The Hindu Business Line : ADB approves $400-m loan to upgrade power transmission grid

The project will strengthen and expand the capacity of the national transmission grid, comprising 765 KV and 400 KV transmission lines as well as substations operated by Power Grid Corporation of India Ltd (Power Grid).

The project aims to improve system reliability, facilitate inter-State power transfers by removing transmission bottlenecks, reduce transmission losses, facilitate efficient utilisation of existing and planned power plants, facilitate the development of a national power trading market, and promote increased private sector participation through open access to the national transmission grid.

PowerGrid's National Transmission Development Plan entails an investment of about $12.6 billion up to the year 2012.

"The huge investment programme will not materialise without long-term finance, for which ADB's loan will act both as a contribution and as a catalyst," said Mr Chong Chi Nai, an ADB Senior Energy Specialist.

Proceeds of the ADB loan will be used to finance sub-projects under PowerGrid's investment program.

Core subprojects jointly identified include the construction of new extra high voltage transmission lines and substations covering Andhra Pradesh, Tamil Nadu, and Pondicherry.

India is facing a power shortage problem. As of March 2004, the peak power deficit was about 11 per cent or 9,510 MW, while the energy deficit was about seven per cent (39,870 gigawatt-hours).

Only around 31 per cent of rural households have access to electricity.

"To ensure reliable and secure delivery of power from generation projects to end-users, development of an adequate transmission system is vital to India's sustained economic growth," said Mr Chong.

PowerGrid, which is both the borrower and the executing agency for the loan, will fund $168 million of the total project cost of $568 million.

This is the third ADB loan to PowerGrid covering 70 per cent of the total project cost and comes from its ordinary capital resources, carrying a 20-year term, including a grace period of five years.

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