ADB approves $200 mn loan to Assam

Satisfied with the past performance of the Assam government in implementing power sector reforms, the Asian Development Bank (ADB) has approved $200 million for 'Power Sector Enhancement Investment Program' in Assam.

The loan amount would be used to partially fund Assam's $764 million power sector investment plan by 2014, government sources informed.

The new facility follows an earlier ADB programme loan to reform Assam State Electricity Board, which was unbundled into new companies to improve service delivery and cut the state's financial burden.

The facility will provide funds to improve transmission and distribution infrastructure, including reducing system losses. A successful distribution franchise scheme, using a public-private partnership model, will be expanded to double consumer coverage.

Technical assistance would be given to lay the groundwork for the development of off-grid renewable power pilot projects, targeted at remote rural communities, and to strengthen the management capacity of the state power companies.

"Though there has been a marked improvement in the power sector in the wake of the reforms, there is still much to be done," Gogoi had told recently, referring to the power sector reforms initiated by the state government couple of years back with loans from ADB.

Transmission and distribution network carrying capacity of ASEB has increased from 550 MW in 2004 to the current 1,250 MW after power sector reforms, said Pradyut Bordoloi, power minster of Assam. "For the past 30 years or so, there has been no investment in the power sector. It was with loans from ADB and that too, with 90 per cent as grant, that our government could make major investment in the sector," he said. Peak hour demand of power in Guwahati has gone up from 80 MW in 2004 to 205 MW now. Similarly, the peak hour demand of Assam, which was 530 MW in 2004, has now touched 1,000 MW. By 2014, the peak hour demand for power in Assam is estimated at 1,700 MW.

The financing facility is expected to benefit around 1 million households, business establishments, hospitals, schools and so on. The loan, from ADB's ordinary capital resources, is slated for release in three tranches of $60.3 million, $89.7 million and $50 million spread out over five years, with interest determined in accordance with ADB's LIBOR-based lending facility