India - Chandrapur Thermal Power Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15246 PROJECT COMPLETION REPORT INDIA CHANDRAPUR THERMAL POWER PROJECT (LOAN 2544-IN) DECEMBER 29, 1995 Energy Operations Division South Asia Country Department II | 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 AND ABBREVIATIONS Currency Unit = Rupee (Rs.) Rs. I = Paise 100 RUPEE (Rs.)/USS EXCHANGE RATES AND CPI (Yearly Averages) Exchange Rate Consumer Price Index Fiscal Year Rupee/USS FY 80/81 = 100 February 28, 1986 (SAR) 13.00 148.0 FY 87/88 13.92 163.2 FY 88/89 16.23 176.3 FY 89/90 17.50 190.6 FY 90/91 22.74 216.3 FY 91/92 26.20 237.0 (estimate) FY 92/93 31.20 FY 93/94 31.46 Average Rate during project implementation period; US$1 Rs. 21.80 Government of India and MSEB Fiscal Year: April I - March 3 1 Measures and Equivalents I Ton (t) = I metric tonne = 1,000 Kg = 2,204 lbs. 1 Kilovolt = 1.000 volts (V) 1 Kilovolt ampere (kVA) = 1,000 volt-amperes (VA) I Kilowatt-hour (kWh) = I unit = 1,000 watt-hours I Megawatt-hour (MWh) = 1.000 kilowatt-hours I Gigawatt-hour (GWh) = 1,000,000 kilowvatt-hours ABBREVIATIONS AND ACRONYMS The Act : Electricity (Supply) Act of 1948, as arnended CEA : Central Electricitv Authority PFC : Power Finance Corporation GOI : Government of India GOM : Government of Maharashtra IBRD International Bank for Reconstruction and Development [CB International Competitive Bidding IFC : International Finance Corporation LRMC Long Run Marginal Cost MSEB : Maharashtra State Electricity Board PAP : Project Affected Person PLF : Plant Load Factor PFC Power Finance Corporation QA : Quality Assurance R&R : Resettlement and Rehabilitation SEB : State Electricity Board  FOR OFFCIAL USE ONLY The World Bank Washington, D.C. 20433 U.S.A. Office of the Director-General Operations Evaluation December 29, 1995 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on India Chandrapur Thermal Power Project (Loan 2544-IN) Attached is the Project Completion Report on India: Chandrapur Thermal Power project (Loan 2544-lN, approved in FY86) prepared by the South Asia Regional Office. A Bank loan for US$300 million was approved on May 16, 1985. The loan was closed on March 31, 1994 compared to the original closing date of December 31, 1992. Because of lower than estimated costs, US$20 million equivalent was canceled from the loan in December, 1991, and a further US$88.6 million equivalent at loan closing. Cofinancing was provided by the Government of India, through the Power Finance Corporation, Government of Maharashtra, and commercial banks. Part II, the Borrower's comments, has not been received. The objectives of the project were to: (i) increase generating capacity of the Maharashtra State Electricity Board (MSEB), (ii) improve the efficiency of MSEB thermal power stations, (iii) transfer power plant construction and operation technology to MSEB, and (iv) enhance MSEB's financial viability and operational standards. The project included the following components: (i) the addition of 1,000 MW of capacity at the Chandrapur coal-fired power plant, and (ii) a thermal plant rehabilitation program. The objectives of the project were partially accomplished. Additional least-cost thermal capacity was installed through the construction of the project, and the performance of the existing power plants has improved. However, the desired level of generation was not achieved due to poor quality of coal that is being supplied to the power station. The improvement of the MSEB's financial performance and viability, was only partially accomplished: tariffs were increased but not sufficiently to recover capital costs and according to a complex tariff structure involving heavy cross subsidies. MSEB's weak performance in bill collection has hardly improved, but it continues to be addressed under covenants of two ongoing loans, the First and Second Maharashtra Power Projects (Loans 3096-IN and 3498-IN). The outcome of this project is rated as marginally satisfactory. The institutional development impact was negligible due to Government interference in decision making. While MSEB achieved a better measure of financial discipline in its operations, its financial performance continues to be weak, and it did not comply with some financial covenants. Compliance with resettlement covenants would only be achieved with a follow up loan. 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. l  Project sustainability is rated as uncertain. While the PCR states that the outcome of the project is sustainable on the basis of the strong demand for its output, it also states that the low quality of the coal is causing accelerated wear and tear, leading to increased outages and serious damages to equipment, and it acknowledges the vulnerability of its finances. Both aspects have a direct bearing on project sustainability and the PCR expects it to be addressed under the proposed Coal Sector Rehabilitation Project, which is scheduled for FY97. However, as there is no assurance that the coal quality problem will be successfully resolved before seriously impairing the expected benefits from the Chandrapur Thermal Power Project, the outcome cannot be regarded as sustainable. The PCR is over generous in its judgments of project performance. However, it provides a well-written overview of the history of the project, supported by extensive statistical information, and draws the appropriate lessons. No audit is planned. Attachment  FOR OFFICIL USE ONLY Contents Preface .....................................................3 Evaluation Summrary .....................................................4 Part I: Project Review from Bank's Perspective .....................................................8 Background .....................................................8 The Implementing Agency (MSEB) at the Time of Project Appraisal ................................8 Project Objectives .....................................................9 Project Description .....................................................9 Project Design and Organization .................................................... 10 Project Implementation .....................................................11 Renovation and Modemnization .....................................................11 Procurement .................................................... 12 Environment, Resettlement and Rehabilitation .................................................... 12 Project Results .................................................... 14 MSEB's Financial Performance: Comparison with SAR Forecasts ................................ 15 Transmission and Distribution Losses .................................................... 18 Bank Performance .................................................... 19 Consulting Services .................................................... 19 Project Documentation and Data .................................................... 19 Part III: Statistical Tables .................................................... 21 This document has a restricted distribution and may be used by recipients only in the performance of their lofricial duties. Its contents may not otherwise be disclosed wiihout World Bank authorization.   3 INDIA CHANDRAPUR THERMAL POWER PROJECT (LOAN 2544-IN) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Chandrapur Thermal Power Project in India, for which Loan 2544-IN in the amount of US$ 300 million equivalent was signed on September 16, 1985, and made effective February 20, 1986. The loan closed on March 31, 1994 vis-a-vis the original loan closing date of December 31, 1992. Funds equivalent to about US$ 191.4 million were utilized from the loan and an amount equivalent to about US$ 108.6 million equivalent was canceled. Cofinancing was provided by the Government of India (GOI), through the Power Finance Corporation (PFC), Government of Maharashtra (GOM), and commercial banks, and the balance was met by MSEB's internally generated resources. The primary objective of the project was to provide 1,000 MW of additional least-cost thermal electricity generating capacity at Chandrapur in Maharashtra State to help in gradually eliminating power shortages in the Western Region. The loan, made to the GOI, was on-lent to the Maharashtra State Electricity Board (MSEB) to help finance the installation of two 500 MW generating units, with the associated expansion of the 220 kV and 400 kV substations, as well as renovation and modernization of existing MSEB power plants. The physical objectives of the project have been met, the two units have been in commercial operation since August 1992 and December 1993 respectively. The other objectives of the project were also generally met, in that technology transfer to MSEB staff was successfully accomplished and MSEB's financial performance and viability was substantially improved. However, MSEB's financial viability is still weak and is therefore continuing to be addressed under the covenants of two ongoing loans, the First and Second Maharashtra Power Projects (Loans 3096-IN and 3498-IN). This PCR (Preface, Evaluation Summary, Parts I and III) was prepared by the Energy Operations Division, South Asia Country Department II, with input from MSEB. [Part II (Project. Review from the Borrower's Perspective) was prepared by GOI and MSEB.] Preparation of this PCR started in March 1995, and it is based, inter alia, on the Staff Appraisal Report (No. 5319-IN), the Loan and Project Agreements, supervision reports, correspondences between the Bank and the Borrower, internal Bank memoranda and the project completion data prepared by MSEB for its own internal evaluation and archives.  4 INDIA CHANDRAPUR THERMAL POWER PROJECT (LOAN 2544-IN) PROJECT COMPLETION REPORT EVALUATION SUMMARY Introduction 1. In the 1950s and 1960s, India's installed capacity and power generation managed to keep pace with the nation's demand for power. Since 1970, however, the situation started to deteriorate rapidly. Delays in the commissioning of new power plants, operating and maintenance problems (mostly due to lower than design coal quality), and insufficient investment under severe budget constraints, led to a critical shortage of power. At the time the project was initiated, the demand for electricity had been growing at an average annual rate of 8% over the previous two decades. Shortages prevailed throughout the country, and during the preceding five years, shortages had averaged an estimated 13% of electricity requirements. 2. As of March 1983, India's total installed generating capacity, including non-utility plant, was about 38,100 MW, of which 63% was conventional thermal, 35% hydro, and 2% nuclear. Industry accounted for about 60% of the consumption, agriculture (mainly irrigation) about 18%, domestic use about 12%, and other categories about 10%. Accelerated agricultural development added to a marked growth of power consumption in rural India. Demand projections indicated that utility generating capacity over the period from 1981/82-1994/95, was required to grow at an average annual rate of about 9.5%, to a total of about 106,000 MW, in which the share of thermal generating capacity would be about 59,000 MW. 3. To ensure that the subsector would be developed in the most economical manner, the Bank encouraged GOI to prepare a comprehensive least-cost National Power Plan (NPP), which was completed in 1982. The principal agencies in the subsector are: (a) the State Electricity Boards (SEB), which are responsible at the state level for the generation, transmission and distribution of electricity; (b) the Regional Electnrcity Boards (REB), responsible for the coordinated dispatch of power at the regional level and for setting the tariffs for interchange of electricity among the States within the region; (c) the Central Electricity Authority (CEA), responsible for formulating national power policies and coordinating the activities of the various agencies in the subsector; (d) the National Thermal Power Corporation (NTPC) and the National Hydroelectric Power Corporation (NHPC), charged with the responsibility of constructing and operating major thermal and hydroelectric facilities and sell electricity in bulk to the SEBs; and (e) the Rural Electrification Corporation (REC), tQ provide financing and technical assistance for rural electrification schemes prepared and executed by the SEBs. Despite the progressive National Power Plan and the apparent organizational capability, the lack of adequate financial resources, management inadequacies specifically within the SEBs, as well as rampant theft of power, rendered the development process ineffective. Shortage of power became more and more acute and load shedding, brownouts and frequent interruptions in the supply of electricity assumed a regular feature in most States. The emphasis of Bank Group lending therefore, shifted  5 from supporting projects owned and operated by the GOI to projects owned and operated by the State Electricity Boards (SEB). This shift in Bank policy was designed to improve the operational and project implementation efficiency, as well as the financial viability of the State- owned power sector institutions. Objectives 4. The main objectives of the project were to: (i) assist in the timely implementation of the third phase (2x500 MW) of the Chandrapur Thermal Power Plant to contribute to GOM's effort in meeting the future demand of electricity at least-cost to the economy; (ii) improve the efficiency of some of the existing power plants by retrofitting to maximize their contribution to the future supply of power; (iii) contribute to the transfer of new technology to MSEB's system by training its personnel in the construction and operation of 500 MW generating units which would enhance the efficiency of the SEB; and (iv) assist in the movement of MSEB towards financial viability and operational standards consistent with intemationally-accepted utility practices. Implementation Experience 5. The implementation of the project is complete. Commercial operation of the two units was originally estimated to occur in November 1990 for Unit 5 and May 1991 for Unit 6. Actual commercial operation, however, was achieved on December 1, 1992 for unit 5 and on December 1, 1993 for Unit 6. The main reasons for this delay are: a. Unusually heavy rains in 1987-88 which caused cessation of construction work; b. Persistent labor problems at the construction site which was plagued by low productivity and numerous work stoppages; c. Several concrete foundations had to be reworked due to poor quality of cement (excessive lime), which caused the foundations to crack due to thermal stresses; d. Delay in the completion of the cooling towers; e. Delay in the delivery of the Generators and Exciters; f. Delay in the completion of the coal handling plant; g. Equipment problems during commissioning, especially in high temperature in the coal mill gear boxes; and h. Poor quality of coal that caused equipment breakdowns and high rate of forced outages. Sustainability 6. In spite of the implementation delays and equipment problems, the project is clearly sustainable because the demand for the full output of the 2 x 500 MW power generating units  6 exists, and power remains in short supply throughout India's Western Region. There is, however, a need for strengthening the financial position of MSEB. The present tariff is not adequate to allow recovery of capital and operating costs and to provide a reasonable profit margin for capital improvements. Also, the coal stock position needs to be increased and the coal quality needs to be improved to enable the power plant to operate without interruption (Part I, paragraph 34). Summary of Project Cost and Financing Arrangements 7. The actual project cost was Rs. 13,856 million (US$ 635.6 million equivalent), including the Renovation and Modernization (R&M) component and interest during construction. The cost of R&M of existing power plants was Rs. 1,256 million (US$ 57.6 million equivalent). In terms of Rupees, the project cost was about 3% lower than the appraisal estimate; in terms of the US$ the project cost was lower by as much as 51 %. Because of these lower than estimated costs, US$ 20 million equivalent was canceled from the loan amount in December 1991, as requested by GOI, and a further US$ 88.6 million equivalent was canceled at loan closing. 8. The Bank financing equivalent to US$ 191.4 million equivalent provided about 30% of the total project cost. Financing was also provided through capital contributions by GOM, internal cash generation by MSEB from security deposits by customers, as well as by the PFC at the later stages of project implementation. Implementation Time Table 9. Project implementation suffered due to: (a) delays in meeting the conditions of loan effectiveness; (b) delays in procurement, especially in respect of plant renovation packages; (c) persistent construction labor unrest; and (d) serious equipment problems during the commissioning phase of the plant. The loan closing date had to be extended, initially by one year from the original date of 31 December 1992, and later by another three months up to 31 March 1994, to permit disbursements to be completed against commitments under the loan. Further extensions were denied because of MSEB's non-compliance with superseding covenants of Loan 3498-IN approved in June 1992. Summary of Performance of the Borrower and the Bank 10. MSEB's implementation of the project was satisfactory. However, MSEB's performance was not satisfactory in respect of compliance with some of the superseding financial covenants of later loans. MSEB's accounts receivable was required not to exceed an amount equivalent to the preceding 2.5 months of billing. Although at the end of FY86, MSEB's level of accounts receivable was equivalent to less than the preceding 2.5 months of sales, the situation deteriorated quickly with MSEB soon in violation of the covenant. The requirement that MSEB produce a surplus of at least 3% on net fixed assets was nodmet in the period from 1986 to 1992. In FY93, MSEB's rate of return rose to 5.11%, but this was only effected as a result of a large forgiveness of debt by the Maharashtra State government. 11. The Bank remained intimately involved in the implementation of the project, from preparation through completion. It maintained excellent relations with MSEB throughout the execution of the  7 project. The Bank was instrumental in helping MSEB correct a number of shortcomings of broader sectoral concerns in its operations, such as, the introduction of a more comprehensive approach towards environmental protection and resettlement and rehabilitation (R&R) issues, as well as the substantial liquidation of accumulated arrears. Frequent reviews by Bank missions of the project implementation process helped remove bottlenecks while enhancing the quality of management. Project Outcome 12. The primary objectives of the project were accomplished; viz., additional least-cost thermal capacity in the region has been installed through the construction of the project, and the performance of the existing power plants has been improved. MSEB has also achieved a better measure of financial discipline in its operations. However, the desired level of generation has not been achieved due to poor quality of coal that is being supplied to the power station. Findings and Lessons Learned 13. Major findings are as follows: (a) The procurement cycle, starting from the preparation of bid documents to the contract award, could have been significantly shortened, and under the ongoing Maharashtra First and Second Power Projects, this is being accomplished by a strengthened project office, use of Standard Bidding Documents, and close Bank supervision. Delays in the procurement cycle caused slippage of the project implementation schedule as compared to the schedule set out at appraisal (Part I, paragraph 14); (b) GOM/MSEB have been obliged to revisit the R&R issues because resettlement was not been completed in accordance with the terms of the loan agreement. The shortcomings are being addressed under the covenants of the ongoing Second Maharashtra Power Project (Part I, paragraph 18); (c) While MSEB's technical competence to "build" projects is well recognized and must be commended for its ability to handle complex problems of procurement, construction, operation and maintenance of large thermal power plants, it continues to remain commercially weak despite the good quality of its top management Part I, paragraph 22); (d) Sound financial health is a key element to the success of a utility. Even though the project helped improve the financial position of M-SEB, its financial performance still remains vulnerable. MSEB's financial discipline needs to be improved (Part I, paragraph 28); (e) The project will fail to achieve its objectives if sustainability is jeopardized by poor quality, as well as inadequate supplies of coal to the power plant (Part I, paragraph 32). 14. Despite the excellent physical results of the project, MSEB continues to be financially weak, the utility is encumbered by State and GOI interference, and the project's objectives to strengthen MSEB were accordingly hampered. This specific lack of project success, which is not unusual in the State power sector in India has caused the Bank to review its lending approach. Future support at the State level will be made only to those sections of the power sector, which are free of controls, commercially viable and where cross-subsidization, if deemed necessary, is reduced and transparent.  8 INDIA CHANDRAPUR THERMAL POWER PROJECT (LOAN 2544-IN) PROJECT COMPLETION REPORT PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity Project Name Chandrapur Thermal Power Project Loan Number Loan 2544-IN RVP Unit South Asia Region Country India Sector Energy Subsector Power Background 1. One of the main elements of India's energy plan involves the development of its presently proven reserves of non-tradable low-quality coal for the generation of electricity. This has resulted in the construction of a number of power plants, built at or near the coal mines to reduce the cost of transportation and handling. 70% of India's electricity is generated from coal, 22% from hydro and the balance from nuclear power, oil and natural gas-based generation. The coal reserves of Chanda-Wardha valley in the western part of India are an important source for power generation; a number of power plants have been constructed in the vicinity of this valley. 2. The Chandrapur Thermal Power Project, located in the Chanda-Wardha valley in the State of Maharashtra, was planned for an ultimate generating capacity of 2,340 MW, to be implemented in four phases. The first phase involving 2x210 MW was commissioned in 1984; the second phase, also consisting of 2x210 MW, was placed on stream in 1986. The third phase, for which this Project Completion Report has been prepared, comprised 2x500 MW generating units"1. The Implementing Agency (MSEB) at the Time of Project Appraisal 3. At appraisal, the consumption of electricity in India had been growing at an annual rate of 8% during the past two decades. In the 1950s and 1960s, installed power generating capacity managed to keep reasonable pace with the nation's demand for power. By 1970, however, the power situation started to deteriorate. A chronic shortage of power generating capacity in India ensued, particularly base load capacity, in which the shortage amounted to 5,000 MW nationwide. The result was frequent load shedding, disruption of services and increased reliance by the industrial consumers on captive plants based on liquid hydrocarbons. The shortages resulted 1/ The fourth and final phase, comprising IxSOO MW, is currently being implemented under the Second Maharashtra Power Project (Loan 3498-IN).  9 primarily from a lack of investments, exacerbated by frequent breakdowns of the existing generating equipment which was having to operate continuously with less than the manufacturers' recommended maintenance, yet being under constant pressure to cater to the ever increasing load demand. The situation was further aggravated by the inefficiency of the older power plants utilizing outdated technology. MSEB's operating costs increased due to these inefficiencies as well as due to rising input costs stemming from increased cost of purchase power, higher fuel cost and the heavy burden of debt service. These, together with the control of tariffs exercised by the Government of Maharashtra (GOM), lirmited the resource mobilization and self-financing capabilities of MSEB. 4. As of March 1985, MSEB's total installed generating capacity was around 4,900 MW, of which about 74% was provided by conventional thermal, 21% by hydro and 5% by gas-based generation. The industrial sector accounted for 62% of the use of the available generation; the agricultural sector's share was 14%, while the balance was consumed by the residential customers. Demand projections indicated that, in order to sustain the momentum of industrial growth in the State of Maharashtra, installed capacity should grow at an annual average rate of 9.5%. The principal method to reduce the deficit and its inhibiting effect on the economy lay in installing large, coal-based thermal power plants. 5. The sector, in general, suffered from: (a) rapid wear and tear of the generating units; (b) lack of systematic and explicit load management programs, based on conservation and pricing; (c) poor performance of existing power plants, primarily due to the deteriorating quality of coal; and (d) high transmission and distribution losses due to the poor condition of distribution systems and to their size and spread. Electricity prices were much lower than their Long Run Marginal Cost (LRMC) resulting in a lack of financial resources. Project Objectives 6. The objectives of the project were to: (a) assist in the timely implementation of the third phase (2x500MW) of the Chandrapur power plant to contribute to GOM's effort in meeting the future demand of electricity at least cost to the economy; (b) improve the efficiency of the power plants currently in operation by retrofitting to maximize their contribution to the future supply of power; (c) contribute to the transfer of new technology to MSEB's system by training its personnel in the construction and operation of 500 MW units which would enhance the efficiency of the SEB; and (d) assist MSEB towards financial viability and operational competence consistent with internationally accepted utility practices, to help achieve a greater degree of self-financing and autonomy, institutional modernization in the sector; and encouraging new project financing techniques. Project Description 7. The project comprised the following components, as established at appraisal:  10 (a) Construction of 2 x 500 MW thermal generating units, including boilers, turbine-generator sets, electrical and mechanical auxiliary equipment, associate civil works and conimon services and facilities; (b) Execution of a thermal power plant rehabilitation program, including the purchase and installation of equipment and material; and (c) Technical assistance for engineering and design of the power station. Additional plant rehabilitation components were included later in the project cycle because of the significant savings realized in the project cost (paragraph 19). Project Design and Organization 8. As the project comprised the first ever 500 MW generating units to be constructed by MSEB, a consulting ser ice contract was arranged with a joint venture between Development Consultants (India) and the United Engineers and Constructors (USA) to provide assistance in basic engineering review, optimization studies, preparation of technical specifications, bid evaluation, review of civil design, inspection of equipment, planning of erection and review of plant operation and maintenance practices. Coal, to be supplied from the Chanda-Wardha valley, was to be transported from the mines by a unit train system, as well as by aerial ropeway. Cooling water was to be supplied from the Erai reservoir, already constructed by MSEB as a part of the earlier development of the power plant. The supply was to be augmented by pumping another 120 m3/sec of water from the Human Reservoir Project of the Irrigation Department of GOM. However, construction of the conduit between the Human Reservoir and the Erai Reservoir was postponed on the basis of a new study conducted by MSEB which concluded that the interconnection could wait until Unit 7 was built.2' 9. MSEB, constituted in 1954 under the Electricity Supply Act of India, is responsible for generation, transmission and distribution of electricity throughout the State. MSEB is a corporate body consisting of a full time Chairman and three full time members for accounts, administration and generation. Presently, MSEB has five Technical Directors. The Technical Directors for Generation, Projects and Generation, Operation and Maintenance, report to the Technical Member for Generation. The Technical Directors for Stores, Extra High Voltage Projects and Distribution report to the Technical Member for Transmission and Distribution. However, MSEB is not a fully autonomous body in executing its responsibilities since, according to statutory power, it is controlled by the State Government, especially in matters of staffing, borrowing and tariff setting. MSEB's capital investment program is determined within the overall State and national planning framework. 2/ Based on a further review of the water requirement bf all 7 units, a recent study has concluded that the Erai Reservoir is adequate to meet the demand of the entire power plant and that the conduit to draw water from the Human Reservoir need not be constructed.  Project Implementation 10. Loan Effectiveness and Project Startup - Loan 2544-IN was approved by the Board on May 16, 1985 in the amount of US$ 300 million equivalent; the Loan Agreement was signed on September 16, 1985 and the loan became effective on February 20, 1986. Even though there were no conditions of effectiveness of the loan, the last date for making the loan effective had to be extended by two months at GOI's request to enable GOM to prepare the legal opinion on the Project Agreement. 11. Implementation Experience. At appraisal, it was estimated that project completion would be achieved by the end of 1992 with the commissioning of the first unit (Unit 5) in November 1990 and that of the second unit (Unit 6) in May 1991. Unit 5 was synchronized on March 22, 1991 and placed in commercial operation on December 1, 1992. Unit 6 was synchronized on March 11, 1992 and placed in commercial operation on Decemrner 1, 1993. The main reasons for the delav in project completion are as follows: I a. Unusually prolonged rainy season that caused several interruptions during the earlier construction phase of the project; b. Persistent labor problems at the construction site, leading to frequent work stoppages; c. Poor quality of lime used in concreting that resulted in several foundations developing cracks due to thermal stresses, all of which had to be reworked; d. Delay in the completion of the cooling towers; e. Delay in the completion of the coal handling plant; f Delay in the delivery of the generators and exciters; g. Equipment problems at the time of commissioning, especially in high temperature in the coal mill gear boxes; h. Poor quality of coal that caused equipment breakdown and unscheduled outages of the units. Other notable causes of project implementation delays included late submission of construction drawings by several contractors, controversy between GOI and MSEB over payment of excise duties while Goods remained impounded, and late allocation by the Steel Authority of India Limited (SAIL) of critical sections of structural steel required for the project. Renovation and Modernization 12. The chronic problems suffered by the existing power plants (paragraph 3), called for drastic measures to improve their utilization and efficiency through Renovation and  12 Modernization (R&M) of viable units, including necessary upgrades for compliance with environmental regulations. MSEB power plants at the following locations were included for rehabilitation: Koradi (lx200 MW), Chandrapur (4x210 MW), Bhusawal (lx62.5 MW), Parli (2x30 MW), Paras (1x62.5 MW) and Nasik (2x140 MW). The R&M schemes included, inter alia, the reconditioning of coal and ash handling plants, upgrading of electrostatic precipitators, revamping of the electrical systems, and purchase of essential spares. Procurement 13. All Bank-financed items were procured using International Competitive Bidding (ICB) procedures in accordance with the Bank's guidelines. The items related to R&M were also subject to ICB. However, some of these items were procured through LCB procedures acceptable to the Bank especially if the amounts involved were small or the number of suppliers were limited. It was envisaged that the Bank would not finance items of a proprietary nature that might be acquired through direct purchase. At later stages of the project, however, the Bank agreed to finance some sole-source procurement when it was determined that certain components of the existing equipment could be obtained only from their original manufacturers. 14. The procurement cycle, from bid opening to contract award, was unduly long. It should have been possible to complete the procurement exercise for the major contract packages in 120 days and all other items in 90 days. Delays in the procurement cycle, especially for the R&M schemes, caused slippage of the project implementation schedule as compared to that projected at appraisal. Although MSEB is supposed to be a fully independent enterprise, interference from both State and central agencies in the procurement exercise result in lengthy and costly delays. 15. During the procurement process, several complaints were raised by bidders against other bids or against MSEB's contract award decisions. These were all resolved to the satisfaction of the Bank. However, MSEB has refused to entertain the claims by the local boiler contractor in respect of components bought from Japan, for escalation of price due to the appreciation of the Japanese Yen vis-a-vis the Indian Rupee. This issue was taken to arbitration and the Contarctor's claim has been denied. Environment, Resettlement and Rehabilitation 16. MSEB acquired about 1,300 ha of land for the power station and the residential colony to serve the needs of the ultimate capacity of the seven generating units, and another 1,800 ha for the ash disposal area. Nearly 700 households in five villages were affected by the land acquisition for the ash disposal area. Another 117 people were landless laborers. The terms of the loan required that Resettlement and Rehabilitation (R&R) of the Project Affected Persons (PAP) should be carried out in accordance with principles, objectives and institutional arrangements satisfactory to the Bank. The Bank had agreed that the R&R could be implemented in accordance with the Maharashtra Resettlement Project and Displaced Persons Act of 1976, which was in agreement with the Bank's R&R policy that aims, inter alia, at assisting displaced persons in their efforts to improve, or at least restore, former living standards and earning capacity. Displaced persons were to be compensated for their losses at replacement cost, given opportunities to share  13 in project benefits, assisted in the transfer and supported during the transition period at the relocation site. 17. Pursuant to the above objectives, GOM issued a notification in the Gazette of the Revenue and Forest Department of May 16, 1976, including within its purview all the land that was acquired. But in a subsequent notification issued on Febriary 28, 1978, GOM canceled the earlier order and rescinded the right of the PAPs from the Chandrapur project to be compensated in accordance with the provisions of the Resettlement Act. Instead, a cash compensation arrangement was adopted after the Village Councils (Zilla Parishads) of the five villages informed GOM of their decision to take cash and reject the provisions of the R&R measures agreed under the loan. It was later determined that a majority of the PAPs were unaware of the provisions of the Resettlement Act and had no knowledge of their entitlement under the said Act. They claimed that the decision to accept cash was forced upon them by the local political leaders. MSEB deposited cash with the Revenue Department of GOM for payment to the PAPs as compensation, based on a resolution issi ed by the government in accordance with the Village Council resolution. The affected families were compensated at the rate of Rs. 50,000/ha for their land. A rehabilitation grant of Rs 35,000 was paid to landowners with houses, and Rs. 15,000 to the landless owning only houses. As this arrangement ran counter to the Bank's policy on R&R, it was agreed at the time of the appraisal of the Second Maharashtra Project that MSEB would conduct a socioeconomic survey in the five affected villages to ascertain the living condition of the PAPs, and what they did with the money they received by way of compensation. This survey, conducted by a Group of Social Workers in September 1990, determined that only about 15% of the land owners had purchased alternative land, while about an equal number had identified land, but had not yet purchased it. About 32% of the PAPs had only identified, but not purchased, alternative residential plots. A large majority of the PAPs spent most of the money on weddings, consumption of liquor and gambling. 18. Based on the findings of the Survey, the Bank mandated, and GOM agreed, that the PAPs be rehabilitated in accordance with the provisions of the Resettlement Act of 1976. It was decided that those families amongst the PAPs that had not been able to secure stable means of livelihood, would be resettled. GOM issued an order to that effect in February 1992 and undertook to complete the resettlement of the eligible families within a period of eighteen months, starting immediately. To establish the eligibility for resettlement, it was further decided that the following would be excluded from the purview of the Act: (a) families among whom at least one member had been given an appointment or qualified for an appointment in MSEB; (b) families that had already purchased altemative agricultural land; (c) families amongst whom at least one member had secured a job elsewhere; and (d) families that had left the village and were not traceable. The number of eligible families in accordance with the above criteria was provisionally set at 207. The Department of Relief and Rehabilitation, in consultation with the District Collector for Chandrapur, prepared a detailed action plan and associated time table for implementing the agreed R&R plan, identifying the various steps and agencies involved in the process, with a local NGO assisting in the implementation of the plan. MSEB was required to deposit money in the Government Treasury for the purchase of land and construction of houses, including the provision for civic amenities. These arrangements were found satisfactory by the  14 Bank, and monitoring of the implementation of the plan is being undertaken by Bank staff via ongoing project missions. 19. Project Costs. At appraisal, the total cost of the project, including contingencies, taxes and duties, and interest during construction, was estimated at Rs. 14,264.9 million (US$1,296.7 million equivalent at an exchange rate of US$ = Rs. 11), of wL;ch Rs. 5,452.1 million (US$495.7 million) represented the foreign exchange component. The actual cost of the project was Rs. 13,856 million (US$ 635.6 million equivalent at an average exchange rate of US$=Rs. 21.80), representing a decrease by about 2.9 percent in rupee terms. The cost in dollar terms, however, was about 51.0 percent lower than the appraisal estimate due to the drastic devaluation of the rupee since appraisal (US$ = Rs. 31.20 at project closing), and all contracts having been awarded to local firms. Because of the substantial savings in the project costs, the Bank agreed, as a special case, to MSEB's request that several additional R&M schemes be included within the scope of the project. 20. Taxes and duties were estimated in the SAR at Rs. 1,293.6 million (US$ 117.6 million equivalent). Taxes and duties eventually paid on the project amounted to Rs. 1,256 million (US$ 57.6 million equivalent), including those for the Power Plant Rehabilitation component. The estimate in the SAR for interest during construction was Rs. 1,986.3 mnillion (US$ 180.5 million equivalent); the actual amount was Rs. 1,720 mnillion (US$ 78.9 million equivalent). 21. Disbursements. Pursuant to GOI's request, US$ 20 million equivalent was canceled from the original loan amount of US$ 300 million on December 5, 1991 as it was deemed to be in excess of the requirements for project completion. Another US$ 88.65 equivalent was canceled on September 15, 1994, when the Bank decided not to agree to grant a further extension of the loan because of MSEB's failure to comply with the superseding financial covenants of the currently ongoing Second Maharashtra Power Project (Loan 3498-IN), which, inter alia, require that MSEB's receivables be kept to less than 2.5 months of billings. A total of US$ 108.65 million equivalent was canceled from the original loan amount of US$ 300 million. The estimated and actual disbursements under the loan are given in Part III, Table 4. The disbursement lag was due mainly to lower than estimated project costs which were the result of the devaluation of the Indian Rupee vis-a-vis the US dollar. Thus project costs in terms of the US dollar were much lower than the SAR estimate. The delays that occurred at the start of the project, coupled with the site labor problems, also adversely affected disbursements. The SAR projected that the loan would be closed by December 31, 1992. But the closing date of the loan had to be extended twice, by one year the first time and then by three months to March 31, 1994, to allow for completion of ongoing procurement and disbursements. The revised loan amount of US$ 191.35 million equivalent was fully disbursed by September 15, 1994. Project Results 22. The project has met its main objectives of: (a) assisting in the augmentation of generating capacity in the region and meeting demand; (b) improving the efficiency of existing power plants; (c) transferring new technology for 500 MW units to MSEB; and (d) strengthening the financial  15 performance and viability of MSEB by putting it on a much healthier financial footing by project completion. However, while MSEB's technical competence to "build" projects is well recognized and must be commended for its ability to handle complex problems of procurement, construction, operation and maintenance of large thermal power plants, it continues to remain commercially weak despite the good quality of its top management. MSEB's Financial Performance: Comparison with SAR Forecasts 23. Results: On the basis of MSEB operating data sunmmarized in Table 12, MSEB's financial performance has been lower than expected. MSEB's net income has been consistently lower than that estimated in the SAR. During the period 1986 to 1992 MSEB failed to meet its 3% rate of return (ROR) covenant due to high debt service liability and higher than estimated operating costs. Had interest not been capitalized, MSEB would have generated a net loss for each year from FY86-FY93 The 3% ROR, stipulated by the Act, was a return calculated on net fixed assets after meeting opeiating expenses, taxes, depreciation, and interest. In FY 93 MSEB's ROR was in excess of the 3%, but this compliance with the covenant was only brought about by the effect of a large debt forgiveness by the State of Maharashtra. More than 90% of MSEB's capital structure was funded through long-term borrowing. As is the case for most SEBs in India, it has been the practice for GOM to provide funds in the form of long-term loans, but not equity contributions. This has resulted in a weak capital structure for MSEB and a heavy debt service burden. Debt service represented one third of the total use of MSEB's funds in FY87, and by FY93 had risen to nearly half MSEB borrowed very significantly from sources other than GOM at high interest rates, which have increased progressively over the years. These factors have resulted in severely limiting MSEB's capacity to contribute to its capital investments. 24. Sales and Operating Costs: The relationship between sales revenues and operating expenses were not significantly different from the SAR estimates, and the comparisons are contained in Tables 13. 14 and 15. Sales revenues grew at 18.4% p.a. while operating expenses grew at 17% p.a. over the project period. Operating expenses were high due, to a large extent, to growing system losses, rapidly increasing cost of purchased power, higher than expected O&M costs, and high fuel costs. Operating revenues were actually higher than projected after FY88. Since tariff increases occurred at spaced intervals, rather than regularly as forecast, government subsidies were needed in years where there should have been a tariff adjustment in order to make up for MSEB's lost revenue. Major tariff increases were in FY87, FY91, and FY93 and government subsidies were provided in FY86, FY89, FY90, and FY92, with a large debt forgiveness in FY93 which contrived to enable MSEB to exceed the 3% target and generated rate of return of 5.1 % that year. Estimates for FY95 indicate a rate of return of 4.4%. The debt forgiveness provided by the State government was in the form of a conversion into equity of a portion of its loans to MSEB (representing a net annual saving in interest of more than US$ 50 million equivalent per year (Rs 150 crores). 25. MSEB Tariff Structure: Tariff increases in MSEB favored agricultural and household consumers. Low-voltage tariffs actually decreased. At appraisal, the average tariff for bulk power and industrial consumers, representing about 67% of the total consumption, was at levels  16 ranging between 55% and 75% of the Long Run Marginal Cost (LRMC) of electricity; while that for the LV consumers, who account for 33% of total consumption, was at a level of about 25% of the LRMC. In March 1987, MSEB revised the tariffs for high-tension consumers (Pune and Bombay and other cities) and some low tension consumers. By 1989, there were sharp differences in the structure with industrial tariffs at or above LRMC, and agricultural tariffs heavily subsidized. The average tariff in 1989 was estimated at 74% of marginal costs. On average, MSEB tariff increased by 13% from FY86 (59 paise/kWh) to FY93 (137 paise/kWh) with major increases in FY87, FY91 and FY93 while the average rate of inflation was 8%. As of May 1995, the average tariff was 152 paise/kWh. Though average tariffs were projected to increase between 6% and 11%, actual tariff increases were between 3% and 27%. The wide variation was due to government intervention and GOM's desire to subsidize certain consumers. In May 1992, MSEB introduced a number of structural improvement in its electricity tariffs. Cross subsidies have increased which has resulted in a rapid increase in "agricultural consumption". 26. Though such changes were introduced, tariffs did not distinguish between the costs of supplying peak as opposed to off-peak energy. The tariff structure is excessively complex and heavily cross-subsidizes low voltage consumers. Despite GOI accepting the principle in both its Sixth and Seventh Plans that energy prices should "reflect true costs", social and agricultural objectives have sharply limited progress towards this objective. Moreover, verv little has been done so far to improve tariff structures through demand management. 27. Billing and Collection: Present collection performance and procedures of MSEB are not satisfactory. MSEB has curtailed the deteriorating trend observed in the mid-1980's, but has not yet been able to reverse the situation in any significant manner. Total customer receivable (including disputed amounts and amounts billed but not yet due) represented 4.6 months of sales at the end of FY93. This fell short of the covenant of 2.5 months. The analysis by consumer category indicates that receivable from agriculture consumers and SEB's in the neighboring states (Gujarat, Madhya Pradesh, Karnataka, and Goa) are extremely high at more than a year of electricity sales. Receivable from other consumers categories, which account for about 70% of revenues, amount to about two months of sales. MSEB is actively pursuing with individual states the settling of arrears and, as of February 1992, concluded an agreement with the Gujarat Electricity Board (GEB) for the phased recovery of its arrears. As a major component of its Operational and Financial Action Plan', MSEB is taking steps to improve billing and reduce its collection period to no more than two months. MSEB considers that for 70% of its arrears (equivalent to about 2.3 months of current billings) the State government directives prevent the Board from taking any useful recovery action. Currently MSEB has hired consultants to prepare an energy billing program which can be utilized on personal computers, to decentralize the billing system. In addition the Board is approaching various regional/cooperative banks to be collection centers, and is increasing its cash collection point working hours. ' The Plan that MSEB has agreed with the Power Finance Corporation, which is financing some of MSEB's schemes.  17 28. In summary, MSEB's financial performance remains vulnerable and has only improved due to the short-term measures taken by GOM. Tariffs do not cover the Long Run Marginal Cost of Supply, and they heavily cross-subsidize low voltage consumers. Operating costs are very high. MSEB has not been able to generate sufficient internal resources to help finance its investment program. MSEB's apparent efforts to reduce receivable do not seem to have borne any fruits yet. MSEB needs to strengthen the monitoring of the various rneasures undertaken to enable its management to measure their effectiveness and take follow up actions as may be required. In lending to individual SEBs, the Bank should continue to press for state-specific programs to improve resource mobilization, through agreed financial programs capable of achieving the 3% rate of return specified in the Act. This is currently being addressed under ongoing loans. It must be noted that MSEB's sales are projected to increase at an annual growth rate of about 4.8%, in line with increases in available supply. 29. Project Financing. The original Bank loan of US$ 300 million equivalent was envisaged to provide for about 27%/r of the total project cost of US$ 1,116 million, inclusive of duties and taxes, but excluding IDC. The Bank loan was expected to cover about 72% of the estimated foreign cost of the project and be applied to the CIF and/or ex-factory costs of the steam generators and high pressure piping, turbine-generator units and associated equipment, feed water and condensate cycle equipment, cooling water system, coal handling and transportation equipment, electrostatic precipitators, water treatment plant, ash handling system, condensate polishing equipment, air compressors, stack elevator, fire fighting equipment, instrumentation and control systems, electrical equipment, as well as consultants' services. The balance of the foreign exchange financing requirement, amounting to US$ 115 million, as well as the local components of some foreign contracts, were to be met by loans extended to MSEB by the GOM and through MSEB's internally generated resources. Following the closing of the loan, MSEB had to arrange for additional financing from the Power Finance Corporation (PFC) to complete the ongoing construction under the project (Part III, Table 7B). The final project cost was of US$ 635.6 million equivalent, inclusive of contingencies, taxes and duties, as well as interest during construction. Financing of the Project Sources SAR Actual (US$ million) percent (US$ million) percent I IBRD 300.0 23.1 191.4 30.1 II GOM Loans - 671.7 51.8 183.5 28.9 III MSEB Internal Resources 325.0 25.1 192.6 30.3 IV Other Financing Institutions - - 35.5 5.6 V Power Finance Corporation - - 32.6 5.1 Total 1,296.7 100.0 635.6 100.0 30. Economic Rate of Return. Benefits of the power plant included within the scope of the project could not be readily separated from those of other investments in generation, transmission and distribution, as well as rehabilitation of existing power plants. The benefits of the investment program relate mainly to the incremental consumption of electricity which the project components make possible. A minimum measure of benefits, ignoring consumer surplus, was then derived  is8 from incremental sales revenue based on the average retail tariffs of MSEB (Rs. 1.52/kWh) representing the rninimum willingness to pay for electricity. In this exercise, the investment for the power plant rehabilitation component has been excluded since it is difficult to determine the actual benefits of such rehabilitation that include increase in generation of the individual units and improvement in operating efficiencies as well. On this basis, the minimum economic rate of return (ERR) achieved is 14%, as against the appraisa! estimate of about 7% based on the existing weighted average financial tariff level of Paise 53.7"kWh. 31. Project Sustainability. The project is sustainable because: (a) the demand for the output of power from the Chandrapur plant exists, (b) the teething problems experienced with some of the major pieces of equipment have been satisfactonly resolved; and (c) the current tariffs are adequate enough to permit recovery oi capital and operating costs. 32. However, the quality of coal, for which the boilers and their auxiliaries were designed, calls for an average useful heat value of 3.759 kcaL kg, and ash of 40%. What the power plant is receiving is coal laden with overburden, sand and shale, and this mixture has an average heat value of 3,063 kcalUkg, and ash of 4591, which sonmetimes reaches as high as 50%. The higher- than-design ash content is causing accelerated wsear and tear of the coal handling equipment, as well as the boiler pressure parts and downstream components, leading to an increased rate of forced outage of the units. The extraneous matter in the coal is causing slagging in the boiler and serious damage to the furnace and the bottom ash hopper as huge pieces of red hot slag fall into the water-filled hopper. The delivery ot coal to the plant has fallen drastically short of requirements because of Coal India's inability to supply. Currently (May, 1995), for instance, the plant has only about four days' stock of coal in reserve in the coal storage yard that has been built to hold about 90 days' consumption. In 1993, one 210 NMAW unit had to be kept out of service continually due to shortage of coal. These problems have a direct bearing on project sustainability and should be resolved satisfactorily as soon as possible The coal quality needs to be improved to increase the availability and efficiency of the plant If the coal mines are unable to assure the supply of design coal, washing facilities sholdd be inistalled at the supply or the receiving end to improve boiler performance and reduce wear and tear. The coal stock should be increased so that a few days interruptions in coal deliveries do not jeopardize the continued operation of the plant. These issues have been brought to MSEB and GOI's attention by Bank staff, and are expected to be addressed under the proposed India Coal Sector Rehabilitation Project. Transmission and Distribution Losses 33. The Bank has maintained constant focus cn the transmission and distribution (T&D) losses of all utilities and encouraged them to reduce these by improving the efficiency of their operations. By introducing a number of system improvements, MSEB was able to reduce T&D losses in the State from about 17% of the available energy in 1978/79 to about 15% in 1982/83. This trend has continued steadily, even though the scope for achieving significant improvements is rather limited. The Bank had requested MSEB to further reduce T&D losses to a level of 14% by 1992/93. MSEB aggressively introduced fiurhe; improvemnent measures and achieved the target. MSEB is continually addressing this problem, includirng the difficult to detect and prosecute theft of electricity.  19 Bank Performance 34. The performance of the Bank from project preparation through project completion was satisfactory. The Bank had excellent relations with the beneficiary throughout the execution of the project despite some inevitable tensions created by the debate about MSEB's financial status and its tariffs, and the eventual decision by the Bank not to extend the loan closing date. Bank staff fostered an environment conducive to increased Bank interaction with MSEB. Consulting Services 35. The engineering and design of the project was entrusted to Development Consultants (Pvt) Ltd., working in joint collaboration with the United Engineers and Constructors, USA. Their performance was satisfactory. Project Documentation and Data 36. The project's legal arrangements adequately reflected the Bank's interests in achieving the objectives of the project. The SAR of the project provided a very useful framework for both the Bank and the Borrower during project implementation. 37. MSEB regularly submitted quarterly progress reports for the project. These have been used for the review of physical and financial performance as well as planning supervision missions to India by the Bank, which often included site visits and review meetings at the MSEB head office in Bombay. 38. MSEB provided a completion report for the project and additional financial information to help prepare this PCR.   21 INDIA CHANDRAPUR THERMAL POWER PROJECT (Loan 2544-IN) PART III: STATISTICAL TABLES Table 1: SUMMARY OF ASSESSMENTS A. Achievement of Objectives Substantial Partial Negligible Not Apwlicable Macroeconomic policies Fl El Ol Sector policies F E ElO Financial objectives EO E F O Institutional developmen. [] Ea Fl Physical objectives Fl El El Poverty reduction O El El Gender concerns O El E l Other social objectives E El Eli Environmental objectives El E El Public sector management El IZi E E Private sector development E E El E B. Proiect Sustainability Likely Unlikely Uncertain ET 1:E Elo C. Bank Performance Highly satisfactorv Satisfactory Deficient Preparation El El Implementation El ElO Covenant compliance l El El Operation r l l E l D. Borrower Performance Highly satisfactory Satisfactorv Deficient Preparation E3 El E Implementation l 12 E Covenant compliance E O El Operation E El O E. Assessment of Outcome Highly satisfactory Satisfactory Deficient E El  22 Table 2: RELATED BANK LOANS/CREDITS TO MAHARASHTRA Loan/credit title Purpose Year of approval Status Trombay Power Load Dispatch 1954 Complete Second Trombay Training / Load Dispatch 1957 Complete Koyna Power Hydropower 1959 Complete Third Trombay Generation 1978 Complete Fourth Trombay Generation 1984 Complete Maharashtra Power I Transmission/Distribution 1989 Ongoing Maharashtra Power II Transmission/Distribution 1992 Ongoing IDA Credits Second Koyna Power Hydropower 1962 Complete In addition to the above project-specific objectives, the sectoral objective was to assist MSEB become a model utility for the poorly performing SEBs. However, this was not specifically mentioned in the SAR.  23 Table 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification 1983 Preparation 1984 Appraisal 7/84 8/84 Negotiations 11/84 4/85 Board presentation 1/85 5/16/85 Signing 2/85 9/16/85 Effectiveness 5/85 2/20/86 Project completion 12/92 3/94 Loan closing 12/31/92 3/31/94 Table 4: LOAN DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Appraisal 37.0 17.0 40.0 75.0 75.0 32.0 21.0 3.0 Estimate /1 Cumulative, Est. 37.0 54.0 94.0 169.0 244.0 276.0 297.0 300.0 Actual 23.0 2.0 20.0 33.0 34.0 40.0 18.4 9.0 10.4 1.6 Cumulative, Actual 23.0 25.0 45.0 78.0 112.0 152.0 170.4 179.4 189.8 191.4 Actual as % of 62.2 46.3 47.9 46.2 45.9 55.1 62.2 59.8 estimate Date of Final Disbursement September 15 , 1994 /I Based on original loan amount of USS300.0 million, later revised to US$280.0 million.  24 Table 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION I. Key Implementation Indicators in SAR/President's Report 1. Procurement Package Bid Issue Contract Award Start up Planned Actual Planned Actual Planned Actual ______________ _______ _______ ________ U5 U 6 U5 U6 Boiler 6/84 3/85 11/85 11/85 2/90 8/90 12/90 12/91 Turbine-Generator 6/84 3/85 11/85 11185 8/90 2/91 2/91 3/92 Generator 7185 4/87 4/86 12/87 8/90 2/91 3/91 3/92 Transformers 12_87 8_90 2 2. Modified Indicators Event Projected at Appraisal A c t u a 11 Unit 5 Unit 6 Unit 5 Unit 6 Boiler Erection Start 5/87 11/87 11/87 2/88 Boiler Drum Lift 12/87 6/88 12/88 5/89 Boiler Hydrostatic Test 5/89 9/89 5/90 4/91 Boiler Light Off 2/90 8/90 12/90 12/91 Steam Blow Complete 4/90 10/90 2/91 2/92 TG Erection Start 2/89 8/89 10/89 2/90 Test Synchronize 8/90 2/92 3/91 3/92 First Coal Fire 9/91 2/92 3/92 3/93 Commercial Operation 2/92 12/92 12/92 12/93 Table 6: KEY INDICATORS FOR PROJECT OPERATION (Commercial Operation to 28 March 1995) Unit Generation, GWh Availability Plant Load Factor/i Expected Actual Expected Actual Expected Actual 5 6,300 4,692 70.0 76.9 62.5 46.1 6 3,400 2,823 70.0 84.3 62.5 48.7 Lower than expected plant load factors have been brought about by poor quality coals and inadequate coal stock levels  25 TABLE 7A: PROJECT COST Appraisal estimate (USSM) Actual USSM) Local Foreign Total Local Foreign Total Preliminary Works 9.9 - 9.9 27.0 - 27.0 Civil Works 138.1 3.8 141.9 141.8 - 141.8 Steam Generators, Turbo- 187.6 200.5 388.1 81.3 43.8 125.1 Generators, Controls, Auxiliaries Mechanical and Electrical 93.1 81.1 174.2 120.1 9.6 129.7 Equipment Transportation, Erection, Insurance 47.6 2.5 50.1 50.3 - 50.3 and Testing Consultancy and Training 3.8 1.5 5.3 2.8 - 2.8 Engineering and Administration 50.0 - 50.0 22.0 0.4 22.4 Thermal/Plant Rehabilitation 32.4 8.4 40.8 43.9 13.7 57.6 Total Base Cost 562.5 297.8 860.3 489.2 67.5 556.7 Physical Contingencies 25.4 14.5 39.9 Price Contingencies 113.1 102.9 216.0 Total Project Cost 701.0 415.2 1,116.2 489.2 67.5 556.7 Interest During Construction 100.0 80.5 180.5 78.9 - 78.9 J. Financing Required 801.0 495.7 1,296.7 568.1 67.5 635.6 NOTE: Contingencies, taxes are included in the total cost figures. Table 7B: PROJECT FINANCING Apprai sal Estimate (USSM) Actual (US$M Source Local costs Foreign Local costs Foreign costs Total costs Total IBRD - 300.0 300.0 123.9 67.5 191.4 GOM Loans 476.0 195.7 671.7 183.5 - 183.5 MSEB Internal Resources 325.0 - 325.0 192.6 - 192.6 Power Finance Corporation - - 32.6 - 32.6 Other Financing Inst. - - - 35.5 - 35.5 Total 801.0 495.7 1,296.7 568.1 67.5 635.6  26 Table 8: ECONOMIC COSTS AND BENEFITS (Rs. Million) Fin. Year Capital Exp. Q&M Fuel Total Cost Incr. Sales Net Benefits 1983 9.1 9.1 -9.1 1984 6.3 6.3 -6.3 1985 2.3 2.3 -2.3 1986 32.8 32.8 -32.8 1987 12.2 12.2 -12.2 1988 49.9 49.9 -49.9 1989 81.1 81.1 -81.1 1990 116.0 116.0 -116.0 1991 109.0 109.0 -109.0 1992 55.4 5.8 16.7 77.9 0.1 -77.8 1993 25.1 13.0 45.5 83.6 45.8 -37.8 1994 14.7 13.0 62.0 89.7 133.9 44.2 1995 16.2 13.0 62.0 91.2 222.3 131.1 1996 47.9 13.0 62.0 122.9 222.3 99.4 1997 13.0 62.0 75.0 222.3 147.3 1998 13.0 62.0 75.0 222.3 147.3 1999 13.0 62.0 75.0 222.3 147.3 2000 13.0 62.0 75.0 222.3 147.3 2001 13.0 62.0 75.0 222.3 147.3 2002 13.0 62.0 75.0 222.3 147.3 2003 13.0 62.0 75.0 222.3 147.3 2004 13.0 62.0 75.0 222.3 147.3 2005 13.0 62.0 75.0 222.3 147.3 2006 13.0 62.0 75.0 222.3 147.3 2007 13.0 62.0 75.0 222.3 147.3 2008 13.0 62.0 75.0 222.3 147.3 2009 13.0 62.0 75.0 222.3 147.3 2010 13.0 62.0 75.0 222.3 147.3 2011 13.0 62.0 75.0 222.3 147.3 2012 13.0 62.0 75.0 222.3 147.3 2013 13.0 62.0 75.0 222.3 147.3 2014 13.0 62.0 75.0 222.3 147.3 2015 13.0 62.0 75.0 222.3 147.3 2016 13.0 62.0 75.0 222.3 147.3 2017 13.0 62.0 75.0 222.3 147.3 2018 13.0' 62.0 75.0 222.3 147.3 * Projected IRR= 14%  Table 9: STATUS OF LEGAL COVENANTS INDIA Chandrapur Thermal Power Project (Loan 2544-IN) Ref. COVENANT COMPLIED LA 3.04 GOI to ensure adequate coal siuppiv by time first generating unit is Yes commissioned LA 3.06 Accounts receivable not to excLed aggregate amount of sales billed No during preceding 2.5 months PA 2.01 (b) GOM relending to MSEB under terms acceptable to the Bank (not less Yes than 9.29% per annum) PA 2.05 GOM undertake to carrv out R&R ui The oustees under the project in Yes accordance with the principles. ohjeci;ves an,d institutional arrangements satisfactorv to the Bank PA 3.03 Introduce uniform accountino s\'sicm Yes 3.04 Produce surplus ot at leas! a '` ot net tixcd avet., Not in period 1986 to 1992; see text of PCR 3.05 Reduce line losses to 14% bv FY'Q-),'93 Yes Table 10: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS Bank Operational Manual Difectves were fully complied with.  28 Table lla: BANK RESOURCES: STAFF INPUTS Staff inputs in carrying out the various tasks through the project cycle from preparation in FY85 through completion in FY95 were as follows: Task Input (Staff-Weeks) Project Identification 10.0 Project Preparation 10.8 Project Appraisal 28.3 Loan Negotiations 7.4 Board through Loan Effectiveness 1.0 Project Supervision 55.2 Project Completion 5.0 Table llb: BANK RESOURCES: MISSIONS Project Cycle Month/Year Number of Days in Specialization /a Performance Type of Persons Field Rating /b Problems /c Throuah ADnraisal Identification /d 12/83 - - Preparation /d 2/84 1 5 E Preappraisal /d - - - Appraisal /d 6/84 3 10 E, EC, FA Suvervision Supervision 1 10/86 2 E, FA I None Supervision 2 3-4/87 2 E 1 None Supervision 3 3/88 1 EN 2 ENV Supervision 4 7/89 1 E I None Supervision 5 1/90 2 E,EN 2 I,ENV,C Supervision 6 11/90 3 FA,E,EN 2 I,ENV,C Supervision 7 2/91 3 FA,E,EN 2 I,ENV,C Supervision 8 10/92 7 E,FA, EC, EN 2 I,ENV,C Supervision 9 9/93 2 E,EN 2 I,ENV,C Supervision 10 2/94 -3 E,FA,EN 2 I,C /a E: Engineer; EC: Economist; FA: Financial Analyst; PR: Procurement Specialist; EN: Environmental Specialist. /b 1 = No or Minor problems; 2 = Moderate problems; 3 = Major problems. /c I = Implementation delays; P Procurement delays; EP = Equipment Problems; FN = Financial Problems/Noncompliance with Financial Covenants.-ENV = Environmental Problems (esp. Relative to Resettlement Action plan); C = Coal shortage. /d Identification by GOI in 1983. Preparation and Preappraisal by MSEB in 1983.  Maharashtra State Electricity Board: Operating and Financial Performance (FY86-FY93) Comparison of Actual verses projected SAR Forecasts 198':':-' 19S:''' 19'i'"'''' 1' " "" 19'':':"" 19 "'' 1 2''':" 1 ''.', DESCRIPTION Forecast' Foreast Fore ast Forecast FctaFF Forecast - AverageTanff (ps/kvh) 59 Be65 7 m. . 79 '6 58 '-2 96 . , 104 111 1 Annualincrease 89%': ' 110% ' 107% ; ' 92% s 19%s 6 95% -.s . 6%. :s 65X 2 :.:-s-~~~~7 ;- 9: .- .:: --::-.::.::::-:- ::.4::::. -:- -:-::::::::::.::- :-::- :..: Operating Revenues 15147 :'i S 17845 MYi:: 20204 " t 3W 22976 s 26333 ' 11e 30301 4:: 24 35172 'W