$300 million ADB loan for Assam's power sector

The Manila-based Asian Development Bank (ADB) has approved a $300million loan to boost Assam's power sector and help the state continue its drive to eliminate power sector inefficiencies.

The multi-tranche loan facility, which is part of a broader 10-year, $3.5 billion state investment program, will fund generation and distribution upgrades, including the construction of a 120-megawatt hydropower plant. It will also finance new energy efficient generating equipment at existing plants, new distribution lines and substations, and financial management training and other support for staff of the state power companies, Assam Power Generation Corporation and Assam Power Distribution Company.

The ADB-funded project is expected to bolster Assam Power Distribution Company's finances by allowing it to lower purchases of expensive electricity from independent power producers.

Meanwhile, the planned. Lower Kopili run-of-the-river hydropower plant in central Assam is expected to help the state avoid over 530,000 tons per annum of carbon dioxide emissions that would otherwise be produced by fossil fuel-driven generation.

"More than a third of households in the state face daily electricity cuts of 5 to 6 hours, many important businesses, such as the tea gardens, still aren't connected to the grid, and in peak periods Assam has to buy up to 15 per cent of its power from independent producers at very high cost," stated a press release of the multilateral lending agency, quoting Herath Gunatilake, lead energy specialist with ADB's South Asia Department. "By funding measures to cut load shedding, the loan is expected to benefit over 2.7 million consumers," it added.ADB has supported Assam's power sector since 2003 with five loans totalling $450 million, which have helped the state enact key reforms and improve transmission and distribution systems.

The new loan will continue past efforts to build up the capacity of power companies and regulatory agencies, and to further cut distribution losses, which have decreased from 40 per cent in the fiscal year to the end of March 2002 to 24 per cent in financial year 2012.The funds are to be disbursed in three tranches with the project set to be completed by the end of 2023.

The first instalment of $50 million is earmarked for the replacement of aging gas turbines at the Lakwa Gas Power Plant in northern Assam. The second tranche will also be for $50 million and the third for $200 million.