60 1.96 1.00 3.326 5.34 3.00
36.00 25.00 25.00 36.00 3.00 3.00 3.00
3.00 NA 162.462
( ) = negative Note: Requirement for land in distribution component is nil and therefore “NA” is put in all column. Source: Calculation based on input from TRANSCO and DISCOM-E.
4. The project influence area, Madhya Pradesh (MP), will benefit directly and indirectly. MP is the second largest state in India with an area of 308,000 square kilometers (km2). The state of MP comprises of 45 districts and 51,806 villages. The population density of MP is 196 per km2. According to the national census of 2001, the population of MP was 60,385,118 persons, of which 52% is male and 48% is female. The sex ratio (i.e., the number of females per thousand males) is 933:1000. The literacy
rate is 64.11% of the total population. Of the literate population, 76.80% is male and 50.28% is female. Of total households, 74% are in rural areas and 26% are in urban areas. Net sown area under agriculture is 49%, and forest land covers about 28% of the geographic area. Of the total population, 57% are classified as nonworkers, 32% as main workers, and 11% as workers. According to the National Sample Survey 55th round, 37.43% of the state’s population lives in poverty. C. Indigenous People
5. The project will not affect any indigenous people. MP’s scheduled tribe population is 12,233,474, or 20.3 % of the state population. An Indigenous People’s Development Framework (IPDF) has been prepared for management of Indigenous People (IP) issues if occurs in the future. D. Policy Framework and Entitlements
6. This RP is based on the Asian Development Bank’s (ADB) policy on Involuntary Resettlement (1995), as well as on the Government’s domestic laws, particularly Land Acquisition Act of 1894 (Govt of India); National Policy on Resettlement and Rehabilitation for Project Affected Persons (NPRR) by the Ministry of Rural Development, 2003; and The Madhya Pradesh Resettlement Policy, 2002. 7. National Policy on Resettlement and Rehabilitation. The basis of the Government’s resettlement policy is the NPRR, which provides minimum conditions ensured for persons affected by acquisition of land for public purposes. The objectives of the policy are to (i) minimize displacement and identify non-displacing or least-displacing alternatives; (ii) plan resettlement and rehabilitation of project-affected families (PAF), considering special needs of tribal and vulnerable sections; (iii) provide a better standard of living for PAFs; and (iv) facilitate cooperation between the project proponent and PAFs. The Land Acquisition Act, 1894 provides the framework for facilitating land acquisition in India. It enables the Government to acquire private lands for public purposes, and seeks to ensure that no person is deprived of land except as provided under this act. 8. Resettlement and Rehabilitation Policy of Madhya Pradesh, 2002. The Madhya Pradesh Resettlement Policy of 2002 recognizes all affected persons irrespective of titles. The policy provides for project-assisted resettlement for (i) resettlement and relocation, (ii) income restoration, (iii) special attention to vulnerable groups, (iv) time-bound and fair compensation, and (v) rebuilding and/or restoration of community resources or facilities. 9. ADB’s policy on Involuntary Resettlement policy requires: (i) avoiding or minimizing adverse project impacts where possible; (ii) consulting with affected persons (AP) in project planning and implementation, including disclosure of RP and project-related information; (iii) paying compensation for acquired assets at replacement value; (iv) entitling APs to receive assistance to restore income and livelihood at pre-project standard, and entitling all vulnerable APs to receive additional assistance to improve their income and livelihood;
11. An entitlement matrix is prepared. The broad entitlement of compensation and assistance will include compensation for loss of agricultural land. (x) Ensure adequate budgetary support to cover implementation costs for RPs. integrating APs economically and socially into their host communities. and restoring common properties and facilities. and monitoring. In case of land to be possessed by the project authority with mutual and voluntary . (ii) Where negative impacts cannot be avoided. in improving or at least regaining their standard of living and income. (ix) Ensure involvement of women and vulnerable groups in all activities related to resettlement planning. The basic principles adopted for the project are: (i) Avoid negative impacts of land acquisition and involuntary resettlement on persons affected by the project to the extent possible.88 Appendix 15 (v) (vi) (vii) (viii) (ix) 10. (viii) Establish grievance redress mechanisms to ensure speedy resolution of disputes. compensation will be based on the Land Acquisition Act (land value + 30% solatium + 12% interest. implementation.3: Entitlement Matrix Type of Losses 1. anyone moving into the project area after the cutoff date will not be entitled to assistance. (vi) Provide for APs not present during enumeration. However. if applicable). and ensure APs’ participation in them. Table A15. etc. and additional assistance to vulnerable groups. assistance for loss of income. particularly vulnerable groups. (xi) Conduct internal and external monitoring of the implementation of RPs. (iv) Provide compensation for acquired assets at replacement and/or market value in accordance with the RP and resettlement framework. if relocated. including non-titled persons. carrying out compensation and rehabilitation programs with equal consideration for women and men.3. and providing income restoration and rehabilitation programs. (v) Provide resettlement assistance and income restoration to APs. The entitlement matrix is described in Table A16. compensation for loss of crops and trees. (iii) Disclose all information related to resettlement planning and implementation. assist APs. including non-titled persons (informal dwellers or squatters and encroachers). providing resettlement assistance to APs. Land Loss of agricultural land Definition of APs Titled owners and APs with traditional land rights • • • Entitlement • Details Compensation based on replacement value Resettlement assistance Assistance to vulnerable APs • In case of compulsory acquisition of land. (vii) Provide compensation and resettlement assistance before taking possession of the acquired lands and properties. Safeguarding and supporting APs’ social and cultural institutions. which provides category-wise details regarding the entitlements according to the resettlement principles.
Compensation of crop at market value for the number of seasons the crop will be affected by the implementation of the project. Transaction costs (documentary stamps. scheduled caste households. untitled households • Reimbursement for unexpired lease • • • • Notice to harvest standing crops Compensation at market value Restoration • • Loss of access to forestland Affected household with forestland access • Provision of alternative facilities and technical assistance • • 2. Additionally. Vulnerable households falling under above categories will be provided an additional allowance according to the extent of vulnerability at a maximum of 30% of the total compensation and assistance. tenants. and based on consultation with landowners. resulting in income generation capacity greater than minimum agricultural wage. resulting in income generation capacity equivalent or less than minimum agricultural wage. Preferential employment in the Project will be provided to vulnerable households. temporary land losers will be in charge of land clearance. Resettlement allowance will be paid in the amount of a daily minimum wage for a maximum of 1½ years to the household losing a portion of land. sharecroppers. sharecroppers and tenants Affected • • • Notice to harvest standing crops Compensation at market value Compensation and • • • . Income Income from standing crops. etc. In any case. which will minimize their traditional dependency on forests. Communities will be involved in community social forestry schemes coordinated by the Department of Forests. This will be estimated by the competent authority. Vulnerable APs will be provided assistance by the project for alternative sources of fuel. compensation will be paid based on estimated market price as decided by the revenue department (district collector and/or competent authority). Lease rates will be determined by the project authority with the help of revenue department. fodder. etc. or leaseholder Farming households. etc.. fodder. registration costs. will be provided access to alternative forest land.) will be borne by the project authority during registration. rent or sharecropping Income from Farming households. poor households. such as fuel.. Resettlement allowance will be paid in the amount of a daily minimum wage for a maximum of 1 year to the household losing a portion of land. Compensation at market value for crops.Appendix 15 89 Type of Losses Definition of APs Entitlement (female-headed households. Households losing access to forestland for their basic needs. sharecropper. no less than one season. they will be compensated for the provision of labor at the minimum agricultural wage rate for the duration of this activity. This will be estimated by the competent authority. Therefore. a Compensation equivalent to 6 months of • • • • Temporary loss of agricultural land Individual tenant. and households headed by physically handicapped or disabled persons) Details consent of the affected people. scheduled tribal households.
such as relocation in consultation with the community. Loss of income from business is not foreseen. Calculation of the income per day will be done by taking into account the annual income of the APs from the business sources. Source: Asian Development Bank assessment. Trees will be compensated based on the market value determined by the Forest Department for timber species. Fruit-bearing trees and perennial crops will be compensated according to the value of fruit for 1 year and the market value of timber. and by the Horticulture Department for other trees. medicine. and natural resources) Lump sum compensation as per government rules Additional assistance • • • • 6. shrines. Preferential employment in the project will be provided to vulnerable households. Government property (loss of land) 5. Cultural properties will be conserved through special measures. Affected households Compensation at market value • Income from forest products and grazing land Affected households • Lump sum compensation • 3. Compensation at nominal annual rate of Re1. community centers. b This will be in addition to the 12% interest mentioned in case of the Land Acquisition Act. Impacts will be documented and mitigated. This will be estimated by the competent authority. protection. Tax will be paid additionally to the APs. and the amount of compensation will be calculated accordingly for the period of damage. Additional assistanceb at per the bank interest on the entire compensation amount for the delayed period will be paid by the project authority. other religious sites. Vulnerable households will be provided an additional allowance according to the extent of vulnerability at a maximum of 30% of the total compensation and assistance. Transmission lines will be designed to avoid settlements. and compensatory replacement (schools. these will be compensated in cash for the total income loss during the period for which the business activities are damaged. The annual income of the business activities usually are registered in the tax department. burial sites.00 for the required land for substation component. rights to food. However. markets. losses do occur.90 Appendix 15 Type of Losses affected business and wage earnings Income from trees or perennial crops Definition of APs individuals • Entitlement income restoration • • Details minimum wages. and impact on vulnerable groups Relevant department Affected households or individuals • • Conservation. places of worship. Other impacts not identified. Lump sum compensation will be given for lost income for one season based on income from the forest or grazing land determined by the Revenue department and project authority in consultation with APs. Community and cultural sites Affected households or individuals • 4. health centers. Unforeseen impacts will be documented and mitigated based on the principles agreed upon in the resettlement framework. Distribution lines are generally designed to avoid structures. . Loss due to Affected • Additional assistance • delay in households payment for or compensation or individuals disbursement of compensation after the scheduled period a Loss of house or other structures is not foreseen. This will be applicable to all the APs and all type of losses in case disbursement is delayed.
implementation. In addition. This is a tentative budget that will be updated as the project is developed and finalized. The proposed PMUs do not have any resettlement specialists. head of PMU. resettlement framework. were discussed. PMU expertise includes (i) engineering planning and design. will cost Rs77 million ($6. and resolve them within 4 weeks. Preliminary information on the program was published in the Gazette. problems and prospects of resettlement. However. and record. GRC. it has been agreed that the plans prepared so far for the Tranche 1 and Tranche 2 (RP.. local administration. PMU resettlement specialist. and financing responsibilities 14. TRANSCO will be responsible for transmission. revenue authority. The main institutions include the government of Madhya Pradesh (Department of Energy). For subproject RPs. . Consultation. and issues related to local needs. compensation options. The EAs translated the documents into local language (Hindi). The resettlement and RP implementation for Tranche 1. Resettlement Budget 15. The respective EAs will have operational responsibility for project management and implementation of their respective components. The main responsibilities of the GRC are to provide support to APs on problems arising from land/property acquisition. The GRC will meet once a month. which includes social and environmental management. All stakeholders were consulted at different stages of project preparation. G. and IPDF) were disclosed in relevant offices where resettlement impacts are anticipated. NGO. implementing Non Government Organization. and APs. data collected during the consultation and review of previous experiences and best practices. market rates. and Grievance 12. F. DISCOM-E. field-level staff. A project management unit (PMU) will be set up at each company. according to the ADB and procedures of India. external monitoring and evaluation agency. however. Information Redress Dissemination. the R&R budget has been worked out. A grievance redress committee (GRC) will be formed to ensure APs’ grievances are addressed and to facilitate timely project implementation. The resettlement budget is prepared for the components of the Tranche 1 with specific reference to TRANSCO. (iii) procurement and contracts management.Appendix 15 91 E. resettlement specialists who are committed to serving throughout project implementation will be added to the PMU. planning. the PMU will have overall coordination.1 million). especially for the TRANSCO components. revenue rates. etc. while the DISCOMs will be responsible for distribution. The GRC will have representatives from APs. and prioritize AP grievances. and will function separately for their respective implementation. Based on the government’s rules and regulations. TRANSCO. district magistrate. (ii) economic and financial management. The documents were disclosed to the APs. categorize. The EA has disseminated information on the project through public consultation and provision of project information. and (iv) safeguards management. and local community. Disclosure. Institutional Framework 13.
and will be oversee all activities related to RP implementation. and (ii) outcome and impact indicators. Monitoring and Evaluation 17.92 Appendix 15 H. The time frame for implementation of the RP will be synchronized with project implementation to avoid undermining commencement and progress of civil works. Table A15. Monitoring components will include performance monitoring.4: Resettlement Plan Implementation Schedule Activity 1 2006 2 3 4 1 2007 2 3 4 1 2008 2 3 4 1 2009 2 3 4 1 2010 2 3 4 A. will carry out internal monitoring according to impact indicators related to the overall project objectives as stated in the R&R policy and in the entitlement matrix.4. The PMU will monitor closely RP implementation for the project through its field staff. An external monitoring consultant will be engaged to monitor and evaluate proactively the RP objectives. Implementation Schedule 16. and external evaluation. Two broad categories of indicators will be monitored during the project: (i) input and output indicators. The tentative implementation schedule is in Table A15. The PMU. Component B (Distribution) Public Consultation Source: Asian Development Bank estimates I. impact monitoring. The RP is expected to be implemented continuously. the sequence might change or delays might occur due to circumstances beyond the control of the project. However. Component A (Transmission) Census/surveys Draft RP Consultation Disclosure Notification NGO selection Cutoff Date Finalization of APs and final notification Compensation Grievance redress Beginning of civil work Monitoring and evaluation (External) B. land free from all encumbrances is to be made available to the contractors in phases for each contract package. with the help of the implementing NGO. According to the conditions in the technical construction works contracts. . and will be completed in a phased manner for over the project duration for each specific contract and tranches. The external monitoring consultant will submit monthly and quarterly monitoring reports. A final evaluation will determine if the R&R objectives have been achieved according to the performance impact indicators.
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