Rs 2400cr Ibrd Aid To Power Harayana Reforms

The World Bank has sanctioned a Rs 2,400 crore (about $600 million) loan, spread over eight to 10 years, to Haryana for power sector reforms.

Disclosing this, Governor Mahabir Prasad said the World Bank loan would be used to upgrade and strengthen the transmission and distribution systems. He told the state assembly that besides the World Bank loan, Haryana would receive over Rs 7,900 crore from other donor agencies for undertaking power sector reforms, including restructuring of the Haryana State Electricity Board (HSEB). He said as part of the reforms, the HSEB would be split into generation, transmission and distribution companies, which would be overseen by an independent regulatory commission.

 

He said one of the distribution companies would initially be converted into a joint venture company to bring in private participation.

Prasad said the state government is also focusing on non-conventional energy. The government has set up the Haryana State Energy Development Agency to promote use of non-conventional energy sources. The state government has also formulated a new power policy to attract private investment in power projects based on non-conventional sources of energy, including solar, biomass, wind and small hydro power methods.

For the promotion of science and technology in the state, the government is setting up a research and application project using tissue culture at Hissar at a cost of Rs 4.97 crore.

India is the first borrower to benefit from Adaptable Programme Lending, a new investment instrument approved by the Banks board of executive directors in September 1997, that allows for greater flexibility than the traditional instruments to support long-term complex reforms.

State-level power sector reforms are crucial for continued economic growth ..., said Djamal Mostefai, a senior energy specialist in the Banks New Delhi office and task team leader of the Haryana Power Sector Restructuring Project.

Haryana has demonstrated its commitment to initiate these critically-needed reforms. The new lending approach enables the Bank to support Haryana at an early stage of its reform programme, develop a long-term partnership with Haryana, and adapt future support to investment requirements and to the pace at which the reforms are implemented, he said.

The main components of the project include construction of high voltage evacuation lines and transmission lines and sub-stations, rehabilitation of 50 feeders, procurement of tools, safety equipment and utility vehicles; improvement of commercial and technical services to consumers; and technical assistance and engineering services.

World Bank sources said economic growth in India continues to be hampered as the countrys power supply constrains industrial development and the financial losses of the power sector remain a burden on public sector finances. Surveys consistently rate power supply as one of their most critical problems. The sector is plagued by major revenue shortfalls due to low tariffs, large system losses and poor collection performance.

The government, with Bank assistance, has been encouraging the states to undertake in-depth power sector reforms. Orissa began its pioneering programme to restructure its power sector, which was bolstered by a $350 million loan from the Bank in 1996.

World Bank sources said Haryanas power sector is in a state of physical and financial crisis, which affects the states economic growth and the welfare of its population. In 1997, power shortages in the state exceeded 25 per cent. The Haryana government is convinced that the states power requirements cannot be met without a massive mobilisation of private financial resources, restoring the creditworthiness of the power utilities and establishment of a proper regulatory and framework.