Announcement of India to Improve Power Utilities Efficiency on January 29, 1992

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 IBRD News Release No. 92/42 Asia Contact: Pat Sison (202)458-0344 INDIA TO IMPROVE POWER UTILITIES EFFICIENCY World Bank Will Support Project With $265 Million Loan Washington, D.C., January 29 --- The Government of India's effort to improve the efficiency of power utilities will receive assistance from the World Bank in the form of a $265 million loan approved yesterday. The loan will support a project to promote the institutional development of the Power Finance Corporation (PFC) as well as help finance a five component work program. While the power sector in India has made impressive progress in expanding energy supply, shortages equivalent to 222 of peak capacity and 9% of total energy requirements persist. In addition, energy demand is expected to continue to grow at a rapid pace over the next five years. The situation is further exacerbated by inefficient use of the energy currently available. The project will help finance the strengthening of PFC's institutional capacity though the provision of equipment, special services, software and training. The project will also support the establishment of a pre-investment fund at PFC which will finance project preparation and other studies. Additionally, under the project, the PFC will onlend funds to State Electricity Boards and State Generating Corporations to help them finance five types of priority investments. These include: transmission and distribution projects; environmental upgrading of power plants; engineering studies for system renovation; institutional strengthening of utilities; and improvements in billing and collection. Loan conditions established by the PFC are designed to instill financial discipline and strengthen the financial base of borrowing institutions. Fifty previous loans have been extended to the power sector. Of these, 32 were IBRD loans totalling $6.4 billion and 18 were IDA credits totalling $2.3 billion. Twenty-seven of these have been completed: 20 for generation; four for transmission; and three for rural electrification. The total cost of the project is $712 million. The PFC is providing $291 million of its own resources and the State Electricity Boards are supplying $142 million. In addition, the United States Agency for International Development (USAID) is providing $14 million to finance technical assistance and training. The loan is repayable over 20 years, with five years of grace, at the World Bank's standard variable interest rate, currently 7.73% NOTE: Money figures are expressed in U.S. dollar equivalent.