India - Second Ramagundam Thermal Power Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11523 PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) JANUARY 11, 1993 Energy Operations Division Country Department II (India) South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Country Exchange Rates (Yearly Averages) Currency and (Abbreviation) Rupee (Rs) Year Rupees/US$ 1978 (Project Preparation Starts) 8.19 1981 (Project Appraisal); and (Project Approved and Becomes Effective) 8.66 1982 9.46 1983 10.10 1984 11.36 1985 12.37 1986 12.61 1987 12.96 1988 13.92 1989 16.23 1990 17.50 1991 22.74 1992 (Project Completed) 26.20 Government of India Fiscal Year April 1 - March 31 Abbreviations CEA - Central Electricity Authority CHP - Coal Handling Plant CMD - Chairman and Managing Director cr. - crores (ten million Indian Rupees) EAP - Environmental Action Plan GOI - Government of India IERR - Internal Economic Rate of Return KfW - Kreditanstalt fur Wiederaufbau NHPC - National Hydro Power Corporation NPTC - National Power Transmission Corporation NTPC - National Thermal Power Corporation PCR - Project Completion Report PFC - Power Finance Corporation PMI - Power Management Institute SAR - Staff Appraisal Report SEB - State Electricity Board  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A Office of the Director-General Operations zvaluation January 11, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on India Second Ramarundam Thermal Power Prolect (Loan 2076-IN) Attached is a copy of the report entitled "Project Completion Report on India - Second Ramagundam Thermal Power Project (Loan 2076-IN)", prepared by the South Asia Regional Office with Part II contributed by the Borrower. The three 500 MW. coal fired thermal units with associated transmission facilities were commissioned in the time and at a cost some 10% higher in real terms than estimated. With the completion of this project, the Ramagundam power plant achieved its full planned capacity of 2100 SW. However, as the present output of the mine linked to the plant is insufficient to support this capacity over a longer period of time, the National Thermal Power Corporation (NTPC) is setting up a temporary additional supply from other sources, which it expects to become available in 1993. In the course of project implementation, NTPC became a strong institution able to plan, design, construct, and operate efficiently large thermal plants and transmission systems. All in all, the outcome of the project is rated as satisfactory and its sustainability as likely. Institutional development is rated as partial given the limited progress achieved in tackling sector issues at the state level. The Project Completion Report provides an informative account of project implementation. OED recently audited four of the projects in the sector. It plans to audit the present project together with other completed NTPC operations. This docu.nt has a restricted distribution a my be used by recipients only in the performnce of their official duties. Its contents may not otherwise be discLosed without worLd 8a* authorization.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) TABLE OF CONTENTS Pare No. PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i EVALUATION SUMMARY .... . . . . . . . . . . . . . . . . . . ii PART I PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . . . . . .1 Project Identity . . . . . . . . . . . . . . . . . . .1 Background . . . . . . . . . . . . . . . . . . . . . . Project Objectives . . . . . . . . . . . . . . . . . .1 Project Description . . . . . . . . . . . . . . . . . . 2 Project Design and Organization . . . . . . . . . . . . 3 Project Implementation . . . . . . . . . . . . . . . . 4 Environment, Resettlement and Rehabilitation . . . . . 6 Project Results . . . . . . . . . . . . . . . . . . . . 7 Project Sustainability . . . . . . . . . . . . . . . . 9 IDA/Bank Performance .... . . . ..... . . . . . 10 Borrower Performance .... . . . ..... . . . . . 11 Financial Aspects. . . . . . . . . . . . . . . . . . . 11 Project Relationship . . . . . . . . . . . . . . . . . 12 Consulting Services .... . . . . ..... . . . . . 12 Procurement .... . . . . . . ..... . . . . . . . 12 Procurement. . . . . . . . . . . . . . . . . . . . . . 12 Project Documentation and Data . . . . . . . . . . . . 13 PART II PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . 14 PART III STATISTICAL SUMMARY ... . . . . . . . . ......... . 20 ANNEXES 1. Ex-Post Internal Economic Rate of Return. . . . . . . . . . . 32 2. Income Statement. . . . . . . . . . . 33 3. Sources and Application of Funds. . . . . . . . . . . . . . . 34 4. Balance Sheet . . . .35 . . . . . . . . . . . . . . . . .. 35 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) Preface This is the Project Completion Report (PCR) for the Second Ramagundam Thermal Power Project in India, for which Loan 2076-IN with the amount of US$300 million was approved on December 22, 1981. On November 20, 1989, the Bank cancelled US$20 million, which were no more needed for the completion of the project. Thus the loan amount was reduced to US$280 million. The loan was closed on March 31, 1992, against the original schedule of June 30, 1988. Total disbursement under this loan was US$277,167,342.62. The undisbursed balance of US$2,832,657.38 was cancelled on August 28, 1992, when the final disbursement under the Loan was made. Cofinancing for this project to the extent of US$30 million, DM 145 million, SR 172 million and JY 27,110 million was provided by OPEC, Kreditanstalt fur Wiederaufbau (KfW) of Germany, Saudi Fund and Exim Bank of Japan, respectively. The PCR (Preface, Evaluation Summary, Parts I and III) was jointly prepared by the Energy Operations Division, Country Department II (India) of South Asia Regional Office and the Energy Division, Technical Department of Asia Region, and Part II by the Borrower. Preparation of this PCR was jointly started by the Bank and the Borrower during the Bank's supervision in February 1992, based on the revised guidelines for PCRs, the Staff Appraisal Report (No. 3608b - IN), the Loan and Project Agreements, supervision reports, correspondence between the Bank and the Borrower and internal Bank Group memoranda.  I  PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) Evaluation Summary Obiectives The two main objectives of the project were: (i) to provide NTPC assistance to alleviate power shortages in the Southern Power Region Interconnected System of India by installing three 500 MW each of coal fired units as the second stage of NTPC's Ramagundam Thermal Power Project; and (ii) to assist GOI in achieving its objective of further advancing the regional and national integration of the power subsector (Part I, para. 2). ImDlementation Experience NTPC successfully implemented the project. The first 500 MW unit (Unit 4) was commissioned one month ahead of the revised schedule and the second and third 500 MW units (Units 5 and 6) four and nine months ahead of the revised schedule, respectively (Part I, para. 11). Results The project fully achieved its main objectives through successful completion of 3x500 MW units of the second stage of Ramagundam station and associated 400 kV transmission lines. By this completion, the Ramagundam Thermal station has become the third of the 2,000/2,100 MW class coal fired thermal stations of NTPC (Part I, paras. 13 and 22). The results of the sectoral objectives sought under the project, i.e., long-range planning on a national basis, improvement of sector organization and strengthening of the finances of the institutions involved in the sector, have not been satisfactory (Part I, para. 23). NTPC's financial rate of return on historically valued net fixed assets declined from a high 17Z in FY86 and FY87 to 13Z in FY91 against the covenanted rate of return of 9.51. The internal economic rate of return (IERR) of the project was about 241 against the estimated figure of about 151 (Part I, paras. 27 and 34). Sustainabilitv Operational efficiency of NTPC, in this power station as well as in other NTPC plants is good and thus contributes to keeping up benefits from the projects NTPC carries out (Part I, para. 28). Insufficient tariffs and an unchecked increase of accounts receivable could endanger such sustainability. The Bank, GOI and NTPC have been taking actions to avoid such an occurrence (Part I, para. 29).  - ii - Findings and Lessons Learned Major findings were as follows: (a) With the completion of its second stage, Ramagundam Thermal Power Project became the third 2000/2100 MW class large-scale coal fired power plant of NTPC, following the Singrauli and Korba projects. Detailed design and engineering work for the project were successfully carried out in-house by NTPC, based on its experience with earlier projects, with very limited support from outside (Part I, paras. 6 and 13); (b) Although hydro power is the major power resource in the Southern Region, thermal power stations, including the Ramagundam Thermal Power Station, have been playing a key role, especially in a dry season, in supplying reliable electric power to the system (Part I, para. 14); (c) It took about one year and three months from opening of bids to finalization of the award for the steam generator package; including about 4.5 months for bid evaluation; about 8.5 months for agreeing with the Bank on award recommendation; and, about 2 months for finalizing the letter of award. These periods should have been curtailed by at least three months (Part I, paras. 11 and 39); (d) Constraints in coal supplies to meet the requirements of the Project have been experienced due to: (i) delays in commissioning of development of mines and consequently insufficient availability of coal; and (ii) industrial relation problems in the linked mines (Part I, paras. 15-17); (e) Completion of the project and final payments required the extension of the closing date of the loan by three years nine months in which two years three months were due to overly optimistic original closing date and one year six months of delay in the actual implementation (Part I, para. 25); (f) The Bank's and GOI's performances in realizing the sectoral objectives sought under the project were not fully satisfactory. The Bank expected that increasing the role of the GOI-owned entities, particularly building up NTPC and emphasizing centralized power planning would lead to more SEB reform. The Bank's support helped NTPC to become India's model utility and, in the process, also helped to improve operational efficiency nationwide. However, the relative autonomy of the States under India's federal structure, limits what can be achieved through involvement exclusively with central agencies (Part I, para. 23); and, (g) Despite the fact that NTPC's (cost plus) tariffs are set at levels aimed at ensuring a satisfactory financial viability, the current policy environment in the power sector prevents NTPC from operating on a purely commercial basis and this has reduced its ability to continue implementing its investment program (Part I, paras. 34-36).  - iii - Lessons learned from this project are summarized as follows: (a) Unexpected constraints in coal supplies and the resultant loss of generation have been experienced. Whereas forecasting of delays in development of mines and the industrial relation problems at the linked mines could not have been foreseen at the stage of project formulation and appraisal, contingent provision for linkage to alternative mines could have probably been considered by the Borrower and the Bank (Part I, paras. 15-17); (b) Socio-economic issues are being assigned higher priority,in preparation/appraisal as well as implementation stages. NTPC should actively pursue consultations with the people affected by its Projects; however NTPC should not limit its involvement in environmental and socio-economic issues to the impact of its power stations, but should act as a catalyst in environmental and rehabilitation and resettlement mitigation measures and monitoring programs for the mines and associated urban and rural development as well (Part I, paras. 19 and 21); (c) In accordance with the emphasis the Bank requires from its Borrowers and the implementing agencies, NTPC should also strengthen its environmental assessment and monitoring functions in its headquarters, regional centers and power plants. The central department in charge of these functions should be headed by an Executive Director (Part I, para. 21); (d) Emphasis should be given during the project preparation stage to shortening the time necessary for award of the contract on the critical path and for completing the payments promptly (Part I, para. 39); (e) As a precondition for further Bank loans, more emphasis is being given to improving the commercial arrangements between NTPC and its clients. However, this has proved to be difficult to achieve in practice unless the financial performance of the SEBs is improved in real terms (Part I, para. 35); (f) To overcome the difficulties mentioned in (e) above, and to enable NTPC to operate on a purely commercial basis, GOI should allow NTPC to sell to other customers the allocated shares of the SEBs which do not comply with their agreements with NTPC. While technical reallocation (by limiting availability of power to a particular SEB) may be difficult to implement, commercial reallocation can be implemented. This can be done by limiting allocations to a defaulting SEB and charging a stiff penalty for drawals exceeding the reduced allocation (Part I, para. 35); and (g) As a result of the changes in the overall economic policy environment within which NTPC is operating, its financial policies need reorientation. Under the circumstances, it would be appropriate to change the existing rate of return covenant into a self financing covenant, because it would not only provide a better monitoring mechanism for the Bank, but also provide better support to NTPC towards meeting its development challenges (Part I, paras. 34 and 36).  i I  PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE Proiect Identity Name: Second Ramagundam Thermal Power Project Credit/Loan No: Loan 2076-IN RVP Unit: South Asia Region Country: India Sector: Energy Subsector: Power Background 1. Power shortages of the 1970's and the adverse effect these were having on the productive sectors of the economy prompted the Government of India (GOI) to intensify its efforts to balance the demand and supply of electricity. The strategy of the GOI was to supplement efforts of State Electricity Boards (SEBs) in increasing installed capacity and the establishment of high voltage transmission lines. Emphasis was put on: (i) accelerating the development of the hydro power potential and large coal fired power plants at both pithead locations and the proximity of load centers; (ii) improving the efficiency of thermal power plants and reducing losses in transmission and distribution networks; (iii) expanding the rural electrification program; and (iv) strengthening the organization and management capabilities of the SEBs. In 1974 GOI decided to proceed with the construction of the first stage of four large thermal power stations of 600 MW each at Singrauli, Korba, Ramagundam and Farakka, located near coal fields and supplying bulk power to the beneficiaries through an interconnected 400 kv transmission system. GOI established in 1975 two power generating companies, the National Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC) to construct and operate large thermal and hydro power stations and associated transmission systems. IDA/Bank has financed the first stage of 600 MW at each plant and its associated transmission. In addition, IDA/Bank also financed the second stage of Singrauli (1,400 MW), Korba (1,500 MW), Ramagundam (1,500 MW) and Parakka (1,000 MW). The feasibility study of the second phase of the Ramagundam project was prepared by NTPC in 1981 and the project appraisal for the second stage was made by the Bank in 1981. The loan was approved in December, 1981. Prolect Obiectives 2. The primary objective of the project was to provide NTPC with assistance needed to assure its envisaged role, including the alleviation of power shortages in the Southern Power Region of the country. Sectoral objectives of the project were Bank Group's assistance to GOI in the power sector in such areas as introduction of long-range system planning on a  - 2 - national basis, improvement of the sector organization and training and strengthening of the finances of the institutions involved in the sector. Project Description 3. The Second Ramagundam Thermal Power Project (Loan 2076-IN) formed the second stage of NTPC's Ramagundam Thermal Power Development program of 2,100 MW (3x200 MW + 3x500 MW) ultimate capacity located in the Karimnagar District of the State of Andhra Pradesh and consisted of installation of the first three units of 500 MW each and associated transmission facilities, including the following components: (a) three 1,725 tons/hour boilers and three 500 MW turbo-generating units complete with all auxiliaries and ancillary electrical and mechanical equipment including the switchyard; (b) the 400 kV transmission lines comprising 1,361 circuit kms of linesi/ and associated sub-stations; and (c) a 6-8 seat, twin engine airplane to be used for supervisory visits of NTPC's plants 2/. 4. In US Dollar terms, the total actual cost was US$952.4 million, of which US$280 million equivalent was provided by the Bank under Loan 2076-IN, US$74.1 million equivalent by KfW, US$30 million by OPEC, US$47.6 million by Saudi Fund, US$192.0 million by Japan Exim Bank, and US$328.1 equivalent from domestic sources. 5. Since August 1991, the transmission facilities implemented under the project are being managed by the National Power Transmission Corporation (NPTC) under a Power of Attorney in its favor issued by NTPC. NPTC, a GOI- owned entity responsible for the implementation and operation and maintenance of the transmission systems was incorporated in October 1989. Between September 1991 and March 1992, the Bank communicated with GOI on the modalities of the transfer of assets from NTPC to NPTC, assessed the management and operational capabilities of NPTC and with its telex of April 2, 1/ 400 kV transmission lines consisted of the following circuits: (Circuit kms) Bangalore - Salem 181 (175) Ramagundam - Nagarjuna sagar 534 (540) Nagarjuna sagar - Cuddapah II 239 (282) Nagarjuna sagar - Munirabad 407 (400) TOTAL: 1,361 (1,397) Figures in parentheses show estimation at the time of appraisal. 2/ This item was subsequently excluded from the scope of the Bank loan.  1992, informed GOI, NTPC and NPTC that it agreed in principle to such transfer. However, at the time of preparation of this PCR, NTPC was still the legal implementing agency of the project. Project Design and Organization 6. As in the case of the first stage, the expansion phase of Ramagundam Development comprised a number of major works and required careful coordination to ensure efficient progress. Much of the detailed power station engineering and design work had been carried out for the first phase. NTPC had already acquired adequate experience in the area of station design and engineering of 200 MW units at Singrauli, Korba, Ramagundam and Farakka and was in the process of installing two units of 500 MW capacity at Singrauli for which a foreign consultant was employed by NTPC to assist in the design, preparation of specification, evaluation of bids, etc. Therefore, appointing a consultant for doing such works was not necessary and pre-award engineering works such as basic engineering, preparation of specification and bidding documents, evaluation of bids, etc., were done in-house by NTPC. A foreign consultant (US firm) was employed to review the basic design prepared by NTPC. The detail design and engineering work for the project were also carried out in-house by NTPC, with very limited support from outside. 7. At the time of appraisal of the first stage, NTPC had adopted a two- tier organizational structure--one at the central/corporate level and the other at the project sites. Technical services, contract and procurement services, quality assurance and expediting etc. were centralized. For each of four power plants, a project organization group under the control of a General Manager was organized to manage the implementation of each project. 8. NTPC was reorganized, subsequently, after the appraisal of the first stage to have three tier organizational structure, corporate, regional and project levels, respectively. 9. NTPC's Board of Directors, which consists of twelve members, is responsible for establishing internal policies. The Corporation is headed by a Chairman and Managing Director (CMD), who is assisted by five full-time functional Directors, namely, Director (Projects), Director (Operation), Director (Technical), Director (Finance) and Director (Personnel). At the Corporate Office, corporate planning, central procurement and vigilance functions are headed by Executive Directors reporting to the CMD. For the purpose of the administration and execution of work at the sites, the Corporation is divided into five regions, (North, West, East, South and National Capital Regions) with headquarters at present located at Allahabad, Nagpur, Patna, Hyderabad and Delhi, respectively. These regions are under the control of Regional Executive Directors who are responsible for the implementation and operation and maintenance of power plants in their respective regions 3/. Every power plant and regional transmission unit is headed by a General Manager. The new structure has the advantage of optimizing the span of control of the CMD. The new structure has the advantage of optimizing the span of control of the CMD and provides for decentralization of line responsibility while retaining centralized systems in 3/ Until August 1991, the Regional Executive Directors were also responsible for the transmission facilities in their regions (para. 5).  - 4 - areas such as long-term planning, basic engineering, procurement of critical equipment and spares, quality assurance, co-ordination with the World Bank and other financing agencies, inspection etc. 10. As NTPC's activities become complex and more geographically dispersed, further adjustments in control will be required to maintain a high level of operational efficiency. This will in turn require some reorientation of technical and management skills as well as adjustments in the organizational structure. NTPC appointed the Indian Institute of Management, Ahmedabad, to carry out a detailed diagnostic study covering the relevance of current operational management policies along with a review of organization structure. The consultants' recommendations in respect of diversification, centralization, organizational structure and human resource development, are presently being evaluated for phased implementation. NTPC has also carried out an internal assessment of the need for centralization/decentralization in the day-to-day functioning of the Corporation. This has been partly implemented with reinforcement of the regional headquarters with commercial and operational services. The project engineering and procurement groups at headquarters have also been aligned for executing regional projects. The Corporation underwent an organization change in August 1991 when the management of transmission lines and associated engineering and contracts work was entrusted to the National Power Transmission Corporation (NPTC -- para. 5). NTPC has now updated its corporate plan for the upcoming 15 years. The corporate plan has identified several key thrust areas, viz. equipment procurement, coal and gas supplies, operations and maintenance, commercial, financing, environment and rehabilitation, research and development, technology, human resources development, organization development and diversification. The corporate plan also focusses on the major constraints that may hamper the long-term viability of the Corporation highlighting external and internal financing resource constraints, lack of commercial discipline in the sector, project approval procedures and lack of clarity in the enforcement of environmental protection regulations. NTPC states that some remedial measures have been suggested for the attention of policy making bodies in the sector. Project Implementation 11. The implementation of the project consisting of three 500 MW units and associated 400 kV transmission lines has been successfully completed. At the time of appraisal, the first 500 MW unit (No. 4 unit) of the project was scheduled to be commissioned in July 1987 based on the placement of award of the main plant equipment (i.e., boiler and turbo-generator) in October 1982 (zero date). But the main plant equipment could be awarded in Oct. 1983 for which the revised "zero date" was determined as July 1983 4/. The revised schedule for commissioning of the first 500 MW unit based on this zero date was July 1988 considering five years for commissioning of the first 500 MW unit and twelve months for each subsequent 500 MW units thereafter. The first 4/ It took about 15 months for the main plant equipment contract from the date of receipt of offer to the date of the award of the contract. This interval included bid evaluation (about 4.5 months), agreeing with the Bank on award recommendation (about 8.5 months) and the finalization of the letter of award (about 2 months).  -5- unit was commissioned in June 1988 which was one month ahead of the revised schedule and subsequent units in March 1989 and October 1989 which were four and nine months ahead, respectively, with respect to the revised schedule. 12. During the initial running and subsequent performance tests, certain initial defects were found in several items of main and auxiliary equipment, such as boilers, boiler feed pumps, condensate extraction pumps, ash handling plant and power transformers. Rectification works have been finished by March 1992 and all units were put into commercial operation on the dates shown in Part III 5/. 13. With the completion of its second stage, the Ramagundam Project became the third 2000/2100 MW class large-scale coal fired power plant of NTPC following the Singrauli and Korba projects. One of major features of the Ramagundam project was the fact that the detailed design and engineering as well as the project construction management were carried out by NTPC's own resources without assistance of local consultants with the exception of small minor areas. (A foreign consultant reviewed the project design as mentioned in para. 6). 14. Although hydro power is the major power resource in the Southern Region, thermal power stations, including the Ramagundam Thermal Power Station, have been playing a key role, especially in a dry season, in supplying reliable electric power to the system (Part I, para. 14); 15. Under the first Ramagundam project, GOI agreed to take necessary steps to make available adequate coal supplies for the 2100 MW power plant. Coal supply did not hinder the operation of commissioned units of this project till 1989-90. However, the operational performance of Ramagundam Power Project was temporarily affected from 1990-91 onwards by constraints in coal supplies due to: (a) delays in commissioning of development of mines and consequently insufficient availability of coal; and (b) industrial relation problems in the linked mines. 16. NTPC took up the matter with the GOI as a result of which alternative coal mines for supply of coal to this project were identified. As coal from some of these mines has to be transported through the normal 'BOX' wagons instead of Bottom discharge wagons, NTPC has also undertaken installation of Wagon Tripplers to enable effective unloading and handling of coal from the alternative mines. The above additional coal handling augmentation system (Wagon Trippler System) to utilize coal from other coal mines is being constructed with additional funding from Saudi Fund for development (SR 42 million, equivalent to US$ 11 million) and will be completed by December 1993. As a result of the measures taken by NTPC, the coal supply position to the project is fast approaching normalcy. 17. As a result of the above, the loss of generation from Ramagundam station was 1193.3 GWh in 1990-91. 5/ Intervals between the sychronization and the date of the commercial operation for three units were five (5), six (6) and eighteen (18) months, respectively. The delay in completion of No. 6 unit was due to rectification of defects in main and auxiliary equipment.  Environment, Resettlement and Rehabilitation 18. At the time of design and implementation of the project, norms for environment protection and requirements of resettlement and rehabilitation plants were not fully developed. Following phenomena encountered at the Singrauli area, NTPC had realized that while a large thermal power project like Ramagundam would lead to faster economic development of the surrounding communities, it could also have a negative impact on the balance of ecological systems if sufficient mitigatory measures were not taken. Therefore NTPC designed the project to comply with the then established environmental quality standards. However, environmental and rehabilitation issues outside the power plant project (i.e., of the coal mine, and other industries developed in the area) were not studied. A detailed Environmental Impact Assessment was not prepared as this was not required at the time of appraisal, which was carried out in early 1981. 19. The implementation of the Ramagundam project, including the expansion phase of the 1500 MW, required the acquisition of 10289 acres of land involving in the relocation of 782 families. NTPC has evolved a rehabilitation program which is needs-based and caters to both physical and economic rehabilitation of the displaced families. In addition to providing monetary compensations for the land acquired by NTPC, alternate land is given to the Project Affected People (PAP). Rehabilitation colonies of the villages of Narsalpalli, Annapurna and Poratpally have been provided with approach and internal roads; two primary schools have been constructed or extended. Immunization and health camps are being organized on a regular basis. In the above villages, 18 bore wells and three hand pumps have been installed for drinking water purposes. Two community centers have been constructed in the villages so that the local population can take part in community activities such as rural sports tournaments, cultural activities, etc. The PAP are given preference for regular employment in NTPC, based on their educational level, skills and experience. To date, 428 PAP have been provided jobs in NTPC. Further, jobs are also arranged with the contractors. In this category, a total of 108 people have been provided with such employment. NTPC townships are generally self contained and two or three shopping complexes are constructed in each township. In general, preference is given to the PAP in allotment of shops. No records exist at the Bank to show that consultations with the PAP were carried out. NTPC should actively pursue consultations with the people affected by its Projects; however NTPC should not limit its involvement in environmental and socio-economic issues to the impact of its power stations, but should act as a catalyst in environmental and rehabilitation and resettlement mitigation measures and monitoring programs for the mines and associated urban and rural development as well. 20. NPTC has also taken appropriate measures with regard to stack emissions and water effluents. Electrostatic Precipitators with efficiency of over 99.5Z have been provided with 500 MW units so as to minimize particulate emission. Various parameters like air quality (S02, NOX and suspended particulate matter--SPM), noise and water quality are continuously monitored to ensure that they comply with environmental quality standards. NTPC is also implementing a scheme for recycling and treatment of the overflow from the ash pond. In addition, through a continuous afforestation program, a large number of trees of various species have been planted and this would be expanded in the future. As a part of reclamation of filled in ash pond area, afforestation has been undertaken successfully on the temporary ash pond.  Tree plantation over the ash pond in the Ramagundam site has been successfully carried out since 1986. The trials of growing some species over the ash pond directly (without soil cover) were carried out. The species such as Casuarina, Acacia, Eucalyptus, etc., have shown excellent growth. As of December 1991, 515,000 trees were planted in the project. 21. As a result of problems encountered and experience gained in the first Bank-financed Singrauli, Korba, Ramagundam and Farakka 200 MW stages, the Bank encouraged NTPC to become more aware of the particular complexities associated with environmental and especially with resettlement issues. The environmental consciousness of NTPC has since been increasing very fast and in the recent projects--e.g., the Talcher Thermal Power Project (Loan 2845-IN)-- the approach to environmental protection and rehabilitation has been more comprehensive right from the beginning. In the Talcher project, a detailed environmental impact assessment was prepared prior to beginning the construction work. NPTC recruited staff specialized in social and environmental sciences and undertook a review of the environmental aspects at the four Bank financed power stations, i.e., Singrauli, Korba, Ramagundam and Farakka in order to implement corrective measures to adequately rehabilitate and preserve the physical and social environment in those areas affected by these projects. To achieve this, NTPC prepared in 1989, under the then proposed Regional Power Systems project, an Environmental Action Plan (EAP) addressing: (i) preparation of Environment Impact Assessments for existing and future projects; (ii) resettlement and improvement of living conditions of the displaced population; and (iii) development of afforestation plans. The progress of the EAP has been satisfactory. Many activities identified are of continuous nature and are being monitored regularly. However NTPC's environmental unit is understaffed. In accordance with the emphasis the Bank requires from its Borrowers and the implementing agencies, NTPC should also strengthen its environmental assessment and monitoring functions in its headquarters, regional centers and power plants. The central department in charge of these functions should be headed by an Executive Director. A program for strengthening and upgrading NTPC's environmental department (including technical assistance) and mitigatory actions to be taken by NTPC under the EAP to correct outstanding problems in respect to environmental conditions and regulations and resettlement, will be followed up under the proposed NTPC-Power Generation Project. Project Results 22. The project fully achieved its main objective through successful completion of 1,500 MW additional power generation capacity and associated 400 KV transmission lines. The generation from the project after commercial operation was 15,597.53 GWh as of December 31, 1991. The unit-wise details are given in Part III. 23. On the other hand, the results of the sectoral objectives of the Bank Group's assistance to GOI to introduce long-range system planning on a national basis, improvement of sector organization and strengthening of the finances of the institutions involved in the sector have not been satisfactory. This is due to the relative autonomy of the states which limits what can be achieved through involvement exclusively with central agencies. Under India's federal structure, central assistance to the states as budgetary allocations are set by an automatic allocation formula. Therefore, GOI has no direct means to ensure that financial performance of the state utilities  improves. Thus, the GOI-owned utilities have no option but to enforce financial discipline through means, such as: (a) letters of credit set at the level of its sales to each client; and/or (b) limiting the supply of power to the level of payments received. However, the success has so far been limited. GOI recently amended its strategy to support efficient public utilities by channelling the discretionary funds not subject to the automatic allocation formula only to the performing states. These funds essentially include financing through the recently established Power Finance Corporation and funds from external assistance 6/. These actions would increase GOI's impact on the sector. However, much needs to be done to begin solving the structural problems of the sector, such as the current allocation process 7/, the planning process, the operational efficiency of the power system, the institutional set up of the state utilities and financing needs of the power sector. In addition, issues affecting energy conservation and socio- environmental aspects of power development should be taken up. 24. The estimated cost of the project at appraisal and actual disbursements are given in Part III. Compared with the appraisal cost estimate of Rs 12,539.60 million (excluding Interest During Construction -- IDC -- and Working Capital Margin -- WCM) actual costs amounted to Rs. 13,439.52 million representing 7.2 percent increase. Rs. 899.92 million of the increase was due to the change in scope. The total project cost estimates expressed in dollar value, however, amounted to US$1,567.50 million (excluding IDC and WCM) in the appraisal and US$908.16 million actually, resulting in a decrease of 42 percent, due to the rapid depreciation of the rupee against the dollar. The average exchange rate for the period of disbursement from the Bank loan was Rs. 18.8 per US dollar, resulting in a depreciation of about 58 percent in the value of Indian Rupee to US dollars. 25. The estimated disbursements at appraisal and actual disbursements are given in Part III. The original closing date of the loan was June 30, 1988. The loan was closed on March 31, 1992 which was three years nine months behind SAR schedule. This delay was due to two components: (i) unrealistic set up of the original closing date (2 years 3 months); and (ii) delays in implementation (1 year 6 months) 8/. Total disbursement under this loan was 6/ GOI's efforts to develop PFC into a viable and effective instrument for promoting improvements in the power sector are supported by the Bank (Loan 3436-IN; Power Utilities Efficiency Improvement Project approved in January 1992), the Asian Development Bank (ADB) under a parallel operation approved in March 1992, and by USAID under a related technical assistance program for PFC's institutional development. 7/ Not only in the power sector but also in coal and natural gas. 8/ (i) The original closing date was June 30, 1988, while the expected project completion date was September 30, 1989 (SAR para. 3.12). The earlier closing date was in fact contrary to normal Bank practice of setting the closing date for similar projects - 6 months to one year after the project completion date in order to ensure the reimbursement of latest payments. The original closing date should have been September 1990.  US$277,167,342.62. In accordance *ith the Bank's practice,' withdrawal applications against eligible expenditures incurred until March 31, 1992, were accepted unitl July 31, 1992, and the final disbursement ws made on August 28, 1992. The undisbursed balance of US$2,832,657.38 was cancelled on this date. This cancellation was in addition to the cancellation by the Bank, on November 20, 1989, of US$20 million which were no more needed for the completion of the project. Keeping in view the financial difficulties faced by GOI and NTPC at the end of 1991, the Bank agreed in November 1991 to finance under the National Capital Power Project (Ln 2844-IN) eligible expenditures made after March 31, 1992, for those ongoing contracts under Ln 2076-IN. These expenditures are estimated at US$4.0 million. 26. The allocation of the loan into various categories and actual disbursement category-wise are shown in Part III. The original allocation was revised in April 1987 to reflect changes in financing for the erection works. An executive airplane which was in the original plan was eventually excluded from the scope of the Bank loan. US$20 million which was no longer necessary for the completion of the project was cancelled from the original amount of the loan of US$300 million on November 20, 1989. 27. In the SAR, the ex-ante internal economic rate of return (IERR) for the project was estimated at about 15 percent, based on measurable economic costs and benefits associated with the 1,500 MW development. The ex-post IERR is about 242 as shown in Part III and Annex 1. Project Sustainability 28. This project is clearly sustainable due to the following reasons: (1) the power station is being operated with a high plant load factor; (2) the demand for its full output is going to exist since power is in short supply; (3) the current tariff is high enough to recover capital and operating costs; (4) the new two-part tariffs, which are will be applied beginning mid-1992, will reinforce incentives to operate the plant efficiently and with high availability; and, (5) the SEBs in the Southern Region pay their bills to NTPC. 29. However given the sectoral problems, whether NTPC's contribution is sustainable is an issue on which GOI, the Bank and NTPC are all working. NTPC's projected high growth may not be sustainable in the medium to longer term, due to external funding constraints as well as inadequate internal resource mobilization, plus an unchecked increase in accounts receivable from consumers in the Eastern and Northern Regions. Sustainability in terms of meeting the financing requirements of overall sectoral capacity expansion (and efficiency improvements) needed to close the demand/supply gap is highly questionable, but that existing capacity of well designed, constructed and operated plants (such as Ramagundam) should continue to generate sustained (ii) Major items of delays in actual implementation were: (a) initial delay in procurement; and (b) subsequent approval of funding for the coal handling augmentation scheme in 1987 which was completed in three years after the award in January 1988; and (c) delay in completion of the performance test following rectification of initial defects during commissioning period.  - 10 - economic benefits expected from these power plants. Whether the marginal economic value of power used in subsidized agricultural or domestic consumption exceeds the LRMC and what share of this plant's output finds its way to these end uses is another question related with the deficiencies existing in the sector. Bank Performance 30. The performance of the Bank from the project preparation through project completion was satisfactory. The Bank maintained good relations with the beneficiary throughout the execution of the project and fostered an environment conducive to increased Bank Group involvement with NTPC. To date the Bank Group has assisted NTPC in implementing a total of 13 projects with a total assistance of about US$4 billion. Through these operations the Bank Group has been strengthening the institutional and financial viability of the corporation. It is important to highlight that, during this initial decade of development, NTPC and the Bank Group developed a close relationship, during which the Bank Group has endeavored to support NTPC in each step of its development, in a manner that goes much beyond the substantial financial assistance extended to its expansion plan. However, in response to SEBs continued poor payment records on their bulk power purchases, which were seriously straining NTPC's finances, the Bank has refrained from further commitments to NTPC since mid-1987. Thus the then-proposed Regional Power Systems Project, which was negotiated in December 1989, was not presented to the Board, as GOI and NTPC could not fulfill within a reasonable period the associated conditions of Board presentation. Following NTPC's takeover in January 1992, of the Unchahar Thermal Power Station from the Government of Uttar Pradesh in compensation for arrears of the UPSEB, NTPC's level of current receivables (excluding the amount still to be paid by GOI through Central Appropriations in FY93 and FY94) at the end of February 1992, was about 2 months of sales equivalent. Therefore it is now substantially in compliance with the Bank's financial covenants under the ongoing loans, and the Bank has recently begun preparation work on a new operation with NTPC. 31. The Bank has also continued addressing a number of shortcomings of broader concern with appreciable success. Major items are: (a) During the preparation of the recent projects, a more comprehensive and up-front approach towards environmental protection, resettlement and rehabilitation issues has been adopted. In 1988, NTPC appointed consultants to study the environmental impact in the Singrauli Region created by the development of coal mines, building of power plants (by NTPC and UPSEB), and other industrial projects, resettlement of the people affected by these projects, and in- migration of skilled workers and their families. The consultants' findings and recommendations are being reviewed by all interested authorities. NTPC prepared in 1989, within the then proposed Regional Power Systems Project an Environmental Action Plan (EAP) for the Korba, Ramagundam and Farakka power projects. The EAP and follow-up of the recommendations for the Singrauli region will be taken up within the newly proposed NTPC-Power Generation Project; (b) Implementation of an Action Plan to liquidate the accumulation of arrears from SEBs;  - 11 - (c) Development of the Power Management Institute (PMI) to provide specialized training in management and other aspects of the power sector. (This is in progress as a part of the Talcher Thermal Power Project Ln 2845-IN); and (d) Preparation of Model Bidding Documents in order to curtail the period needed to conclude procurement of contracts. Borrower Performance 32. The performance of NTPC was generally commendable and met most of the expectations of the appraisal report. All the three 500 MW units were successfully completed ahead of the revised schedule under the well established control of NTPC project management by successfully overcoming numerous difficulties. 33. As a direct outcome of development from large thermal power stations comprising Singrauli, Korba, Ramagundam and Farakka projects, NTPC has made good progress in building up its organization and manpower resources. NTPC has accorded special importance to the training of engineers and operating staff as well as managerial staff. This success of NTPC's third super thermal power project has been primarily as a result of the implementation of a well planned training program with concentration on pre- operational spheres of activity such as planning, design and construction. Financial Aspects 34. The most salient feature of NTPC's operations was the spectacular growth the corporation experienced. From FY85 to FY91, the value of average net fixed assets increased by 38Z per annum, while electricity sales (GWh) grew at an average of 30X per annum. The pace of NTPC's growth is however declining. Total annual investments increased only by about 17Z over the same period and work-in-progress has remained stagnant since FY88. NTPC's return on net average fixed assets in operation (historically valued) declined from a high 17Z in FY86 and FY87 to 13Z in FY91. The returns achieved are well in excess of the 9.5Z which was required under the loan as a target from FY89. These levels of rate of return did not, however, translate into adequate contributions from internal resources to NTPC's investment program ( an average of only about 12? over the last 5 years). This can be partially explained by NTPC's ambitious expansion program. During the last years, NTPC's rate of return has somewhat declined, because new tariffs have been agreed upon only recently but as they are not yet applied, 500 MW units are effectively billed at 200 MW tariff rates. This will be the case until the new two-part tariffs are in place (para. 28). However, NTPC's level of accounts receivable, throughout the period under review was well above the 2 months level covenanted by the Bank under Ln. 2555-IN, in 1985. The unsatisfactory bill collection performance has not only reduced NTPC's self- financing ratio and tightened its liquidity but, more importantly, has prevented NTPC's traditional lenders, such as the Bank, from extending new loans to finance NTPC's investment program. It also highlights the shortcomings of the rate of return covenant which does not differentiates between income accrued and income actually received.  - 12 - 35. Under the prevailing policy environment in the Indian power sector, NTPC is prevented from operating on a pure commercial basis. Many of the SEBs have not been respecting the commercial terms of the supply contracts, bill collection in the current environment is largely beyond NTPC's control. In order to function as a commercially oriented enterprise, it is essential that NTPC be provided by GOI with the freedom to allocate the power from its new investments based on demand and take into account the past commercial performance of its beneficiaries and their ability to pay for the power allocated to them. In case of non-compliance by any of NTPC's power station beneficiaries with agreed commercial and financial terms of their power supply agreements, NTPC should be allowed to sell its power to other utilities. While technical reallocation (by limiting availability of power to a particular SEB) may be difficult to implement, commercial reallocation can be implemented. This can be done by limiting allocations to a defaulting SEB and charging a stiff penalty for drawals exceeding the reduced allocation. Under the proposed time-slice operation which is currently under preparation, agreements are being sought from Government to allow NTPC to either cut-off or reallocate power from non-paying customers. 36. GOI has recently indicated that entities such as NTPC would no longer be able to rely on GOI budgetary support, have to start paying out dividends and have to raise their own funds in the capital markets. GOI has realized that this requires a reorientation of NTPC's financial, as well as commercial, policies and practices. The new policies would aim at a greater reliance on funds generated from internal resources and NTPC's ability to raise funds from domestic and international capital markets. The details are currently being discussed in the context of the new operation with NTPC, but it is anticipated that the rate of return covenant would be replaced by a self financing ratio. Project Relationship 37. Good relationships were maintained by the Bank with GOI, NTPC, and other participants in the project. Consulting Services 38. The design and engineering work for the project as well as construction management were carried out in-house by NTPC with very limited support from Indian consultants in a few areas. The basic design was reviewed by a foreign consultant (a US firm). The performance of the consultants was satisfactory. Procurement 39. The Bank guidelines were strictly adhered to by NTPC for procurement of 28 contracts involving international competitive bidding. Eleven contracts were awarded to foreign firms for an amount estimated at US$28.6 million. The average procurement time per contract--from the issuance of bid documents to contract award--was planned to be nearly one year, consisting of around 3 months for bidding and about 7-9 months for bid evaluation. The award of the contract package on the critical path of implementation, namely the steam generators contract, took about 15 months (para. 11 and footnote 5). However, this was an isolated case and since then both the Bank and NTPC have been trying to ensure that similar difficulties on  - 13 - agreeing on award recommendation and thus delays do not occur. In an effort to speed up procurement, a standard bidding document for supply and erection has been finalized in April 1992 9/. This model bidding document will be used for bidding in World Bank financed projects and is expected to cut down substantially the time lag experienced in previous projects, including the Second Ramagundam Power Project. NTPC should give further emphasis to finishing promptly the payments for the contracts, so that the closing dates of new loan(s) would not need to be extended. Project Documentation and Data 40. The project's legal agreements adequately reflected the Bank Group's interests in a satisfactory execution of the project. The staff appraisal report was comprehensive, well prepared and provided a useful framework for the Bank and NTPC during the project implementation. The Borrower regularly submitted Quarterly Progress Reports for the project. These have been used for review of physical and financial performance and they were generally used for planning the visits of the supervision missions to India, which often included site visits in addition to review meetings at NTPC Corporate Office, New Delhi. 9/ Covering the Instructions to Bidders and General Terms and Conditions of Contract.  - 14 - PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE A. Adeguacy and Accuracy of Factual Information in Part III 1. Part III of the PCR prepared by the Bank includes statistical data covering various aspects of construction and operation of the project. The factual information relating to NTPC, contained in this section is generally based on the Staff Appraisal Report (SAR) prepared by the Bank for the project, discussions between Bank and NTPC during various supervision missions and quarterly project progress reports submitted by NTPC. B. Comments on the Analysis in Part I 2. The analysis made by the Bank under Part I is comprehensive and has covered important aspects. The analysis is generally in order. Nevertheless, there are certain issues which need to be further examined keeping in view the background of developments as they took place to better appreciate the events. These are as follows: i) Prolect Implementation (reference para 11 of Part I) 3. As per SAR the first, second and third 500 MW units were to be commissioned in July '87, July '88 and July '89 respectively based on main Plant Award date (zero date) of October '82. A careful analysis of the reasons for variation between these estimated dates of unit commissioning and the corresponding actual dates would reveal that their time gap was due to reasons beyond any reasonable control of NTPC. In fact NTPC took all possible steps to keep to the schedule and even initiated advance procurement action pending signing of the Loan Agreement. 4. From Para 11 to Part I, one is likely to get an impression as if NTPC took unduly long time in evaluation and award of their contract for the Steam Generator Package, which was on critical path. This is not so. The bids for the Steam Generator (SG) were opened on 31.8.1982 and NTPC finalized the evaluation report/award recommendation in the record time of four and a half months (against the normal 6 to 12 months period for such large and complex packages) and forwarded the same to World Bank on 18.1.1983. M/S BHEL, the lowest qualified bidder had submitted two offers (base offer and alternative offer) and NTPC had recommended acceptance of the alternative offer. The Bank while conveying its concurrence on 1.5.1983, had, however, stipulated the award to be made as per 'Base Offer' of BHEL. Detailed interactions took place between NTPC and Bank regarding acceptance of BHEL's 'Base Offer' or 'Alternative Offer' and a final agreement was reached in September, 1983. Pre-award discussions/negotiations were then held with BHEL and after resolution of various issues and tying of necessary contractual details, the award was placed on 10/12/1983.  - 15 - 5. The Turbo-generator Package, though awarded in October, 1983, envisaged the 'Zero date' as July, 1983. 6. Based on the date of award of the Steam Generator Package (Dec. '83), the commissioning schedule for the three units works out to Dec. 88, Dec. 89 and Dec. 90 whereas based on the zero date of July, 1983, agreed for the Turbo-Generator Package, the commissioning schedules for the three units were July '88, July '89 and July '90 respectively. All the three units were commissioned ahead of schedule by 1 to 9 months reckoned with reference to the Zero Date of July '83 and 6 to 14 months with respect to the Zero Date as the date of award of the SG package. ii) Loan Extension (reference para 25 of Part I) 7. The loan was originally scheduled to be closed on June 30, 1988. However, it was extended by 45 months and was finally closed on March 31, 1992. The main reasons for extension in loan closing date are as follows: (i) Earlier fixation of original closing date: Even though the expected Project completion date as per SAR was September 30, 1989, the original closing date was fixed as June 30, 1988. In fact, the closing date should have been fixed originally as September 30, 1990 leaving a margin of at least one year after the Project completion date to facilitate reimbursement of last payments. (ii) Variation in SAR schedule and actual schedule: As per the SAR the placement of award of the main plant equipment was to take place in October, 1982. However, the Main Plant Equipment (Turbo-generator portion) could be awarded in October, 1983 and the Main Plant Equipment (Steam Generator portion) in December, 1983. The reasons for variation in the Zero Date have already been detailed in paras 3 to 5 above. (iii) Augmentation of Coal Handling Plant (CHP): Originally, the Coal Handling Plant was designed with minimum redundancies with a view to keep the project cost low. However, provisions in the layout had been kept to augment the system should the necessity arise. From initial feed back of operations, augmentations of the Coal Handling System became imperative, more so due to the fact that the quality of coal actually supplied to the plant was worse than that considered in design of the plant. This augmentation included installation of an additional track hopper, crusher house and associated conveyors. The funding for the coal handling augmentation was approved in 1987 and the construction of the same was completed in 3 years after the award of the package in January, 1988. However, extension of the loan closing date was necessitated for conducting the performance and guarantee tests and release of final payments thereafter. (iv) Final payments: During the initial running and subsequent performance tests, certain initial defects were observed in some of the equipment such as boilers, boiler feed pumps, condensate extraction pumps, ash handling plant and power transformers for which modifications were required to be carried out in the equipment. This resulted in delay in conducting the performance and guarantee (P&G) tests and consequently in the release of final payments, thereby necessitating extension in the loan closing date.  - 16 - iii) Procurement (reference para 39 of Part I) 8. The average procurement time from issue of bid documents to contract award was nearly eleven months, consisting of 3-4 months for bidding and about 7-8 months for bid evaluation, including necessary internal approvals, concurrence by the Bank, pre award discussions and award of contract. Keeping in view the complexities involved in some of the Contract Packages, the time taken seems to be reasonable. 9. The 500 MW units for Singrauli, Korba and Ramagundam (which were proceeding almost parallel) were the first ones for NTPC and did involve certain peculiarities and complexities encountered in the bidding process under international competitive bidding system, and all these problems were effectively solved by NTPC. Keeping the above in view, the time taken in evaluation of bids and award of the contract, does not seem to be excessive and is comparable with other Bank financed procurement, of course with some exceptions. Nevertheless, NTPC, with its eagerness for a constant improvement, was successful in achieving a declining trend in the subsequent projects. iv) Financing Issues Receivables (reference para 34 of Part I) 10. Regarding NTPC's outstanding dues against the sale of power, it may be noted that with a view to limit the accounts receivables to a reasonable level, a covenant was provided first in the Loan Agreement for the Rihand Power Transmission Project and was repeated in subsequent projects viz. the Combined Cycle Power Project, Talcher Thermal Power Project and National Capital Thermal Power Project (NCTPP) requiring NTPC to maintain its accounts receivables at a level not exceeding billing for the two preceding months. The Bank is aware of NTPC's/GOI's continuous efforts to bring down the receivables. As one of the measures GOI decided to recover through Central appropriation an amount of Rs. 1020.50 crs. due to NTPC from SEB's as on May, 1990. In addition to above, as a one time measure, to make a substantial reduction in outstandings, NTPC took over the Feroze Gandhi Unchahar Thermal Power Project (FGUTPP), (2x210 MW) of Uttar Pradesh Rajya Vidyut Utpadan Nigam (a Government of UP undertaking). These measures resulted in the outstandings of NTPC being brought down considerably well within the covenanted limit. By acquiring FGUTPP, NTPC has also gained by adding to its portfolio, a productive asset by way of adjustment of its outstandings and surcharge thereon. During the course of discussions, it has also been realized by the Bank that for the size and nature of NTPC's operations the covenant relating to measure of receivable at the level of two (2) months average billing is not realistic and needs a review 10/. Nevertheless, NTPC and the Government of India are constantly endeavoring to keep the bills receivable with in reasonable limits. 10/ This statement is GOI's and NTPC's perspective and does not reflect accurately the Bank's views and position.  - 17 - Return on Investment 11. NTPC's return on net average fixed assets in operation (historically valued) though declined from a high of 17Z in FY86 to 132 in FY91, have been substantially higher than the covenanted figures (9.5Z). The main reason for the decline is that in the case of units commissioned later and with higher (500 MW) capacity, though higher capital cost has been incurred, the tariffs charged are still on the basis of capital cost of 200 MW units commissioned in first half of 1980s. With the implementation of revised tariffs (two part tariff system as per K.P. Rao committee report) the declining trend in the rate of return is expected to be arrested. 12. With regard to para 29 of Part I concerning sustainability of NTPC's medium and long term growth rate and financing requirements of overall sectoral capacity expansion (and efficiency improvements) needed to close the demand/supply gap, the Bank is aware that GOI has taken several measures to augment the resources available for power sector by way of major policy changes which encourages private sector participation, including foreign participation, in the field of generation and /or transmission/distribution of electricity. These measures are expected to provide substantial additionality of funds for the power sector and help in minimizing the demand/supply gap. NTPC's capacity expansion program would also have to be reviewed in the context of these developments and keeping in view NTPC's excellent track record, it is expected that necessary financial support from external financing source including the World Bank, ADB etc. would continue. Further, NTPC could also be able to mobilize necessary resources from domestic capital market and external commercial borrowing . The single most important factor to be taken care of in this regard is concerning the outstandings to be kept within acceptable limit for which all possible actions are being taken by NTPC and GOI, about which the Bank is being fully kept apprised. As regards the sector as a whole also, the various SEBs have taken/are taking several measures including those under "Operational and Financial Action Plans" OFAPs which, are expected, to go a long way in reducing the several deficiencies. (v) Environment, Resettlement and Rehabilitation (reference paras 18 to 21 of Part I) 13. It has been mentioned in para 18 that environmental and rehabilitation issues outside the power plant project (i.e. of the coal mine, other industries developed in the area) were not studied. It needs to be appreciated that these actions were not in the purview of NTPC. Further, the concerned organizations were obliged to comply with the applicable regulations although the details of the actions taken by them have not been covered (presumably not considered relevant for this Project Completion Report for Ramagundam-II). 14. As per the existing regulations and practices prevailing at the time of implementation of the project, all rehabilitation measures were implemented in consultation with the concerned State Governments. Informal consultations with the Project Affected Persons (PAPs) about the help to be provided by NTPC in rehabilitation and resettlement were also held although formal consultation with the PAPs through Non-Government Organizations (NGOs) or other similar forum were not held as this was neither stipulated by the Bank nor was the prevailing practice. Nevertheless, as brought out in para 19, NTPC has taken adequate measures in this regard not only in compliance  - 18 - with the prevailing regulations but also even beyond in so far these were practicable. 15. In fact, NTPC has taken the step to recirculate the ash water coming back from ash dyke area as the same had high PH value. For being discharged otherwise, the supernatant water form the ash dyke is required to be treated to meet the standards laid down by the Andhra Pradesh State Pollution Control Board. Accordingly an effluent treatment plant is being set up with assistance from SFD. This plant is also used for treatment of effluents from the main plant area. A part of the treated water shall be recycled back to the ash handling system. As far as NTPC's role to act as catalyst for the mines and associated urban and rural development is concerned, NTPC has already taken a lead amongst all the industries in conducting comprehensive EIA studies and adequate Rehabilitation, Resettlement - mitigative measures and in monitoring programs and has been freely exchanging the relevant information with the other industries. What is required perhaps is a little more initiative on the part of these industries and the support of the Government for accelerating the process. 16. As brought out in para 20 of Part I, the need for utilization of ash has been well recognized by NTPC and towards this end a full fledged Ash Utilization Division has been formed at Corporate Office with Deputy General Manager as its head, reporting to Director (Technical). This division has initiated all necessary actions for maximum possible utilization of ash from NTPC's power stations. 17. Regarding use of ash for back filling of mines, NTPC had taken up with the concerned mining authorities but they have not yet agreed. However, the matter is again being taken up with the Coal India Limited for the use of ash for back filling of either abandoned or active mines. As regards the question of development of the national level technologies in mining and ash handling, which allow back filling of ash to the mines, this aspect will have to be studied in detail by the concerned agencies considering all its implications including the levels of investment required and their possible sources etc. 18. As evident from paras 20 and 21 of Part I, NTPC has fulfilled all its obligations in connection with environmental requirements which also establishes that the organization's environmental group was adequately staffed. However, the need for augmenting the unit to cater to the future requirements is well recognized and the same is being adequately addressed under the proposed NTPC-Power Generation Project. iv) Evaluation of the Bank's Performance 19. Ramagundam Thermal Power Project was the third in the series of large thermal power projects (Singrauli and Korba being first and second projects) and the first in the Southern Power Region of the country taken up by NTPC for implementation during its first phase of development. The assistance extended by the Bank contributed substantially in bringing the project to fruition. The project was supervised closely and an adequate number of site visits under supervision missions were made. Excellent cooperation existed between the Bank staff and NTPC during the implementation of the project. In fact, this relationship continued to grow and to date the  - 19 - Bank group has extended financial &sslstaance to NTPC to the extent of nearly US$ 4 billion for the implementation of 13 projects. With the approval of assistance for the Second Ramagundam project, the Bank Group was involved in the total Ramagundam Project (2100 MW). Discussions for a series of three Bank loans for a total commitment of US $ 1 billion to support NTPC's investment program during the eight plan period under 'time slice' concept are in progress. vii) Evaluation of the Borrower's Own Performance 20. At the time the second Ramagundam Thermal Power Project was envisaged, it was expected that the project, on completion would contribute significantly to the easing of power shortages in the region. With the satisfactory completion of the project NTPC has been able to achieve this main objective as the generating performance of the units at this station has been satisfactory and the power station is supplying much needed electricity to the Southern Region, which continues to suffer from peaking as well as energy shortages. The project has also contributed to the overall development of the area. 21. Right from inception, NTPC had adopted as an organizational objective, achievement of self sufficiency in the design and engineering of large thermal power stations and high voltage transmission lines. This process was started in its first two (2) projects itself i.e. Singrauli and Korba (both financed by the Bank) and NTPC has substantially achieved this goal in the Ramagundam project. For the first time, entire design and engineering for this project were successfully done by NTPC in-house with very limited support from consultants. 22. NTPC has recognized training, both managerial and technical, as one of the important needs for organizational development. It is significant that the Korba and Farakka power projects assisted by the Bank include procurement of a full scope 500 MW thermal power plant training simulator. The Korba project also has a 200 MW training simulator. This has been very useful in training of power plant operators and technicians and has contributed significantly in efficient and reliable operation of NTPC's Power Plants. 23. It has been recognized that NTPC has set for itself a tight time schedule of commissioning 500 MW units within 5 years from the date of order of the main plant equipment. To achieve this objective, NTPC developed its Integrated Project Management and Control System (IPMCS) taking into account the work culture and working environment in which NTPC is operating. The IPMCS has been successfully used by NTPC which is evident from the fact that almost all of its projects were completed in time and in some cases, even ahead of schedule.  - 20 - PROJECT COMPLETION REPORT INDIA SECOND RAMAGUNDAM THERMAL POWER PROJECT (LOAN 2076-IN) PART III: STATISTICAL SUMMARY Related Bank Loans Loan No. Year of Title Purpose Approval Status Loan 1648-IN To help (a) solve January Closed in The project Credit 874- rationing in the 1979 June 1987 was success- IN/Ramagundam Southern Regions fully com- Thermal Power by providing three pleted. 200 MW generating units; (b) assist GOI in achieving its objective of further advancing the regional and ultimately the national integra- tion of the power subsector. Proiect Timetable Date Date Date Item Planned Revised Actual - Appraisal mission 01-02/81 01-02/81 - Loan/Credit Negotiation 11/81 - Board Approval 12/22/81 - Loan Signaturo 01/06/82 - Loan Effectiveness 03/16/82 - Loan Closing 06/30/88 (i) 03/31/89 03/31/92 (ii) 03/31/90 (iii) 03/31/91 (iv) 03/31/92 - Loan Completion 07/31/92  l 21 { Loan Disbursements Disbursements (in US$ million) Loan 2076-IN Bank Fiscal Year Estimated Actual Actual Z of and Semester Cumulative Cumulative Estimate 1983 1 2 18 1984 1 30 - 2 60 30.5 11.0 1985 1 66 30.5 11.0 2 132 39.7 14.3 1986 1 216 47.5 17.1 2 288 72.2 26.0 1987 1 294 85.3 30.8 2 300 /a 135.1 48.7 1988 1 149.1 53.8 2 192.5 69.4 1989 1 205.9 74.3 2 231.8 83.6 1990 1 235.1 84.8 2 261.6 94.4 1991 1 263.3 95.0 2 270.4 97.5 1992 1 270.4 97.5 2 274.1 98.9 1993 1 277.2 /b 100.0 /a US$20 million was cancelled on November 20, 1989. lb The loan was closed on March 31, 1992, against the original schedule of June 30, 1988. Total disbursement under this loan was US$277,167,342.62. The undisbursed balance of US$2,832,657.38 was cancelled on August 28, 1992, when the final disbursement under the Loan was made.  - 22 - Prol-ct ImDlementation Indicators Appraisal Estimate Revised Estimate Actual (1) Installation of three 600 MW units To be co_Tissconed:/ To be commis- Co_is- with associated civil work: sioned Tn:a sioned In: No. 4 500 MW unit July 1987 July 1988 /b No. 6 600 MW unit July 1988 July 1989 June 1988 No. 6 600 MW unit July 1989 July 1990 March 1989 October 1989 (1) Installation of 400 Kv transmission lines along with associated substa- To be completed by tions: matching with units Completed (i) Bangalore Salem in: 181 km May 1988 (ii) Ramagundam Nagarjunasagar August 1987 534 km October (iii) Nagarjunsuagar-Cuddapah (II) 1988 239 km March 1989 (iv) Nagarjunasagar - Munirabad 407 km /a Commissioning means synchronization. Lk Datoe of commercial operation were as follows: No. 4 600 MW November 1988 No. 6 600 MW September 1989 No. 6 600 MW April 1991  - 23 - Project Costs and Financing A. Comparison of Estimated and Actual Project Costs S. Item SAR Actual SAR Actual No. (In Rs. Million) (In US$ Million) A. Power Plant & Facilities 1. Preliminary & Civil Works 680.80 1,614.57 85.10 95.86 2. Mechanical Works 3,820.80 8,591.77 477.60 587.41 3. Electrical Works 577.60 572.52 72.20 38.74 4. Coal Transportation System 135.20 275.16 16.90 14.22 Sub-total 5,214.40 11,054.02 651.80 736.23 B. Transmission System 1,051.20 1,764.60 131.40 130.60 C. Air Plane 8.00 N/A 1.00 N/A D. Engineering Services and 824.00 620.90 103.00 41.33 Administration E. Contingency (Physical) 347.60 * 43.50 * F. Contingency (Price) 3,862.40 * 482.80 * G. Taxes and Duties 1,232.00 * 154.00 * TOTAL PROJECT COST 12,539.60 13,439.52 1,567.50 908.16 (excluding IDC & WCM) H. Interest During Construction 662.90 468.40 82.90 32.17 I. Working Capital Margin 183.60 12.10 TOTAL PROJECT COST 13,202.50 14,091.52 1,650.40 952.43 * Included in respective package costs.  - 24 - Prolect Financing (US5 '000) Planned (Loan Source Asreement) Revised Final (USS '0U0) (US5 '000) X (US5 '000) Z 1. IDA/IBRDL Category TIT) olTers and aux- iliary and mech- anica1 equipment, and associated erection work 252,000 234,000 221,150 (2) Electrical and transmission equipment, and associated erec- tion work 37,000 55,000 55,827 (3) Consultants' services 1,000 1,000 185 (4) Air transmission vehicle La - 3,500 0 (5) UnallocatEid 10,000 6,500 0 Difference due to cross exchange rates on Special Account payments - - 5 Revised subtotal - 277,167 29.2 Cancelled tb - 20,000 Cancelled (August 28, 1992 -- undisbursed balance) - 2,833 Subtotal 300,000 18.2 300,000 300,000 2. KfW (FRG) /c 72,700 4.4 74,100 /g 7.8 3. OPEC Ld 30,000 1.8 30,000 3.2 4. Saudi Fund /e 43,680 2.6 47,600 Lj 5.0 5. EXIMBANK of Japan /f 176,370 10.7 192,035 Lj 20.2 6. Domestic 1,027,650 62.3 328,095 L& 34.6 Total 1,650,400 100 948,997 100 La An air transmission vehicle (executive airplane) was originally included in Category (1) and subsequently revised to explicitly categorized in Category (4). This item was eventually excluded from the scope of the Bank finance for the project. Ib US$20 million was cancelled on November 20, 1989. The cofinancing agreement with KfW of Federal Republic of Germany was signed on September 28, 1984 in the amount of DM 145 million (equivalent to US$72.7 million) to cover 3 units 500 MW turbine senerators. /d The cofinancing agreement with OPEC was sIgned on may 21, 1982 in the amount of $30 million. /e Saudi Fund of Saudi Riyals of 172 million was signed on May 14, 1985 to cover civil works for water treatment plant, procurement of three diesel locomo- tives, miscellaneous mechanical and electrical equipment. /f Japanese '62 billion was funded for three projects and of which JY 27,110 million (equivalent to Rs 2,575.0 million) was allocated to this project. ]. Based on the conversion rates prevailing on dates of actual disbursements.  - 25 - Project Results A. Direct Benefits Indicator Estimated at closing date/full development (As of December 31, 1991) 1. Energy Generation (GWh) Unit 4(500 MW) 7,734.77 (Since Commercial Unit 5(500 MW) 5,824.87 operation) Unit 6(500 MW) 2,037.89 Total 15,597.53 2. Power Transmission To the Beneficiaries in the Southern Region B. Economic Impact (1) In the appraisal report, the return on investment was calculated for the second phase expansion by 1,500 MW of the first 600 MW stage of the Ramagundam thermal power station to demonstrate the relationship between tariffs and the economic cost of the development. It was defined as the discount rate at which the present worth of the economic cost associated with the development equals the present worth of the economic benefits over the life cycle of the development. The measurable costs included: (a) capital and labor costs involved in the development of generation and transmission facilities; (b) the annual operation and maintenance costs; and (c) fuel costs. The benefits were measured in terms of the revenues to be derived from the sale of electricity. (2) Based on measurable economic costs and benefits associated with the 1,500 MW development, the ex-ante internal economic rate of return (IERR) was estimated at about 15Z (for economic tariff of 25 paisa/kWh and consumer surplus of 12 paisa/kWh) and about 8Z (for economic tariff of 25 paisa/kWh only). For PCR, the benefits were calculated by the following two ways: (i) weighted average of sales tariffs of SEBs of Rs 0.70/kWh was applied; and (ii) total tariff of Rs 1.58/kWh including consumer surplus of Rs 0.88/kWh 11/ was applied. The resultant ex-post IERRs for the 1500 MW development were (i) about 3.3Z, and (ii) about 24Z. The former is based on relatively low tariff rates in the Southern Region and relatively higher coal cost 12/. 11/ The consumer surplus as per SAR for Second Maharashtra Power Project was used as a reference. 12/ Comparison between Ramagundam II and Rorba II projects for sales tariffs and coal price is as follows: Ramagundam II Korba II -- Weighted average of sales tariffs of SEBs (Rs/kWh) 0.70 1.06 -- Coal price (Rs/ton) 426.75 203.53  - 26 _ (3) Comparison of tariffs in SAR and PCR is summarized below. Share of Regional State Consumption (Z) Average Tariff (Paise/kWh) SAR PCR SAR 1980-81 PCR 1990-91 Andhra Pradesh 23 27.6 36.0 70.6 Tamil Nadu 41 22.4 31.0 71.7 Karnataka 24 16.4 23.4 70.1 Kerala 12 11.7 19.5 56.3 Goa n.a 4.8 95.0 Pondicherry n.a 2.4 68.9 Unallocated n.a 14.7 n.a Total 100 100.0 Weighted Averaged - financial 29.0 70.0 - economic 25.2 n.a. C. Financial Impact (1) The principle beneficiaries of the power generated from the Ramagundam power station are the state electricity boards in Tamil Nadu, Karnataka and Andhra Pradesh which are consuming about 85Z of the power generated. The balance of the available electricity has been supplied to Kerala SEB and Goa and more recently to Pondicherry. APSEB and KEB have had good payment records, while TNSEB and KSEB are at times late with their payments. On the average dues outstanding from sales of the Ramagundam Power Station are currently below 2 months of sales equivalent. (2) NTPC's actual and projected financial statements for the period FY85- FY91 are presented in Annexes 2 to 4. The most salient feature of NTCP's operations was the spectacular growth the corporation experienced. From FY85 to FY91, the value of average net fixed assets increased by 38Z per annum, while electricity sales (GWh) grew with an average of 30Z per annum. The pace of NTPC's growth is however declining. Total annual investments increased only by about 17Z over the same period and work-in-progress has remained stagnant since FY88. In FY90 the value of net assets in operation became larger than work-in-progress. During the period under review, net profits even grew by 41Z per annum, but NTPC's return on net average fixed assets in operation (historically valued) declined from a high 17Z in FY86 and FY87 to 13Z in FY91. The returns achieved are well in excess of the 9.5Z which was required under the loan as a target from FY89. GOI's current policy is to set tariffs for NTPC power stations an a cost-plus basis with specific normative operational parameters. NTPC's better financial performance should be largely credited to NTPC having operated the power stations at efficiencies well above the norms and standards used for the purpose of tariff setting. On the other hand, while NTPC's performance was much better than most other public enter- prises, the FY91 returns were negative in real terms. Moreover, NTPC's contributions to investments from internal resources was relatively modest and the level of accounts receivable, throughout the period under review was well above the 2 months level covenanted by the Bank under Ln. 2555-IN, in 1985. The following table represents the key operational results forecasted in the appraisal report compared with actuals:  -27- SECONO KOR8A ANO RAMAGUlNGAM THERMAL P068R PROJECTS ...... ..... ............ .................. Y.' r endiNO March 01 1985 1986 1987 1988 1989 1990 1991 ......................................... ...................................... ................ ................... ................ ................... ................ .................. .................................................. Fon,!w Actual Fore-ast Actual Forecast Actuat Forecst Actul Forecast Actual Forecast Actua Forcast Act-ta l"ctricity S.tn. (GCA> 6,551 8,316 9,893 12,839 13,261 14,408 17,883 17,533 24,070 248T75 30,651 35,421 36,086 40,306 A-.ea # lk Tariff IP/Kc) (Garatio) 33 37 33 38 34 40 34 41 35 46 36 52 36 53 Total Ope9otino r- .S 2,299 3,438 3,513 5,294 4,78Z 6,453 6,526 8,622 8,954 12,748 11,599 20,573 13,900 24,207 Totat oparating EIp-nos 1,376 2,042 2,131 2,943 2,771 3,522 3,6O 4,712 5,342 7,559 6,992 12,567 8,397 14,577 1at Profit 257 875 336 1,830 589 2,118 625 3,024 860 3,308 1,186 5,366 1,993 7,009 A~rg8 Mat FictI 8ss8ts (0Itoric) 16,281 10,957 21,175 14,016 26,808 17,209 35,582 23,856 45,041 35,078 53,332 53,567 57,919 75,48z Not. of 8.turr on Historic Assets (X 6X 132 72 17% 82 17X 72 162 82 15 9S 15X 10 138 ODarsting Rtio (X) 602 59% 612 56X 58X 552 59X 552 602 592 602 61X 60S 602 Cctnb.,tiofl to Construct,om (Ar-Ja 2 62 72 82 -1X 122 98 142 8X 25X 10X 932 138 5002 163 Debt Service C-corg 2.0 3.3 1.8 4.9 1.7 4.0 1.4 3.9 1.4 2.4 1.3 2.5 1.3 2.5 D*OtEquity Ratio 34/66 32/68 37/63 36/64 41/59 42/58 45/55 43/57 47/53 47/53 45/55 47/53 4/a58 43/57 Current Ratio 7.3 1.0 6.0 .6 5.9 1.6 5.6 1.7 5.2 1.8 4.7 1.8 7.2 1.9 Accou,ts tec.i-6bls (t of days) 32 184 32 163 32 164 32 177 32 175 32 210 32 233 (3) As can be seen from the table above, NTPC has in fact outperformed most of the financial targets set in the appraisal report, the exceptions being the much lower level self financing and poor bill collection. While the lower level of self financing can be partly attributed to the much larger size of the investment program than anticipated during appraisal, the level of accounts receivable has consistently been above 5 months and was even 7.7 months of sales equivalent at the end of FY91 13/. The situation would have been worse if the Government had not at times, settled part the outstand- ing bills on behalf of the SEBs through central appropriations. Also, the increased working capital requirements resulting from the poor bill collection performance, considerably reduced NTPC's ability to contribute to its invest- ment program from its internal resources. NTPC's average self financing ratio from FY87-91 was only about 121 and NTPC was increasingly confronted with tightening liquidity situation. The unsatisfactory bill collection perfor- mance has not only reduced NTPC's self-financing ratio, but more importantly, its inability to collect in time, has prevented NTPC's traditional lenders, such as the Bank, to extend new loans to finance new plants in NTPC's invest- ment program. (4) Under the prevailing policy environment in the Indian power sector, whereby the Government determines fixed allocation for supply of power of NTPC plants and NTPC is unable to either cut-off or re-allocate power from non paying customers, NTPC is prevented from operating on a pure commercial basis. Since many of the SEBs have not been respecting the commercial terms of the supply contracts, bill collection in the current environment is largely beyond NTPC's control. Bill collection for power generated from the project has been much better, but most of NTPC sales are presently in the Northern and Eastern Regions, which have also been the major defaulters in terms of payment of bills. Under a new time-slice operation which is currently under preparation, agreements are being sought from Government to allow NTPC to either cut-off or reallocate power from non-paying customers. 13/ In May 91, GOI decided to settle an amount of Rs.10 billion through central appropriations over a period of four years. In addition, in January 1992, NTPC took over the Unchahar Power Station from UPSEB, NTPC's largest defaulter, with the proceeds to be used to off-set the accumulated arrears. As a result, the average level of NTPC's accounts receivable at the end of February 1992 was about two months of sales equivalent, not taking into account the Rs.5 billion, which is still to be paid by GOI through central appropriations in FY93 and FY94.  - 28 - FY87 - FY91 Year Ending March 31, 1991 Forecast 2 Actual 2 (Rs million) (Rs million) Total Internal Cash Generation 24,843 61 36,518 29 Equity Contributions 2,311 6 35,876 29 Capital Receipts 0 363 0 Loans - 34,404 27 Bonds 18,539 15 Total Borrowings 13,615 33 52,943 42 Total Sources 40,769 100 125,700 100 Total Investments 20,491 50 100,977 80 Total Debt Service 18,110 44 13,483 11 Increase in Working Capital 2,169 5 11,241 9 Total Applications 40,769 100 125,700 100 Contribution to construction 222 12Z Debt service coverage 1.4 2.7 (5) During the FY87-FY91 period, NTPC met 422 of its total financing requirements including debt service and increased working capital needs by borrowing. The balance was met equally from internal cash generation and GOI equity contributions. This denotes a heavy reliance on GOI support, particu- larly if we take into account that a large part of the borrowings were loans made by multilateral and bilateral agencies to GOI which were onlent to NTPC. Although the interest rates were in line with those charged in the domestic capital markets (up to 152 in the period under review), GOI generally took the foreign exchange risk, and the terms (20 years, including 5 years grace) were more favorable than commercial credits. Also, GOI has ploughed all profits back into NTPC's operation, by not requiring any dividends to be paid out. During NTPC's initial period of growth this was a sound policy, but it has also shielded NTPC and its customers from paying the full cost of the power generated by NTPC. GOI has recently indicated that entities such as NTPC would no longer be able to rely on GOI budgetary support, have to start paying out dividends and that it would have to raise its own funds in the capital markets. GOI has realized that this requires a reorientation of NTPC's financial, as well as commercial, policies and practices. The new policies would aim at a greater reliance on funds generated from internal resources and NTPC's ability to raise funds from domestic and international capital markets. The details are currently being discussed in the context of a new wtime-slice" operation for NTPC.  - 29 - Status of Covenants COVENANT SUBJECT STATUS Project Agreement Dated July 11. 1980 PA 2.02 NPTC shall engage consultants to assist in Complied with the design and engineering of the Project. PA 2.04 NTPC shall take out insurance on goods Im- Complied with ported for tho Project. PA 2.06 NTPC shall maintain appropriate records on Complied with the Project and furnish regular progress reports to the Bank. PA 2.06 NTPC shall furnish a complotion report with- Being complied in six months after the closing date of the Project. PA 2.08 NTPC shall properly acquire all necessary Complied with land for the Project. PA 2.09 NTPC shall ensure compliance with appropri- Complied with ate environmental standards in execution and operation of tho Project. PA 3.03 NTPC shall inform the Bank in advance, of Complied with any proposal to change NTPC's limitation to borrow funds. PA 3.04 NTPC shall take out insurance against risk Complied with in such amounts as will be consistent with appropriate practice. PA 3.06 NTPC shall enter Into bulk supply contracts Complied with with SEB customers allocated a share of ele- ctricity supply from the Projoct. PA 4.02 NTPC shall submit audited financial state- 86/86: Complied ments and auditor's report within 7 months 88/87: Complied of FY end. 87/88: Complied 88/89: Complied 89/90: Complied 90/91: Complied PA 4.03 NTPC shall achieve an annual rate of return Superseded by covonents under subsx- of not less than 9.6% from FY90/91 onwards. quent NTPC Projects requiring 7% ROR in FY84/86 through FY89/90 and 9.6% ROR from FY90/91 to FY94/96 and a satisfactory level thereafter - being complied with. /a Loan Agreement Dated January 6, 1982 LA 2.02 (b) GOI shall maintain a special account in Complied with (Opened 08/87 31O.OM) dollars as amended 06/03/87 LA 3.01 (b) GOI shall enter into a subsidiary loan Complied with agrement with NTPC under terms satisfactory (The actual lnterest rate was 12% to the Bank (not lose than 11.76% per annum). per annum). LA 3.03 GOI shall grant import permission for goods Complied with financed under the Project and make available foroign exchange funds required therefore.  - 30 - COVENANT SUBJECT STATUS LA 3.04 OI shall onsuro adequate coal supplies for Complied with the Project. LA 8.04 GOI to furnish the Bank not later than 6 86/86: Complied months after the end of tho FY the auditor's 86/87: Complied report in respect of the special account 87/88: Complied (amended 06/03/87) 88/89: Complied 89/90: Complied 90/91: Complied LA 4.02(a) NTPC to maintain a system of SOEs (amended Complied with LA 4.02 GOI to submit tho Bank not later than 87/88: Complied b(ii) 6 months after end of FY auditor's opinion 88/89: Complied in regard to the statements of expenditure 89/90: Complied submitted during tho year (amended 03/16/87) 90/91: Complied /a NTPC shall enter into bulk supply contracts with SEB customers allocated a share or *lectricity supply from the Project.  - 31 - Use of Bank Resources A. Staff Inputs Staff inputs in carrying out the various tasks through the project cycle from preparation in FY81 to completion in FY93 were as follows: Task Input (Staff-weeks) Project Preparation 2.2 Project Appraisal 24.3 Loan Negotiations 3.9 Loan Processing 8.2 Project Supervision 59.7 Project Completion Report 4.2 Project Administration 2.9 Total 105.4 B. Missions Project Cycle Month/ Number of Days Speciali- Performance Type of year persons in field zation la rating /b Problems /c Through Appraisal Identification Ld Preparation /d Preappraisal L Appraisal 01/81 4 Supervision Supervision 1 02/81 3 25 E,FA,EC 1 Supervision 2 06(84 1 21 FA 1 Supervision 3 05/85 2 15 E,FA 1 Supervision 4 09/86 3 19 E,E,FA 1 Supervision 5 09/87 3 10 E,FA,FA 1 Supervision 6 01/88 3 20 E,FA,FA 1 PR Supervision 7 09/88 3 29 E,FA,EC 1 I Supervision 8 07/89 1 11 E 1 Supervision 9 02/90 1 8 E 1 Supervision 10 07/90 1 9 E 1 Supervision 11 07/91 1 9 E, FA 1 PCR 02/92 1 9 E, FA la E: Engineer, LO: Loan Officer, FA: Financial Analyst. EC: Economist. 7b 1 - No or minor problem, 2 - moderate problem, 3 - major problem. 7c I: Implementation delays, PR: Procurement problems and delays. 7h Identification was made by GOI in 1974. Preparation and preappraisal were made by NTPC in 1978.  .-Poot Internal SEco oic sets of Return for Roemoa,dam 11 I.6P.Coel(baIdk) 0.645 6. 0ta.Irca (0) am (Rc WII 1I-/) 2.C..l CO(P*/sb) 426.76 7. Aug. Coe,9. (S) 7 3.011 Cs(Re/kl) 4i1l.96 6, 400kV 1*s.. (S) 2.6 4. UK p./W1t/V. 400 9. T00 Lo"1. (S) la.a 5.S..afltiVaI.aV .dv a tariff of 0. 0A.jkw CA,..ar oorpla. Imcludedi t.SbMsjki 8.pondlture Benefit.. Pro.r 51t.10 Troo.l-alon Sy.L.. E36 ToLal Insded Inds.d Operating Coata T10 Coot Coot of Rovenu. Conwe.er Ido. Total Projeclot.1 Project Capltal --------------------------Total Capital Total Capital Supply t.oO.aaratiloSlal fro S.,rple 1/92/10011aaflt, S.eflt. Year Coat Coal ll on Ps Coot 0D14 TS Coot 0C14 End-oro(H) (CM) End-Ua.rsinclwded /b (Baa.) (lnclud.comau s"-44 622.6 622.9 61.9 61.9 266.5 971.2 U5.2 (971.2) (971.2) 1944-66 63 .1 663.1 91.9 91.9 306.0 1,060.0 56.6 (1.040.0) (1.060.0) 196-66 1,121.0 1,121.0 146.6 146.6 561.7 1,763.2 61.4 (1,703.2) (1,763.2) 1966-67 1,567.2 1,567.2 264.3 266.3 720.9 2.664.4 64.9 (2,664.4) (2.664.4) 1947-66 1,953.6 1,953. a 30.3 36.3 696.7 3236.6 70.2 (3,236.6) (3,236.6) 1 1966-69 2.016.4 261.2 13.0 93.0 2,472.6 366.2 13.1 371.4 927.1 73.1 3,544.1 1,279.9 945.6 60.9 1,367.6 76.6 (3.236.2) (2,476.6) 2 1969-90 660.0 1,099.3 40.7 290.4 1,960.4 41.9 13.6 56.4 253.0 76.1 2,361.0 4.00.1 2,960.6 1.953.4 4.409.1 61.1 (413.6) 2,042.1 3 1990-1 1.187.6 1,047.0 36.6 271.4 2.661.0 199.4 16.6 214.9 546.4 69.1 3,401.4 3,616.6 2,019.7 1,911.3 4,326.4 69.3 (1.466.1) 924.0 4 1991-92 454.1 2,546.4 67.0 600.0 3,469.6 0.4 15.6 16.0 206.9 93.2 3,607.7 6,556.4 6,324.7 4,427.3 9,993.0 100.0 619. 6,1S6.S 1992-93 241.9 2,263.6 63.9 600.0 3,169.6 16.6 1.6 111.3 96.6 3.411.6 6,280.0 6,096.6 4,267.7 9,632.9 100.0 566.0 6.221.1 6 1993-94 470.6 ,26.6 63.9 6.0 8,416.4 16.6 16.6 216.6 99.6 3.760.3 6,260.0 6,096.6 4,257.7 9,632.6 100.0 617.4 66 "2. 6 7 1994-95 2,263.6 53.9 600.0 2.647.7 16.6 15.6 99.8 3,063.0 6,260.0 6.096.8 4,267.7 9,632.9 100.0 1.204.7 0.669.9 a 196-96 2,263.0 6.9 60.0 2,947.7 15.6 16.6 99.6 3,063.0 8,260.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,549.9 9 1996-97 2,263.6 3.9 600.0 2,947.7 16.6 15.6 99. 3,063.0 6,250.0 6,096.6 4,267.7 9,532.9 100.0 1,204.7 6,59.9 10 1997-96 2,263.6 5.9 600.0 2,947.7 10.6 16.6 99.6 3,063.0 5,260.0 6,096.5 4,267.7 9,632.9 100.0 1,204.7 6,69.9 11 199S-99 2,23.6 63.9 600.0 2,947.7 15.5 16.6 99.5 2,093.0 6,260.0 6,096.6 4,267.7 9.632,9 100.0 1,204.7 6,59.9 12 1999-2000 2,26. 6 63.9 00.0 2,947.7 16.6 16.6 99.0 5,063.0 0,260.0 6,096.0 4,267.7 9,42.9 100.0 1,204.7 6,54.9 13 2000-01 2,261.6 3.9 600.0 2,947.7 16.6 16.6 99.6 3,063.0 6,260.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,56".9 14 2001-00 2,263.6 63.9 60.0 2,947.7 16.5 15.1 99.0 3,093.0 6,250.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,569.9 16 2002-0 2,263.6 .9 600.0 2.947.7 16.6 16.6 99.8 3,063.0 6,250.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,59.9 16 2003-04 2,263.6 63.9 600.0 2,947.7 16.5 16.5 99,0 3,063.0 6,260.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,56.9 17 2004-06 2,263.5 53.9 600.0 2,947.7 16.6 16.5 99.6 3.063.0 6,260.0 6.096,5 4,267.7 9,632.9 100.0 1,204.7 6,569.9 16 2005-06 2,263.6 3.9 600.0 2,947.7 16.6 16.5 99.6 3,063.0 6,200.0 6,098.6 4,267.7 9,632.9 100.0 1,204.7 6,569.9 19 2006-07 2,263.6 U.9 0.0 2,947.7 16.6 15.5 99.6 3,063.0 6,200.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,59.9 20 2007-6 2,263.8 .9 600.0 2,947.7 15.6 15.5 99.5 3,063.0 6,250.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6, 59.9 21 2006-09 2,263.6 83.9 600.0 2,947.7 18.6 15.6 99.6 5,063.0 6,250.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6, 59.9 22 2009-10 2,298.6 ".9 600.0 2,947.7 16.5 15.& 99.6 3,063.0 6,260.0 6,096.6 4,267.7 S,6G2.9 100.0 1.204.7 6,59.9 23 2010-11 2,263.6 ".9 600.0 2,647.7 15.6 16.6 99.6 3,063.0 6,260.0 6,096.6 4,267.7 9,632.9 100.0 1,204.7 6,U9.9 24 2011-iU 2,2S.6 U.9 00.0 2,947.7 16.5 15.5 9".6 3,063.0 6,260.0 6,096.6 4,267.7 9,63.9 100.0 1,204.7 6,69.9 Xii 0.0081 0.241 /b Joflatla 1ed.; #a per CO..41 pmeIeNwaormd IM9 is C_O.Ur wIut go per OM of G_ N4 ti"reAtra Pwer Pr oject i4  SECOND RAAGUiNDAN THERNAL POUER PROJECT NATIONAL THERNAL POWER CORPOBATION LTD. INCONE STATEMENTS (in million of Rupees) Year ending March 31 1985 1986 1987 1988 1989 1990 1991 ,,,,,,,, ,,.,....... ,., .......,..,,.., .. ....,,,,,, ,,,...................................... ....... ............ --- - ----- ................ ---------- ---- ------ - , - ------- ..........................> ............... IMCCOE DESCRIPTION Forecast Actual Forecast Actual forecast Actual forecast Actual Forecast Actual Forecast Actual Forecast Actual Electricity Generation (GWh) 9,248 14,174 15,921 19,378 27,296 38,595 43,965 Less: Aux Cons.(GCh) 932 1,335 1,513 1,845 2,421 3,174 3.659 Electricity Sates (CGh) 6,551 8,316 9,893 12,839 13,261 14,408 17,U83 17,533 24,070 24,875 30,651 35,421 36,086 40,306 Average Bult Tariff (P/Kih) (Generation) 33 37 33 38 34 40 34 41 35 .46 36 52 36 53 Operating Revenues: Electricity Sates 2,164 3,077 3,310 4,829 4,510 5,736 6,161 7,201 8,461 11,460 10,970 18,376 13,160 21,254 Tranasission Charges 148 284 555 1,176 993 1,691 2,404 Electricity Duty 134 111 203 III 272 87 366 93 494 179 629 294 740 347 Other Incalim 102 70 75 152 116 212 201 Total Operating Revenue 2,299 3,438 3,513 5,294 4,782 6,453 6,526 8,622 8,954 12,748 11,599 20,573 13,900 24,207 Operating Expenses: Fuel Cost 518 1,252 898 1,952 1,259 2,360 1,799 3,165 2,600 5,285 3,557 8,985 4,461 9,760 Operation nd Maintenance 329 404 445 483 547 616 729 807 964 1,175 1,180 1,745 1,323 2,105 Depreciation 395 265 585 377 694 448 986 579 1,285 912 1,626 1,396 1,873 2,251 w Electricity Duty 134 112 203 111 272 87 366 93 494 179 629 294 740 347 1 Others* 10 21 11 69 8 147 113 Total Operating Expenses 1,376 2,042 2,131 2,943 2,771 3,522 3,880 4,712 5,342 7,559 6,992 12,567 8,397 14,577 Operating Incaoe Before Interest 922 1,396 1,382 2,350 2,011 2,931 2,647 3,910 3,612 5,189 4,606 8,006 5,503 9,630 Interest Chargeable to Revenue 665 492 1,045 570 1,422 866 2,022 1,248 2,752 1,791 3,422 2,730 3,510 3,472 Profit before Tax 257 904 336 1,781 589 2,065 625 2,662 860 3,398 1,184 5,276 1,993 6,158 Less:Provision for Tax 1 1 0 Profit after Tax 257 904 336 1,780 589 2,064 625 2,662 860 3,398 1,184 5,276 1,993 6,158 Prior Period Income (Net) (28) 50 53 362 (90) 90 851 Net Profit 257 875 336 1,830 589 2,118 625 3,024 860 3,308 1,184 5,366 1,993 7,009 Average Net fixed Assets (Historic) 16,281 10,957 21,175 14,016 26,808 17,209 35,582 23,856 45,041 35,078 53,332 53,567 57,919 75,482 Rate of Return on Historic Assets (X) 6X 13X 71 17X 81 17X 7X 16X 8X 15X 9X 151 10X 13X Operating Ratio (X) 60X 59% 61X 56X 581 55X 59X 55 60X 591 601 611 60X 601 a Includes deferred expenses, prliPiprary expenses, bonds expenses, rebate to customers and contingencies.  SECOND RAHAGQJNDAN THERMAL POWER PROJECT NATIONAL 1HERMAL POWER CORPORATION LTD. SoURCES AND APPLICATION Of FUNDS (in millon of Rtpees) Year ending march 31 1985 1905 1986 1986 1907 1987 1988 1988 1989 1989 1990 1990 1991 1991 ,,,,,,,,,,,,,,,,,,..... ... . . ............... ......................... --- -- -- -- -- ----- ---- ---- ----- ---- ---- ----------------........ ---------------......... --------------- --------------- SOURCES DESCRIPTION Forecast Actual Forecast Actual Forecast Actual Forecast Actuat Forecast Actual Forecast Actusl forecast Actuat ] .....--- ---- ----- ---- ----- ---- ----- --- ----.- .- ---..... ..----- ------- - -*--*-- *- -- *---*----- * ----.-....---...... ---.-- -------- . ---------------- -------------... ... ........--- ---------------- SOURCES OF FUNDS Operating Incooe before Interest 922 1,396 1,382 2,350 2,011 2,931 2,64.7 3,910 3,612 5,189 4,606 8,006 5,503 9,630 Prlor Period Inco.e (Met) 0 (28) 0 50 0 53 0 362 0 (90) 0 90 0 851 DepreciationM) 395 265 614 377 694 448 986 579 1,285 912 1,626 1,396 1,873 2,251 Total Internal Cash Generation 1,317 1,632 1,996 2, 17 2,705 3,432 3,633 4,851 4,897 6,011 6,232 9,492 7,376 12,732 Equity Contributions 4,694 4,859 4,257 6,808 2,311 5,909 0 6,879 3,682 6,594 12,812 Capital Receipt 26 0 114 24 87 21 I11 Borrowings ........... Loans Contracted 4,416 5,131 5,865 4,836 11,972 6,712 5,019 Bonds 0 1,634 4,300 4,394 1,499 4,346 4,000 Total sorrowings 3,355 4,416 4,750 7,365 4,594 10,165 5,742 9,230 3,188 13,471 91 11,058 9,019 TOTAL SOURCES 9,366 10,933 11,003 16,950 9,610 19,620 9,375 20,984 8,085 23,251 6,323 27,165 7,376 34,680 APPLICATION OF FULDS Totat Investment 8,541 10,011 9,795 14,048 7,802 17,806 6,655 17,630 4,243 19,064 1,306 20,397 484 26,079 '' Debt Service Interest Charged to Operations 665 492 1,045 570 1,422 866 2,022 1,248 2,752 1,791 3,422 2,730 3,510 3,472 Amrtizatlon of Loans 0 - 63 - 217 - 499 845 747 1,376 1,087 2,045 1,542 Totat Debt Service 665 492 1,108 570 1,639 866 2,521 1,248 3,597 2,538 4,799 3,817 5,555 5,015 Increase (Decrease) In Uorking Capital 159 430 101 2,332 168 947 199 2,106 245 1,649 218 2,951 1,337 3,586 Provislon for Tax 0 0 0 1 0 1 0 0 0 0 0 0 0 0 TOTAL APPLICATION OF FUNDS 9,366 10,933 11,003 16,950 9,610 19,620 9,375 20,984 8,085 23,251 6,323 27,165 7,376 34,679 Contribatlon to Construction (Arnuat) X 6X 7X 8X -1X 121 92 14X 8X 25X 102 93X 132 100X 162 Debt Service Coverage 1.98 3.32 1.80 4.87 1.65 3.96 1.44 3.89 1.36 2.37 1.30 2.49 1.33 2.54 ,_-. ...... .-.. .. .. .. .. .. . ..--. (t) Depreciation pertains to operation,  SECOND RAHAGUWDAN THERHAL POWER PROJECT NATIONAL THERMAL POWER CORPORATIOW LTD. BALANCE SHEET (In mitlion of Rupees)_ Year ending March 31 1985 1986 1987 1988 1989 1990 1991 BALANCE DESCRIPTIOI forecast Actual forecast Actual Forecast Actuat forecast Actual forecast Actual forecast Actual Forecast Actual ASSETS Gross Block 20,531 13,363 23,774 16,047 33,105 20,689 43,003 30,508 54,295 44,784 62,495 69,972 66,968 92,422 Less:Depreclatlon 670 476 1,285 903 1,979 1,416 2,966 2,069 4,250 3,068 5,876 4,554 7,749 6,877 Wet flxed Assets in Operation 19,861 12,887 22,489 15,144 31,127 19,273 40,037 28,439 50,046 41,716 56,619 65,418 59,219 85,546 Capital Works In Progress 16,149 19,656 22,702 31,069 21,173 44,302 17,933 52,187 10,882 57,062 3,989 52,360 56,039 TOTAL FIXED ASSETS 36,010 32,543 45,191 46,213 52,300 63,575 57,970 80,626 60,928 98,778 60,608 117,778 59,219 141,584 Current Assets Cash and Bank Hatance 11 84 12 448 17 134 22 5,973 27 2 30 291 34 684 Short-term deposits 395 637 1,053 737 4,544 s,364 1,179 5,279 ReceIvabtles 192 1,626 293 2,284 398 2,828 544 4,058 746 5,981 967 11,561 1,158 15,102 Inventories 205 704 238 940 331 1,322 430 1,742 543 2,639 625 3,632 670 5,414 Loans & Advances 326 1,972 3,642 783 2,614 1,824 2,088 Other Current Assets/Debtors 2 17 2 13 3 148 4 178 4 104 5 125 5 231 Total Current Assets 409 3,151 544 6,293 749 9,127 1,000 13,469 1,320 15,884 1,627 22,797 3,046 28,799 HIsc.Capitat Expenditure 19 19 16 17 18 19 41 TOTAL ASSETS 36,420 35,713 45,735 52,526 53,048 72,718 58,969 94,112 62,248 114,680 62,234 140,594 62,265 170,424 LIABILITIES Equity Share Capital Issued 23,659 20,632 27,915 26,685 30,226 32,851 30,226 37,658 30,226 44,073 30,226 49,640 30,226 59,237 Share Deposit 236 990 734 2,806 73 1,100 4,314 Retained Earnings 315 1,402 652 3,231 1,241 5,463 1,866 8,511 2,727 11,906 3,910 17,293 5,903 24,420 Totat Equity 23,973 22,270 28,567 30,906 31,468 39,047 32,092 48,975 32,953 56,052 34,136 68,033 36,130 87,971 Total Long-tern Debt 12,390 10,364 17,077 17,729 21,454 27,894 26,698 37,124 29,041 49,848 27,755 59,819 25,710 67,296 Current Liabilities 56 3,081 91 3,891 127 5,778 179 8,014 255 8,780 344 12,742 426 15,158 Total Debt 12,446 13,445 17,168 21,620 21,581 33,671 26,877 45,138 29,296 58,628 28,099 72,561 26,135 82,454 TOTAL EQJITY AWD LIABILITIES 36,420 35,713 45,735 52,526 53,048 72,718 58,969 94,112 62,248 114,680 62,234 140,594 62,265 170,425 Debt:Equity RatIo 34/66 32/68 37/63 36/64 41/59 42/58 45/55 43/57 47/53 47/53 45/55 47/53 42/58 43/57 Current Ratio 7.3 1.0 6.0 1.6 5.9 1.6 5.6 1.7 5.2 1.8 4.7 1.8 7.2 1.9 Accoults Receivable (f of da") 32 184 32 163 3? 164 32 117 32 175 32 210 32 233 ........... ................... ... .... .........