India - Upper Indravati Hydro Project

Document of KLtE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-3523-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPME AND INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$156.4 MILLION AND A PROPOSED CREDIT OF SDR 156 MILLION TO INDIA FOR THE UPPER INDRAVATI HYDRO PROJECT April 18, 1983 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.  CURRENCY EQUIVALENTS (As of April 7, 1983) US$1.00 = Rs 10.017 Rs 1.00 = US$0.0998 Rs 1 million = US$99,800 The US Dollar/Rupee exchange rate is subject to change. Except as otherwise noted, conversions in the Staff Appraisal Report were made at the rate of US$1 to Rs 9.5, which repre- sents the projected exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS CEA - Central Electricity Authority GOI - Government of India GOO - Government of Orissa NHPC - National Hydro Power Corporation NTPC - National Thermal Power Corporation OIPD - Orissa Irrigation and Power Department OSEB - Orissa State Electricity Board REB - Regional Electricity Board REC - Rural Electrification Corporation SEB - State Electricity Board kV - kilovolt (1,000 volts) kW - kilowatt (1,000 watts) kWh - kilowatt-hour (1,000 watt-hours) MW - megawatt (1,000,000 watts) GWh - gigawatt-hour (1,000,000 kilowatt-hours)  FOR OFFICIAL USE ONLY INDIA UPPER INDRAVATI HYDRO PROJECT LOAN, CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: State of Orissa. Amount: Bank Loan: US$156.4 million, including capitalized front-end fee. IDA Credit: SDR 156 million (US$170 million equivalent). Terms: Bank Loan: Repayment over 20 years, including five years' grace, at the applicable rate of interest; front-end fee of 0.25% of the base loan amount. IDA Credit: Standard. Relending As part of Central assistance to States for Terms: development projects on terms and conditions applicable at the time. GOI will carry the exchange and interest rate risks. Project Construction of a 600-megawatt hydro-electric power Description: station comprising four 150-megawatt turbogenerator sets, a 110-sq km reservoir, four dams and eight dykes, together with associated channels, tunnels, shafts and penstocks, in the Koraput and Kalahandi districts of the State of Orissa, and provision of associated engineering and administrative serv- ices. The tail waters from the power station will provide a capability for the irrigation of about 109,000 hectares in the vicinity of the plant. There are no risks other than those normally associated with this type of project. The major structures are all of types that have been fre- quently built in the past, and there is adequate understanding of and experience with their con- struction. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Cost: (US$ millions) Item Local Foreign Total Land and Preliminary Works 16.2 - 16.2 Dams, Reservoir and Associated Structures 91.2 3.1 94.3 Power Station 29.0 63.5 92.5 Channels, Tunnels and Penstocks 46.0 2.6 48.6 Quarters and Buildings 13.7 - 13.7 Roads and Bridges 6.6 - 6.6 Tools and Construction Plant 0.3 3.2 3.5 Energy and Services 5.8 - 5.8 Engineering and Administration 32.5 - 32.5 Base Cost 241.3 72.4 313.7 Physical Contingencies 36.7 7.5 44.2 Price Contingencies 93.1 28.0 121.1 Total Project Cost (excluding 371.1 107.9 479.0 taxes and duties) Taxes and Duties 27.3 - _27.3 Total Project Cost 398.4 107.9 506.3 Front-end Fee on Bank Loan - 0.4 0.4 Total Financing Required 398.4 108.3 506.7 Financing Plan: (US$ millions) Local Foreign Total IBRD 80.6 75.8 156.4 IDA 137.5 32.5 170.0 Government of Orissa 180.3 - 180.3 Total 398.4 108.3 506.7  -i.i- Estimated (US$ millions) Disbursements: IBRD/IDA FY FY84 FY85 FY86 FY87 FY88 FY89 FV90 T A Annual 27.4 1/ 9 81 88 62 26 Cumulative 27.4 56.4 13-7/.4 225.4 1171.4 415 4 3 , ;. 3 Rate of Return: About 12%. Appraisal Repor-: No. 4289-IN, datod 4pril li, 1983. 1/ Including payment of front-end fee of about US$0.4 million,   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAII AND CREDIT TO INDIA FOR THE UPPER INDRAVATI HYDRO PROJECT 1. I submit the following report and recommendation on a proposed loan and development credit to India for US$156.4 million and SDR 156 million (US$170 million equivalent) respectively on standard terms to help finance the construction of a hydro-electric power station on the Indravati river in the State of Orissa. The project is designed primarily to increase the electrical generating capacity in the State by 600 megawatts to a total of over 2,000 megawatts, but will additionally provide a capability for the irrigation of about 109,000 hectares of land in the vicinity of the plant. The Government of India (GOI) will channel the proceeds of the loan and credit to the Government of Orissa (GOO) in accordance with GOI's standard terms and arrangements for financing State development projects. The exchange and interest rate risks will be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3872-IN, dated April 7, 1982), was distributed to the Executive Directors on April 19, 1982. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 700 million (in mid-1982) and an annual per capita income of US$240. Economic growth has been slow in the past, averaging about 3.6% per annum over the past 30 years. The economy is dominated by agriculture which employs more than two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those with little or no land. Conse- quently the latter have only an insecure grasp on the means of existence. Growth of value-added in agriculture -- 2.3% per annum over the past 30 years -- has been slower than growth of industrial value-added (5.0% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost measured in 1970/71 prices) from 60% to about 40%, while the share of industry rose from 15% to around 24%. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid economic transformation, with significantly higher productivity and income levels. 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Second Uttar Pradesh Public Tubewells Project (No. P-3458-IN), dated February 15, 1983.  -2- 4. Nevertheless, there has been steady progress on several fronts. In the face of a large and rapidly growing population, India has been able to increase agricultural output faster than total population while eliminating persistent dependence on foodgrain imports. Savings and investment have increased markedly since 1950/51: gross domestic savings more than doubled from 10.8% of GDP (at factor cost) to 24.8%, while gross domestic investment rose from 12.5% of GDP to 26.2%. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20% was reached during the early 1960s; for a few years in the late 1970s, surpluses arose, and at the present time, for- eign savings are about 10% of investment. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.5% per annum, only marginally higher than the volume growth of imports over the same period. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.6% per annum for the 1970s as a whole, a performance which demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role, 6. Moving into the second half of the 1970s, the Indian economy was buoyed by relatively rapid export growth and an expanding level of foodgrain output, which culminated in a record 132 million tons of foodgrain production in 1978/79. As a result, growth in real GDP, agricultural and industrial value-added, substantially exceeded the historical 30-year trends (paragraph 3). In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domes- tic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a large trade deficit. Severe inflationary pressures also emerged after several years of virtual price stability. The impact of these setbacks is still being felt in the Indian economy, par- ticularly in the balance of payments, and adjustments will be needed for some years to come. However, the short-term recovery process is almost completed and the economy has regained its growth momentum. Recent Trends 7. In 1980/81, the economy substantially recovered with real GDP growing by 7.5%. While industrial output expanded by 4%, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15%. Increased foodgrain production, along with judicious use of Government buffer stocks built up in earlier years, also helped moderate price rises. Inflation remained a serious problem with the annual average wholesale price index rising 18%, although the second half of the year provided clear evidence of a deceleration in inflation.  -3- 8. 1981/82 was a year of solid growth after the rebound in 1980/81 and GDP grew by 5.5%. While foodgrain production rose only modestly over its 1980/81 level, other crops including oilseeds and sugarcane performed well and total agricultural output grew by 4%. The availability of power, coal and rail transport, already improved in 1980/81, was even better in 1981/82, recording growth rates of about 10%, 9.4% and 15% respectively. As con- straints on the supply of infrastructure and basic commodities continued to ease, industrial output responded with an 8% increase. The downward trend in inflation continued. Wholesale prices rose by about 9% on an average annual basis, while the increase on a March 1981 to March 1982 basis was less than 2%, showing a continued deceleration. Easier supply conditions, combined with a more restrictive monetary policy, contributed to the sharp decline in the rate of inflation. 9. The performance of the agriculture sector in 1981/82 ensured that supply conditions in the country remained quite favorable. It also provided continuing evidence of the positive effects of large investments and appropriate policies in past years. Foodgrain production reached between 132 and 134 million tons, thus matching or perhaps surpassing the previous record. Irrigated area expanded by 2.5 million hectares, while fertilizer consumption improved over its 1980/81 level by more than 7%, despite substan- tial price increases. Recent performance and probable future trends suggest that on average foodgrain supplies will exceed demand. However, the balance remains delicate with some imports likely to be required from time to time. Indeed, the effects of the severe 1979/80 drought were still being felt in 1981/82 when 2.25 million tons of wheat were imported to rebuild depleted stocks. Nevertheless, the relatively low import requirement, the ability of the Government to delay imports for as long as two years after the production shortfall, and the decline in foodgrain prices in real terms demonstrate the flexibility and resilience provided by the public foodgrain system. 10. Shortages of basic commodities and infrastructural services were major contributors to industrial stagnation and the onset of high inflation in 1979/80. This was the culmination of several years of declining capacity utilization in important, interrelated sectors such as power, coal, and rail transport. A major cause of the improved economic climate over the last two years has been a much improved level of output in these sectors, due mainly to greater efficiency and utilization of installed capacity. Expansion of coal output by about 10 million tons for the second successive year and of rail freight traffic to a record level were particularly noteworthy features of the 1981/82 economic performance. The shortfalls in domestic energy production which contributed so heavily to the poor 1979/80 performance have also been reduced. However, even though there remains large scope for improving efficiency, further improvements in capacity utilization will become increasingly difficult, and increases in capacity are needed to meet increasing demand. 11. Despite a brief phase in the late 1970s, when savings rates exceeded investment rates and foreign exchange reserves actually increased, recent experience shows that the needs of the Indian economy continue to outstrip the availability of resources, both internal and external. Investment exceeds domestic savings. The latter, at nearly 25% of GDP, are already high and further increases, particularly from the household sector, will be increasingly difficult to obtain. However, over the last two years, the  -4- Government has taken a number of measures to generate higher savings in the public sector. Principal among these were price and tax increases, and subsidy reductions, on a range of commodities produced mainly in the public sector. 12. The shortage of resources is even more apparent in the foreign sec- tor. Problems became serious after 1979/80 when the cost of India's POL imports rose sharply and the terms of trade deteriorated. Coupled with domestic supply shortages and a slowing down in export growth, these factors caused India's current account deficit to rise from only 0.6% of GDP in 1979/80 to 2% of GDP in 1980/81. In 1981/82, the current account deficit rose to US$4.3 billion, representing 2.7% of GDP. Unfavorable movements in export prices and the terms of trade threatened a worse outcome. However, the much improved performance of basic import-substituting industries and a resumption of healthy export volume growth (8.3%) prevented this. To finance this gap in the face of inadequate concessional aid flows, the Government drew down a record US$2.36 billion in foreign exchange reserves, withdrew almost US$700 million under the recently negotiated IMF Extended Fund Facility, and turned increasingly to other non-concessional sources of finance. In 1980/81 and 1981/82 for example, new government guaranteed commitments for commercial borrowing totalling over US$1.3 billion were contracted for major projects. 13. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at an acceptable level of growth. In particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently, in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to further reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has main- tained and extended the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export and industrial policy measures have Improved the prospects for accelerating export growth. Development Prospects 14. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufac- turing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is exten- sive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institu- tional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and  -5- reasonable access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 15. The medium-term framework for advancing India's development objec- tives is the Sixth Five Year Plan (1980/81-1984/85), which is now about halfway completed. The Plan assigns priority to agriculture, energy develop- ment, the growth of exports and domestic import substitutes where appropriate, and the removal of infrastructural bottlenecks. Overall perfor- mance has so far been encouraging, although the likelihood of continued bottlenecks in key sectors such as power and transport is growing. Moreover, fulfillment of the Plan targets will require an acceleration of domestic savings rates. The efforts of the Central Government to raise resources have so far been impressive and are likely to be broadly sufficient to meet the financing requirements of the Central Government's share in plan investment, if inflation can be kept in check. However, a significant shortfall in savings is likely to occur in some states unless further measures are intro- duced. There will be a need also for continuous efforts to maintain and raise further the already high level of private savings. Recent increases in interest rates and tax concessions on time deposits should stimulate such savings. The further dampening of inflationary expectations, the prospects for which look bright, will be an important part of this effort. 16, The higher capital formation rates of the past few years augur well for future income growth. Thus far, however, output growth has not matched the size of India's investment programs. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure. These services, such as power, transport and irrigation, have inherently high capital output ratios. However, at least some of the rise in the sectoral capital output ratios has been due to a deterioration in efficiency and is avoidable through better management. Bottlenecks in these basic sectors clearly can prejudice growth in other sectors where large investments have been made. As demon- strated in the last two years, performance in the basic service sectors can be improved through better planning and management, thus leading to higher productivity and capacity utilization, throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of trade- able commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as power and transporta- tion, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital to overall medium- and long-term prospects. At present rates of development, however, an adequate balance between supply and demand in these sectors will be difficult to sustain. Performance in the power sector to date suggests that India's power deficit will continue into the early 1990s, although more rapid project implementa- tion and efficiency could narrow the size of the gap. For railways, real investment levels may be inadequate to meet demand projections and will need to be monitored closely and adjusted upward as necessary if serious bot- tlenecks are to be avoided in the next few years. 17, Under the Sixth Plan, India has an ambitious energy production program backed by substantial financial commitment. While the gap between domestic consumption of petroleum and production remains large, the prospects for progressive substitution of domestic petroleum for imports are quite bright. In 1981, resources for exploration were raised by successive price  -6-- increases for petroleum products. On the production side, scheduled expan- sion is expected to raise domestic production of crude from the current 46% to about 64% of demand by 1984/85. The rapidly expanding level of exploratory activity, combined with the possibilities for accelerated offtake from known fields offer much encouragement for India's longer term energy prospects. 18, The continuation of India's balance of payments difficulties has been marked by the progressive use of foreign exchange reserves and non-concessional borrowing to finance the deficit. Use of reserves reached a record level in 1981/82, leaving less than four months of import coverage by the end of the year. At the same time, India also made use of the IMF Extended Fund Facility. Entering this period with a favorable debt service profile, India has so far also been able to tap commercial capital markets at favorable spreads (over, of course, relatively high underlying rates) and in the last two years commercial borrowing has been stepped up. These sources will be important in the future since India's current account deficits, though not large relative to the size of the economy, will nevertheless be large in absolute terms and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. 19. India's development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and exter- nal balance, while at the same time maintaining reasonably high growth. In the longer term, income growth represents the best strategy for achieving these needed adjustments, both by generating higher savings for further investment, and by fostering the development of export and import-substituting industry to realign the balance of payments. In the short-term, significant external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of pay- ments consequences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance. Although India is currently in a position to increase borrowing on commercial terms from the very low levels of the past, there are limits to India's creditworthiness in world markets. Main- taining an adequate rate of growth while adjusting the structure of the Indian economy to a more open and efficient environment as intended by the Government requires foreign resources in addition to the level of commercial borrowing available to India. Indeed, along with increasing exports, higher levels of investment to support an adequate rate of growth is a key element in maintaining India's recently improved creditworthiness. India is still a very poor country with a large rural sector and enormous investment require- ments for human development and basic infrastructure. The fact that India has been able to maintain over the past seven years a rate of growth above the long term trend, despite the severe setbacks of 1979/80, lends substance to the hope that a more open trade policy and concerted efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of savings both foreign and domestic, can sustain a rate of growth closer to 5.0% per annum than the long run trend of 3.6% per annum. Combined with a reduction in the rate of population increase to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of less than 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India.  -7- 20. A large and growing population and severe poverty underline the need for India's development efforts to be protected and accelerated if possible. The 1981 Census placed India's population at 683.4 million, or about 12 million- higher than official projections. The fact that there was no decline in inter-census rates of population growth, equivalent to about 2.2% per annum, is a cause for concern. While further analysis may suggest this rate of growth to be slightly overestimated, the expectation of a measurable decline in the population growth rate has not materialized. Until full details of the Census are released, firm judgements about the reasons for this outcome are not possible. However, the results re-emphasize the need for continuing efforts to strengthen the family planning program in a broad range of activities and services. These efforts are given high priority in the Sixth Plan which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35% by 1984/85. 21. Reduction of poverty remains the central goal of Indian economic growth. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 38% of the urban population subsist below the poverty line. Improvements in the living stand- ards of the poor will depend to a large extent on the overall growth of the economy, particularly on increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1981 resulting from India's sustained effort to raise agricultural production, reflects such developments. There is also a role for direct Government action in faster implementation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health facilities and the provision of secure village water supplies. Operations such as the community health volunteer program and the national adult literacy campaign provide encouraging evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERATIONS IN INDIA 22. Since 1949, the Bank Group has made 68 loans and 153 development credits to India totalling US$4,095 million and US$10,956 million (both net of cancellation), respectively. Of these amounts, US$1,280 million has been repaid, and US$5,291 million was still undisbursed as of September 30, 1982, Bank Group disbursements to India in the current fiscal year through Septem- ber 30, 1982 totalled US$287 million, representing an increase of about 76  -8- percent over the same period last year. Annex II contains a summary state- ment of disbursements as of September 30, 1982, and notes on the execution of ongoing projects. 23. Since 1959, IFC has made 28 commitments in India totalling US$219.6 million, of which US$26.4 million has been repaid, US$55.6 million sold and US$7.5 million cancelled. Of the balance of US$130.1 million, US$121.9 million represents loans and US$8.2 million equity. A summary statement of IFC operations as of September 30, 1982, is also included in Annex II (page 5). 24. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricul- tural productivity, and efforts to improve the availability of basic agricul- tural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of development finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan. The continued active involvement of the Bank Group in agriculture, energy and infrastruc- ture development will appropriately contribute to India's adjustment and growth prospects. Irrigation will need continuing support, with emphasis on improved efficiency in water conveyance systems to ensure reliable delivery to farmers' fields. In addition, major investments to develop the large Narmada River basin will be vital to India's efforts to increase agricultural production. Important complements to these efforts, such as fertilizer production and distribution, agricultural credit and extension, will continue to receive support. A continued program of investments aimed at rapidly increasing the domestic supply of energy will clearly be necessary if India is to curb the cost of oil imports and alleviate the critical power shortages which constrain output in both the agricultural and industrial sectors. Exploitation of oil and gas resources is a central element of this program, which should be supplemented by investments in hydro and thermal power gener- ation, and in the expansion of the transmission and distribution networks. Industrial projects to increase the domestic production of basic commodities, which have been in short supply and which India has a comparative advantage in producing, should also receive high priority. Finally, raising the efficiency and levels of transportation infrastructure would mitigate a key constraint to achieving higher levels of economic growth so that further support of the railways and for ports development will be particularly appropriate.  -9- 26. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s However, there is now a need for increased foreign assistance to India, not only to help the economy adjust to the more recent oil price increases and the over- all deterioration in the world trade environment but also to maintain the relatively higher growth rates achieved during the first two years of the Sixth Plan. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity anG: competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigationa, and water supply. 27. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support. This requirement for additional assistance can be met, in part, through Bank lending. Given its development prospects and policies, India is judged credit-worthy for Bank lending to supplement IDA assistance. A continuation of efforts already underway to achieve growth in productive capacity, trade expansion, higher levels of savings, foodgrains self-sufficiency and a reduction in the rate of population growth should result in continued economic growth and improvement in the balance of pay- ments. Despite recent setbacks, India's external payments position is still manageable. The ratio of India's debt service to the level of exports was about 11% in 1982/83 and is projected to remain below 20% through 1995/96. As of September 30, 1982, outstanding loans to India held by the Bank totalled US$2,922 million, of which US$1,308 million remain to be disbursed, leaving a net amount outstanding of US$1,614 million. 28. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 50%, 43% and 53%, respectively, in 1981/82. On March 31, 1982, India's outstanding and disbursed external public debt was about US$17.9 billion, of which the Bank Group's share was US$7.1 billion or 38% (IDA's US$5.9 billion and IBRD's US$1.2 billion). In 1981/82, about 16.0% of India's total debt service payments were to the Bank Group.  -10- PART III - THE POWER SECTOR Background 29. The performance of the Indian power supply industry and the economy as a whole are closely related, and economic growth and improve- ment of the standard of living depend to a large degree on the development of the power sector. Since alternative sources of energy are not readily available in the amounts needed, shortage of power has an immediate impact on virtually all activities of the economy. Energy matters have been receiving top priority consideration in Central and State Government policy planning, and the power sector now takes the largest share of India's public investment resources (12% of the Sixth Five-Year Plan outlay). In spite of this emphasis, demand for power continues to out- strip supply. Power Supply and Demand - India-Wide 30. In the 1950s and 1960s, installed capacity 1/ and power generation managed to keep pace with the nation's demand for power, both growing at an average annual rate of 10-12%. Since 1970, the situation has deteriorated: delays in commissioning new power projects, operating and maintenance problems, and insufficient investment under severe budget constraints have led to a critical situation in which demand for power consistently outstrips supply. This situation was exacerbated by below-average monsoon rains (particularly in the early 1970s and in 1979) which affected hydro-electric power generation, and an unstable coal supply caused by disruptions in coal mining and transport, as well as the poor quality of the coal itself. Between 1970/71 and 1974/75, growth in power generation averaged only 5% annually. The situation improved cor- siderably over the period 1975/76 through 1979/80, with growth in both generation and capacity averaging 7-9% annually. This improvement resulted from successive good monsoons in 1975/76 and 1976/77, improved coal supply, and a concerted effort to improve project implementation, thermal capacity utilization and overall power system management. In 1979/80, however, generation increased by only about 2% in spite of a 7% increase in capacity, due mainly to lower hydro plant availability than 1/ -Installed capacity in reference to a power generating unit is the manufacturer's rating of the unit, usually specified in megawatts (MW). This rating indicates the rate at. which the generator will produce electricity under certain specified conditions. Available capacity is the actual rate at which electricity can be generated, taking into account electricity required for scheduled maintenance and the generation process itself, for example, for fuel pumps and other auxiliary purposes.  -I 1- normal. The situation has since improved with power generation increasing at a greater rate than installed capacity: data for 1980/81 and 1981/82 indicate an average increase for these two years of about 8.0% per year for power generation and 6.5% per year for installed capacity indicating better utilization of existing resources. Nevertheless, power shortages have persisted in many parts of the country, particularly in the Eastern Region. Total installed generating capacity as of March 1982 was about 35,000 MW, including nonr-utility plant. Of this total, about 63% was conventional thermal, 35% hydro, and 2% nuclear. 31. Industry consumes about 60% of all electricity sold, while agriculture (mainly irrigation) accounts for about 18%, domestic use for about 12%, and other uses 10%. As a result of accelerated agricultural development, there has been a marked growth of power consumption in the rural areas where more than 80% of India's population lives. The number of electrified villages, for example, grew from just over 3,000 in 1950/51 to an estimated 300,000, or about 52% of all the villages in India, by the end of 1982. Projections made by India's Central Electricity Authority (CEA) in its long-term system plan indicate that over the thirteen-year period 1981/82-1994/95, utility generating capacity should grow at an average annual rate of about 9.5% to total some 106,000 MW, of which about 59,000 MW (56%) would be thermal, 44,000 MW (41%) hydro and 3,500 MW (3%) nuclear. About 15,000 MW of the additional generating capacity are expected to be added by 1984/8 5. Power Supply and Demand - Eastern Region 32. The Eastern Region comprises the States of Orissa, West Bengal and Bihar. These States will be served by the proposed project. The major supply authorities of the Eastern Region are the Bihar State Electricity Board, the West Bengal State Electricity Board, the Orissa State Elec- tricity Board (OSEB)--which will own and operate the power plant when it is completed--the Damodar Valley Corporation, the Calcutta Electric Supply Corporation, and Durgapur Projects Limited. The total installed capacity in the Region in March 1982 was about 5,350 MW, of which OSEB accounted for about 17%. Orissa's existing power system comprises four hydro sta- tions--Hirakud (198 MW), Chiplima (72 MW), Machkund (34 MW), Balimela (360 MW)--and one coal-fired thermal station at Talcher (250 MW), totall- ing 914 MW. A further 560 MW is presently under construction at Upper Kolab, Rengali and Talcher. Only about 27% of Orissa-s generating plant is thermal, making the State considerably less vulnerable than the Region at large (in which 80% of its capacity is thermal) to unplanned outages of thermal units, which have arisen frequently in recent years, particularly in West Bengal. 33. During the late 1970s, installed capacity in the Region increased by about 4% to 5% per year. Plant availability, however, deteriorated during the later years, leading to a decrease in generation in 1979/80,  -12- and only small increases thereafter. Much of this was due to poor mairr- tenance of thermal plant in the State Electricity Boards (SEBs), labor disputes affecting plant operations and coal supply, and institutional weaknesses of the SEBs. Potential unconstrained peak demand in the Region is expected to grow, after the present shortages have been overcome, by about 8.5% per annum until 1995. However, although installed capacity is expected to increase at a rate of about 15% per annum until 1985, rela- tively reliable supply is unlikely to be attained before the early 1990s. The probability of loss of load, particularly if high forced outage rates continue, will be unacceptably high throughout the 1980s. Supply restric- tions will have to continue for some time to come, and can only be eased through the timely implementation of projects and rapid improvement in plant maintenance. New additions to capacity during the 1980s will be predominantly thermal. New sites available for hydro development are limited and will take time to develop. However, hydro-power development will increase significantly during the early 1990s, so that by 1995 about 30% of total installed capacity in the Region will be hydro. Much of this increase in hydro capacity will take place in Orissa, where more than 1,000 MW will be commissioned by 1990, and a further 1,000 MW could be developed thereafter. Large expansion of thermal capacity is likely at the coalfields at Farakka in West Bengal and Talcher in Orissa. Bank Group Operations in the Power Sector 34. Since 1954, the Bank has made thirteen loans to India for power projects amounting to US$982.5 million and IDA fifteen credits totalling US$2,096 million. of these amounts, US$2,139 million is for generating plant; US$23 million for construction equipment for the Beas hydro-electric project; US$380 million for the provision of high-voltage transmission; and US$536.5 million for the support of rural electrifica- tion schemes. Fifteen loans and credits have been completed: ten for generating plant, the Beas Project, the first three Power Transmission Projects, and the First Rural Electrification Project. The Fourth Power Transmission (Credit 604-IN of January 1976), First Singrauli (Credit 685-IN of April 1977), First Korba (Credit 793-IN of May 1978), Third Trombay (Loan 1549-IN of June 1978), and First Ramagundam (Credit 874-IN and Loan 1648-IN of February 1979) Thermal Power Projects, and the Second Rural Electrification Project (Credit 911-IN of June 1979), are in an advanced stage of implementation. The credit for the Second Singrauli Thermal Power Project (Credit 1027-IN) and the credit/loan for the first stage of the Farakka Thermal Power Project (Credit 1053-IN and Loan 1887-IN) were approved in May and June 1980, respectively. The credit for the second stage of the Korba Thermal Power Project and the loan for the second stage of the Ramagundam Thermal Power Project were approved in July and December 1981, respectively. The loan for the Third Rural Electrification Project was approved in June 1982. The First and Second Singrauli, First Korba, and Trombay projects are on schedule. The  -13- Farakka and Ramagundam projects are proceeding satisfactorily after ini- tial delays. The first two units of Singrauli were commissioned on schedule in 1982. The third Singrauli unit and the first at Korba will be commissioned soon. 35. A project performance audit was conducted in 1980 for the Second Power Transmission Project (Credit 242-IN). The project was considered to have been successful in assisting the nine beneficiary SEBs in extending their transmission systems to help meet their growing power requirements. Utilization of generating capacity in these SEBs exceeded the appraisal forecast. Rehabilitation of the finances of the SEBs, which commenced under this project, is continuing under subsequent projects. The audit highlighted the difficulties of adequately supervising this project which consisted of many wide-scattered subprojects, and of effecting institur tional improvements in the absence of a close working relationship between the Bank Group and the beneficiary SEBs. With the assumption of increased responsibilities by the CEA in the power sector, a considerably more effective relationship with the SEBs is envisaged. Sector Institutions 36. The institutional structure of the Indian power sector is complex. Under the Indian Constitution, the responsibility for supplying power is shared between the Central Government and the State Governments, and full agreement between the Center and the States is required for the implemen- tation of most actions. With the rapid expansion of the power sector, there has been an increasing need to coordinate the activities in the power industry beyond State boundaries, and various agencies have been established with a view to promoting integrated power development in the country. The principal agencies in the sector are: the State Electricity Boards, the Regional Electricity Boards (REBs), the Central Electricity Authority, the two Central power corporations--the National Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC)--and the Rural Electrification Corporation (REC). 37. The SEBs were constituted by the State Governments under the provisions of the Electricity (Supply) Act, 1948, to promote the coor- dinated development of generation, transmission and distribution of elec- tricity in the most efficient and economical manner, and to control and regulate private licensees and utilities. The States effectively own or control over 90% of electricity supply facilities. While the SEBs are corporate entities and enjoy some autonomy in the management of their day-to-day operations, they are under the control of State Governments in such matters as capital investment, tariffs, borrowings, pay scales and personnel policies. 38. As a means of improving collaboration between SEBs and estab- lishing Regional rather than State power systems, Regional Electricity  -14- Boards have been set up for each of the Northern, Southern, Eastern, Western and North-Eastern Regions. The general function of an REB is to coordinate the operation of the Regional power system to the maximum benefit of the Region as a whole, to coordinate overhaul and maintenance programs, to determine generation schedules and power available for trans- fer between States, and to determine tariffs for the transfer of power within the Region. At present, REBs function mainly in an advisory role. 39. The CEA was constituted in 1950 with responsibility for developing national power policy and coordinating the activities of the various agencies involved in electricity supply. Its powers were enlarged by amendments in 1976 to the Electricity (Supply) Act, 1948. It is now also responsible for the formulation and coordination of plans for power development, optimization of investments in the power sector for the whole country, development of interconnected system operation, training of personnel, and research and development. Its Thermal Department takes responsibility for monitoring the performance and maintenance records of thermal power stations, and for organizing the training of power station personnel. The Economic and Commercial Department accumulates data on economic, financial and accounting aspects of the power industry, both at Center and State levels, with particular reference to the operations of the SEBs, and advises SEBs on financial matters. 40. Because SEBs had been unable to build and maintain sufficient plant to meet the rising demand, GOI in 1975 incorporated NTPC and NHPC, whose main purpose is to construct, own and operate large Central power stations, as well as high-voltage power transmission lines and associated substations. NTPC is at present building six large thermal power sta- tions, while NHPC is building three hydro stations. Although the Central Government is becoming increasingly important in the sector, the SEBs will continue to play a major role, particularly in hydro-electric projects. The States own most hydro sites and are unlikely to turn over these sour- ces of comparatively inexpensive energy to the Center. NHPC can develop hydro sites only when the water rights are clear and the State has sur- rendered its claim on them. 41. The REC was constituted in 1969 and registered under the Companies Act, 1956, as a limited company wholly owned by GOI. Its primary objec- tive is to finance rural electrification schemes prepared by SEBs throughout India, functioning as a financial intermediary with technical expertise, and ensuring the efficient onlending of funds drawn primarily from GOI. REC coordinates its lending operations with the activities of other agencies which provide financing for rural development. Although the amount of REC financial support is small in relation to total SEB operations, REC today finances more than half of total rural electrifica- tion expenditures.  -15- Bank Group Strategy in the Power Sector 42. The Bank Group has had a continuing dialogue with the Government in seeking solutions to a number of complex and politically sensitive problems wh-sh have confronted the Indian electricity supply industry since Independence. The sensitivity of Center-State relations and the political constraints arising from the fact that electricity supply is within the concurrent jurisdiction of the Central and State Governments (para 36) have dictated a policy of seeking progress through cooperation. More specifically, the Bank Group's main objectives in its lending opera- tions in the Indian power sector are: (a) to accelerate the installation of generating and transmission capacity to eliminate power shortages and to promote measures to improve the operation and maintenance of existing plant; (b) to foster comprehensive long-range regional and national system planning so as to assure implementation of a least-cost power development program; (c) to promote improvements in sector organization and training; and (d) to strengthen the finances of the sector institutions, par- ticularly the SEBs. 43. Some noteworthy results have been achieved, which include: (a) the establishment of the REBs and later of the Centrally-owned power companies (NTPC and NHPC), which marked the first important steps towards Central ownership of power generation and transmission facilities; (b) reorganization and strengthening of the CEA through amendment of the Electricity (Supply) Act in 1976; (c) amendment of the financial provi- sions of the Electricity (Supply) Act, which provided for the development of SEBs on a more commercial basis, with the objective of financing from internal sources a reasonable proportion of their investments (para 44); (d) implementation of action plans by a number of SEBs, designed to improve their financial performance through tariff increases, rationaliza- tion of manpower requirements, improved maintenance management, and the introduction of other cost-effective measures; (e) completion of tariff studies by most of the SEBs with a view to reassessing tariff policies (para 76); (f) satisfactory progress of NTPC's generation/transmission construction program with Bank Group assistance (para 46); and (g) establishment of the Committee on Power to review all aspects of the power sector (para 45). 44. Two areas of specific concern to the Bank Group in the past have been the lack of a nationwide long-range plan for power development, and the weak financial position of some SEBs. With regard to the first of these, a long-range national power development study designed to provide the basis for a least-cost power development program was completed by GOI in late 1982. The study projects the growth in power demand and the correspondinig capacity expansion requirements through the year 2000, according to different scenarios based upon India's rate of economic growth. A least-cost expansion program for each of the five electricity supply regions is also derived in the study. With regard to the financial  -16- performance of the SEBs, there has been considerable improvement in over- all performance since 1978/79. GOI is keen to maintain the rehabilitation effort and further improve performance through the introduction of finanr- cial policies that would enable the SEBs to operate more along commercial lines and enhance their self-financing capability. With the approval in 1982 of the Third Rural Electrification Project (Loan 2165-IN), new finanr- cial performance criteria, which set specific levels of internal cash generation and rural electrification subsidies paid by the States to the SEBs, were established for those SEBs intending to participate in the project. A number of SEBs have already undertaken to fulfill these requirements, and all of the major SEBs are expected to do so. These measures should lead to further improvements in the SEBs financial per- formance in the 1980s. 45. In 1978 the Indian authorities recognized that all aspects of the sector needed to be reviewed in depth and that satisfactory solutions had to be found for outstanding sector development problems. Consequently, GOI established in November 1978 a Committee on Power whose purpose was to examine all aspects of the power industry and make recommendations for improvements. The Committee completed its task and submitted its conclu- sions to GOI in September 1980. These conclusions refer to all major aspects of the power sector--power planning, project formulation and implementation, operation and maintenance, organization and management, finance, financial management and tariffs, rural electrification, and research and development. Implementation of most of the Committee's recommendations is already underway: for example, better planning proce- dures and improved operations and maintenance management, such as plant breakdown procedure and spare parts procurement. However, other important measures require due deliberation by GOI and the State Governments and their joint agreement before they can be implemented. These measures include sector development, organizational structure, and sector finances. 46. In 1982, GOI submitted a program for the implementation of five categories of power sector improvements which the Bank Group considered areas of high priority. The five categories are: (a) improving the performance of thermal power plants; (b) coordinating power development with the development of other sectors; (c) intensifying hydro-electric power development; (d) strengthening the role of the Central sector in power generation and transmission; and (e) establishing appropriate finar- cial objectives and policies for SEBs. Satisfactory progress has been made in these areas, and a number of actions have already been achieved. For example, teams of specialists have been established by the Department of Power to visit all power plants with 100/120 MW and 200/210 MW thermal generating units in the country to diagnose technical and operational problems, propose solutions and assign responsibilities for their implementation. The draft long-range power plan, forecasting power demand and capacity expansion through the year 2000, has been completed (para 44). A second hydro-electric project (Bodhghat) has been posed to  -17- the Bank and a number of others are in advanced stages of preparation. GOI, through NTPC, now has under construction and partly in operation about 10,000 MW of power generating capacity, which includes, as well as the four large thermal plants at Singrauli, Korba, Ramagundam and Farakka being financed by the Bank Group, two new thermal plants (RiLtand and Vindhyachal) begun by NTPC in 1982. A project (the Fifth Power Transmis- sion Project) to reinforce the Centrally-owned power transmission grid, and provide the first stage of integration of the Northern, Western and Southern regional grids, has recently been appraised by the Bank Group. NTPC has been decentralized, providing regional organizations for more effective monitoring, control and operation of its power generation and transmission facilities. Finally, draft legislation for amendment of the financial provisions of the Electricity (Supply) Act, 1948 has been prepared by GOI for submission to Cabinet in the spring of this year (para 71); a uniform system of commercial accounting for the SEBs is under development; and new financial performance criteria fcr the SEBs have been introduced (para 70). PART IV - THE PROJECT 47. The project was prepared by the Irrigation and Power Department of the Government of Orissa (OIPD) and appraised by a mission which visited India in October/November 1982. A Staff Appraisal Report is being dis- tributed separately to the Executive Directors. Negotiations were held in Washington in March 1983. GOI and GOO were represented by a delegation with Mr. N. Misra as coordinator. A Supplementary Project Data Sheet is attached as Annex III. Project Description 48. The proposed project, located in the Koraput and Kalahandi dis- tricts in the State of Orissa, is designed primarily to increase the power generating capacity in the State by about 600 MW to a total of over 2,000 MW, and thereby provide a substantial quantity of low-cost energy to help meet the growing electricity needs of the State and of the Eastern Region of India. Designed as a low load factor plant, the Upper Indravati power station will provide needed peaking capacity to complement the Region's thermal power stations. Secondarily, the project will direct waters from the Indravati river in the Godavari basin into the Hati river in the Mahanadi basin, providing water to irrigate about 109,000 hectares (270,000 acres) of cultivable land for which no other feasible irrigation source exists. 49. The project comprises the following components:  -18- (a) a hydro-electric power station of 600 MW installed capacity, consisting of four 150 MW turbo-generator units, capable of producing an average annual energy output of 1,962 gigawatt-hours (GWh); (b) a reservoir with an area of 110 sq km and a live storage capacity of about 1,435 million cubic meters; (c) four dams--Indravati, Muran, Kapur and Podagad--of masonry, earth, or composite masonry and earth fill, ranging in height from 40 m to 73 m and in length from 436 m to 540 m; (d) eight dykes, totalling about 3,000 m in length; (e) a water conductor system consisting of a head race channel, horseshoe tunnel, surge shaft, two pressure tunnels and four steel pen- stocks; (f) a tailrace channel 9 km in length to conduct water to a re-regulating reservoir for irrigation purposes; (g) site services and facilities, including roads, bridges, quarters and buildings, and power, water and sewerage facilities; (h) engineering and administrative services. 50. Turbo-generators of 150 MW capacity are the largest that can be transported to Upper Indravati given limitations on road and rail tran- sportation. Of the turbo-generator choices considered--120 MW and 150 MW--the larger equipment was found to be more economical, and electri- cally compatible with the system. The proposed capacity of 600 MW, gener- ating 1,962 gigawatt-hours per year, implies a load factor of 37%, which is consistent with the forecast generation requirements. Additional generators can be installed at the site if needed. 51. The output from the project will be transmitted over two 220 kV transmission lines to a 400 kV substation owned and operated by the National Hydro Power Corporation. Additional transmission lines within Orissa that may be desirable to optimize the transmission of the project-s output will be financed and built by the Government of Orissa (Section 3.07 of Project Agreement). Project Implementation 52. The project will be implemented over an eleven-year period (early preparation work began in 1979) by the Orissa Irrigation and Power Depart- ment. OIPD provides irrigation services throughout the State and con- structs hydro-electric projects for subsequent operation by the Orissa State Electricity Board. The Secretary, Irrigation and Power, is the  -19- permanent head of the Department, and he is assisted by a group of Chief Engineers, one of whom is responsible for the Upper Indravati Project. Orissa has a common State engineering cadre, from which the OSEB draws its engineering staff on deputation. Engineering advice and consulting serv- ices are provided by the Central Water Commission on hydraulic structures and equipment, and by the Central Electricity Authority on electrical matters. 53. A special Control Board, under the chairmanship of the Chief Minister of Orissa, was set up in January 1979 to oversee the execution of the Upper Indravati Project. The members include the Minister for Irriga- tion and Power, the Chief Secretary, the Secretaries of three other inter- ested departments, the District Collectors from the project area, and the Chief Engineers of the project. The Chief Construction Engineer, Upper Indravati, who has been resident on the site since the start of work, is responsible for all the civil works; the Chief Engineer, Elec- tricity/Electrical Projects, is responsible for the electrical and mechanical works. 54. Project accounting procedures for major projects within the State are well established, and are based on the system of Public Works Account- ing common throughout India. However, project accounts in their present form are not altogether suitable for effective monitoring of project progress and cost against appraisal estimates. OIPD's accounting arrange- ments are presently under review as part of a larger study of OIPD's project management being carried out by consultants (para 55). The review will include project accounting requirements, accounting procedures, and appropriate formats for project accounts. 55. OIPD has completed a number of power projects, and two (Upper Kolab and Rengali) are presently under construction. While OIPD's techni- cal expertise and experience in such projects are sound, project manage- ment of these developments has not been entirely satisfactory since cork- struction schedules have slipped and estimated costs have been exceeded. However, OIPD is reviewing its existing construction management and accounting arrangements with consultant assistance and is expected to provide a review report to the Bank Group by August 1983. Provision of the report is a condition of effectiveness for the loan and credit (Sec- tion 5.01(a) of Development Credit Agreement). Following completion of the review, and in consultation with the Bank Group, GOO will implement those recommendations in the consultants' report as are accepted by GOO (Section 3.06 of Project Agreement). 56. Systematic field investigations in the area of the proposed project began as early as 1959. In 1982, a panel of independent experts employed by the Bank carried out a review of the major features of the project to ensure that the project is technically and economically sound. In the course of its review, the panel, together with Association staff,  -2 0- examined a number of studies on the locations, types and sizes of the various works, structures and equipment that had been carried out to that time, and found them satisfactory. However, the panel recommended an expanded program of exploration, some design changes to the Podagad and Muran dams to rectify problems previously encountered at these sites, and further studies. All the important recommendations of the panel were accepted by OIPD and have been implemented. Although other problems may still emerge before all investigations are complete, none is foreseen that might pose a threat to the feasibility of the project. OIPD has appointed a Board of Consultants, consisting of independent experts, to review the designs of the dams and structures and conduct periodic reviews during the period of construction. Periodic inspections of the dams and structures will also be carried out after the project is in operation, and during negotiations details of OIPD's dam safety inspection procedures were provided to the Bank Group and found acceptable (Section 3.02 of Project Agreement). 57. A considerable amount of preliminary work on the project has already been completed. Tenders for the major items such as the dams, turbines and generators are scheduled to be awarded by the end of 1983. Commissioning of the four turbo-generator units is scheduled to occur between September 1988 and April 1990. Commissioning of the first unit will take place a year before the masonry dams are complete. Construction of the system of irrigation canals downstream of the power station has not been provided for in the project and has not yet been scheduled in detail, but will proceed as rapidly as funds can be made available for it. 58. Following the commissioning of the fourth generating unit of the hydro-electric plant in April 1990, the facilities will be transferred from OIPD to OSEB, who will assume responsibility for their subsequent operation and maintenance. OSEB already operates a number of hydro-electric projects constructed by OIPD. The dam structures built under the project will remain under the control of GOO, and OSEB will pay half the cost of dam maintenance. Power generated by the plant prior to the transfer of the facilities to OSEB will be purchased by OSEB, although GOO has not yet decided upon the terms to be applied. Water releases from the project will be governed mainly by irrigation requirements once the downstream irrigation works have been built, so it will be necessary to ensure that water releases will be adequate for power generation require- ments. Accordingly, GOO will ensure that the Upper Indravati power sta- tion will be permitted water releases sufficient to generate energy and peak power appropriate to the electrical demand in all months of the year (Section 3.05 of Project Agreement). Land Acquisition 59. Almost all of the major structures included in the project are located on State-owned land. The State may also expropriate land where  -21- necessary. The areas to be flooded in the formation of the reservoir can be acquired, and other land is available for persons disDlaced. About 20,000 people in 105 villages will be displaced by the reservoir and will be resettled in the general area of the project. They will be compensated with homestead and agricultural land, and provided with :ransp -t to the new location, in accordance with guidelines formulated Ev the Orissa authorities. Details of these guidelines were provided to the Bank Group during negotiations and were found satisfactory. OIPD will formulate a resettlement plan and implementation schedule based upor. the guidelines at least two years before submergence of any land in the pr-oject area (Sec- tion 3.03 of Project Agreement). Funds have been provided in the cost estimates for resettlement purposes, and no problems are foreseen. Ecology 60. The Environmental Appraisal Committee within GO->s Department of Science and Technology has studied the project, and its recommendations will be followed. In conjunction with the Soil Conservation and Agricul- ture Departments, OIPD will undertake a comprehensive afforestation program in the catchment area to replace lost forest and reduce sedimenta- tion in the reservoir. No rare or endangered species are found in the area, and the plentiful water in the reservoir is expected to benefit wildlife. Project Cost and Financing 61. The total cost of the project, including contingencies but exclud- ing about US$27 million in taxes and duties, is estimated at about US$479 million equivalent, of which about US$108 million (22%) represents the estimated foreign exchange costs. A capitalized front end fee on the proposed IBRD loan adds approximately a further US$0.4 million (US$390,025) to the financing required. The principal cost components, net of physical and price contingencies, are: land and preliminary works US$16.2 million; dams, reservoir and associated structures US$94.3 million; power station US$92.5 million; channels, tunnels and penstocks US$48.6 million; engineering and administration US$32.5 million; quarters and buildings US$13.7 million; and other components US$15.9 million. The project cost estimates are based on 1982 prices. Price contingencies, amounting to about 38% of base cost, are based on expected inflation rates of 8.5% for 1982/83, 8.0% for 1983/84, 7.5% for 1984/85, 7.0% for 1985/86, and 6.0% thereafter, for both local and foreign costs. Physical contingencies of about 15% on civil works and 10% on mechanical and electrical equipment have been allowed, amounting to about 14% of base cost. 62. The proposed Bank loan of US$156.4 million (including the capital- ized front end fee of about US$0.4 million) and IDA credit of SDR 156 million (US$170 million equivalent) will finance all of the foreign  -22- exchange costs of about US$108 million and about US$218 million of the local costs, and will cover about 68% of the total project cost net of taxes and duties. The balance of the funds required, aggregating about US$180 million equivalent, will be provided by GOO from its own resources. The proceeds of the proposed loan and credit will be made available by GOI to GOO through its allocation to State funds as part of its normal assis- tance to the States for development projects. The exchange and interest rate risks will be borne by the Government of India. Procurement and Disbursement 63. The main project components, including the dams, dykes, link channels, tunnels, penstocks, powerhouse, tailrace canal, and the electri- cal and mechanical equipment for the powerhouse and associated structures, will be covered by about twenty-six separate contracts, valued at about US$324 million equivalent. Most of these will require both supply and erection or construction by the contractor. Fourteen of these contracts, amounting to about US$293 million equivalent and covering the major works, will be awarded on the basis of international competitive bidding and have been packaged so as to be suitable for this purpose. The remaining twelve contracts and others not lending themselves to ICB, amounting to about US$49 million equivalent, will be awarded using OIPD's local competitive bidding procedures, which are satisfactory. Such contracts will cover civil works for link channels, dykes, headrace channel, approach channel, power house excavation, access roads, site buildings, staff quarters and power distribution in the area of the project, and tools, plant, miscel- laneous equipment and materials up to an aggregate amount of US$14 million equivalent. Indian tenderers competing under international competitive bidding will be granted preference margins of the lesser of 15% or the current rate of import duty in respect of equipment contracts, and 7-1/2% of civil works contracts, and are expected to win most of the contract awards. Contracts of more than US$500,000 equivalent will be subject to prior review by the Bank Group. The proceeds of the loan and credit will be disbursed over an eight-year period (FY84-FY91), and will cover 100% of the c.i.f. cost of imported goods or of the ex-factory cost of goods manufactured in India, and 85% of expenditures on civil works. By the end of the sixth year, over 96% of the proceeds of the loan and credit will have been disbursed. Expenditures amounting to about 10% of the total project cost have already been incurred in the early preparation work for the project. Expenditures incurred since April 1, 1982 and prior to loan and credit signing, covering such works as dam and power house excavation, and construction of quarters, buildings, access roads and bridges, will be financed retroactively up to an amount of US$10 million equivalent (SDR 9.2 million), representing about 2% of the total .project cost (Schedule 1, para 4 of Development Credit Agreement).  -23- The Orissa State Electricity Board (OSEB) 64. OSEB was czonstituted in 1961 under the Electricity (Supply) Act, 1948 and is responisible for the generation, transmission and distribution of electricity throughout the State of Orissa. OSEB constructs and operates thermal generating stations, and operates hydro-electric stations constructed by OIPD. OSEB is not fully autonomous, however, since it is controlled by GOO in matters of staff conditions of service, accounting, borrowing and tariff-setting. OSEB's capital investment program is deter- mined within the overall State and national planning framework. 65. OSEB is E corporate body consisting of seven members including a full time Chairman and three full-time members for Generation, for Trans- mission, Distribt;tion and Commercial matters, and for Finance. The other three members of she Board are part time and comprise GOO's Secretary, Finance Department; Secretary, Irrigation and Power Department; and Chief Engineer Electricity/Electrical Projects. The first two full-time members are experienced Chief Engineers drawn from the State cadre, and the Finance Member is usually drawn from the State finance service. OSEB is divided for management purposes into 14 circles, each headed by a Superin- tending Engineer, who is responsible for three or four operating Divisions (67 in total), each of which is headed by an Executive Engineer. Account- ing staff operate at headquarters and at the Divisional level, which is the primary cost and revenue earning center. 66. The management of OSEB is drawn from the engineering cadre, who tend to devote their time primarily to engineering activities, while such areas as meter reading, billing, consumer accounts and connection proce- dures have not had in the past the attention they deserve. However, a start has been made on tackling these problems and OSEB has retained accounting consultants to overhaul its procedures in these areas (para 74). 67. In the area of plant operations, the State's only thermal power plant--at Talcher--which has been in operation for 14 years, has proved unreliable in the past in providing base load service, primarily because of the poor quality of the coal used and the resultant heavy wear on the coal and ash handling plant. Plant management has been so occupied with the operations and maintenance problems that little attention has been given to the plant's thermal performance. However, OSEB now has in progress a program of actions designed to alleviate or rectify the major problems at the Talcher plant. A further important aspect of plant opera- tions, utility management, that has not been receiving due attention in OSEB is the control of energy losses, which have been reported in recent years as about 20% of energy generated. There are serious difficulties in approaching this problem, such as a widespread lack of metering, and the evident unreliability at present of OSEB's statistics for sales and unac- counted energy. OSEB has recently established a special cell to tackle  -24- this problem, and studies are being carried out. OSEB will produce a long-term action program by March 31, 1984 designed to reduce energy losses to acceptable levels, and will implement the required measures from fiscal year 1984/85 (Section 3.14 of Project Agreement). 68. OSEB's accounting system follows the lines of the Public Works Accounts code, with some modifications, with its emphasis on "authoriza- tion" of expenditure rather than upon management information. Under the Third Rural Electrification Project, OSEB agreed to introduce, from April 1, 1984, a common system of commercial accounting, which is presently under preparation by consultants appointed by GOI. At nego- tiations, this agreement was reconflrmed (Section 3.12 of Project Agree- ment). 69. OSEB appointed, in 1982, a firm of chartered accountants to examine OSEB's accounting arrangements and to bring accounting work up to date. Progress has been good. However, during the latter part of 1983/84 intensive preparation and staff training for the introduction of the new commercial accounting system will be needed and during 1984/85 its intro- duction and operation will require careful monitoring. Audited accounts for 1982/83 and 1983/84 will also have to be prepared during this period, under the existing accounting system. Thereafter, the first annual accounts based upon the new system will require timely preparation. OSEB will retain the services of qualified and experienced accounting consult- ants to assist in the above tasks (Section 3.10 of Project Agreement). OSEB Finances (a) Financial Performance 70. The financial operations of SEBs are regulated by the provisions of the Electricity (Supply) Act 1948, as amended from time to time. In June 1978, after intensive consultation with the Bank Group, several amendments to the financial provisions of the 1948 Act were enacted so as to enable the SEBs to reorganize their finances along commercial lines, primarily through the introduction of the concepts of reasonable contribu- tion to investment and of equity share capital. There has been little attempt by the States to give practical effect to these measures. Equity capital has not been introduced to the SEBs and States have not specified the surplus to be earned by their SEBs. Furthermore, certain anomalies remaining in the Act prevent SEBs from operating in accordance with com- mercial accounting principles. To some extent GOI initiatives were await- ing the publication of the recommendations of the Committee on Power, which is the subject of a continuing dialogue between GOI and the States. In the meantime the Bank Group has continued to press for major reform of SEB finances and, during the processing of the Third Rural Electrification Project, reached agreement with GOI concerning: (a) the introduction of a uniform commercial accounting system of SEBs throughout India;  -2 5- (b) improved financial performance by SEBs, measured in terms of achieving not less than a 20% contribution to investment annually from 1982/83; and (c) the limitation of subsidies paid by the States to their SEBs, in respect of rural electrification losses, to a reasonable proportion of an SEB's sales revenues. 71. GOI has made encouraging progress with the State Governments and their SEBs in respect of the above agreements. Financial consultants are already working on the preparation of a commercial accounting system; CEA finance staff has been strengthened and several States have already indi- cated their agreement to the above principles. In particular, to fulfill the requirements for participation in the Third Rural Electrification Project, the Government of Orissa and OSEB have given formal undertakings to GOI to introduce the commercial accounting system, to achieve the required contribution to investment, and to limit the rural electrifica- tion subsidies. These agreements were reconfirmed during negotiations (paras 68, 75). Furthermore, following discussions with the Bank Group, GOI has now prepared a series of further amendments to the 1948 Act to remove the remaining legal obstacles to the operation of SEB finances along commercial lines. These amendments have been submitted to Cabinet for review and approval. 72. OSEB was required, under Bank Group lending operations prior to the Third Rural Electrification Project, to achieve a rate of return of at least 9.5% on its average net fixed assets in operation. Prior to 1980/81 OSEB consistently fell short of this target. Net income was insufficient to meet interest on borrowings. A rate of return of 11%-12% would have been required for OSEB to meet its interest obligations in full. OSEB has now been able to resolve certain difficulties with major industrial cor- sumers and substantial tariff increases have occurred since 1978/79 which have led to improved financial performance (para 75). 73. OSEB's finances have been supported to an extent by subsidy paid by the State Government in respect of rural electrification losses. Recent investigations of OSEB's accounts indicate that such losses prob- ably have been overstated and that, in future, OSEB would not require any such subsidy to achieve the recently-agreed 20% cash generation covenant. In 1980/81, net cash generation equivalent to about 25% of capital invest- ment was achieved, after capitalization of interest is taken into account. (b) Billing and Collection 74. OSEB's receivables have ranged in the past from the equivalent of three to six months billings in respect of electricity sales. At March 31, 1981 such receivables amounted to Rs 300 million. Efforts are now under way to remedy certain deficiencies in the billing system, to strengthen billing, collection and recovery procedures and to incorporate adjustments into the 1981/82 accounts. In particular, OSEB proposes to  -26- transfer the responsibility for the administration of the accounts of about 250 major industrial consumers, who generate some 75-80% of OSEB's revenues, to the Board's headquarters. This will improve accountability and the control of cash flow. Thereafter, with the assistance of the present accounting consultants, efforts will be concentrated upon improv- ing the billing and collection arrangements in respect of the large num- bers of small consumers throughout the State. Accordingly, OSEB will, from fiscal year 1983/84 onwards, ensure that the level of its consumer receivables does not exceed the equivalent of three months billings of electricity sales (Section 3.13 of Project Agreement). (c) Tariffs 75. OSEB has introduced a series of tariff increases in recent years which have enabled it to improve its financial performance; the operating ratio has improved from 95% in 1978/79 to about 75% in the 1982/83 finan- cial year. The average tariff (inclusive of duties and fuel surcharge) has risen from Rs 0.20/kWh in 1978/79 to Rs 0.37 in 1982/83, a significant achievement. In order to fulfill its obligations under the Third Rural Electrification Project, and to achieve an annual contribution to invest- ment of not less than 20%, OSEB will require an average tariff increase from the present Rs 0.37/kWh to Rs 0.57/kWh by 1989/90, the year of com- missioning the Upper Indravati Project. While much of this 54% increase in tariffs would be needed to offset assumed price escalation, an increase of about 15% at constant 1982/83 prices would be required to maintain the 20% contribution to investment. OSEB will review its tariffs annually to ensure that its revenues are sufficient to meet all operating and maintenance costs and full debt service, and to provide a surplus equiv- alent to not less than 20% of its capital investment (Section 3.15 of Project Agreement). In addition, beginning with fiscal year 1983/84, GOO will limit any annual subsidy to OSEB to the lesser of OSEB's rural elec- trification losses or an amount equivalent to 10% of OSEB's sales revenues (Section 3.04 of Project Agreement). 76. Average tariffs of OSEB have been rising at a rate of about 207% per year in recent years to a 1982/83 level of 37.0 paise/kWh (USc3.9/kWh). Industrial tariffs, accounting for about 85% of consump- tion, have been increasing at a comparable rate, while domestic and agricultural tariff levels have decreased in real terms. In general, on the basis of marginal cost-based tariff studies carried out by OSEB in 1981 and Bank staff in 1982, tariffs for high voltage (mostly industrial) consumers range from 50% to 93% of the long-run marginal cost (LRMC) of supply, while low voltage tariffs (particularly those of domestic and agricultural consumers) cover only 25% to 50% of LRMC. Cross subsidiza- tion among consumer categories is the policy of OSEB and GOO, and for social and political reasons is unlikely to be abandoned in the near future. Nevertheless, since 85% of OSEB supply goes to high voltage industrial consumers, the overall variation between LRMC and the average  -27- price per kWh is acceptable. However, further improvements to the struc- ture of OSEB tariffs are desirable, and have been discussed with OSEB with the recently updated tariff study in view. Major improvements would include: (a) correction of the distortion that exists in the ratio between demand and energy charges for customers with a two-part tariff; (b) adoption of a system of demand charges such that industrial consumers of lower-voltage supply are subject to higher demand charges than con- sumers of higher-voltage supply; (c) increase in the level of low-voltage tariffs relative to high-voltage tariffs; (d) modification of the system of domestic tariffs from a decreasing block system to an increasing one; and (e) elimination of the ceiling on total price per kWh for selected categories of consumers under a two-part tariff system. OSEB will accord- ingly review its tariff situation in light of these proposed modifications and in consultation with GOI introduce improvements to its tariff struc- ture as considered appropriate (Section 3.16 of Project Agreement). (d) Transfer of Upper Indravati Hydro-Electric Station to OSEB 77. The value of the assets to be transferred to OSEB upon commission- ing of the hydro-electric station under the project will be equivalent to the full cost of the identifiable power components, together with 5< of the reservoir costs. This apportionment of costs is based upon GOO studies of the respective power and irrigation benefits and is reasonable. State Government projects are financed from budgetary grants, rather than from loans, and as no direct interest cost is incurred, there is no capitalization of interest during the construction period. However, OSEB will be required to assume and service a loan equivalent to the value of the assets transferred on the above basis, including an imputed amount for interest during construction. The loan will be repaid over 25 years with interest at the higher of 7.5% (OSEB-s forecast average borrowing rate at the expected date of transfer), or GOO's then current lending rate to OSEB. However, in view of the fact that the Electricity (Supply) Act is being amended, these terms and conditions will be subject to the provi- sions of the Act as amended at the time of transfer (Section 3.08 of Project Agreement). (e) Financing Plan 78. OSEB will not contribute directly to the cost of the project, although through a combination of tariffs and duties its consumers are expected to contribute the equivalent of about 47% (Rs 5,688 million) of the combined GOO and OSEB investment of Rs 12,135 million in the power sector through 1989/90. OSEB will, however, share the costs of main- tenance of the major dams associated with the hydro-electric station, although these remain the responsibility of GOO. 79. OSEB's financial requirements for the period 1982/83 through 1989/90 (the project construction period) are estimated at Rs 7,724  -28- million. About 79% (Rs 6,090 million) of this amount will have to be borrowed by OSEB through 1989/90 from GOO or other institutional sources. Such funds would be made available to OSEB under the Sixth and Seventh Five Year Plans in respect of capital expenditures sanctioned by GOI. OSEB's capital structure, and in particular the introduction of equity share capital, will be the subject of future discussions with GOI and GOO. (f) Future Finances 80. Financial projections for OSEB prepared in cooperation with CEA and covering the period 1982/83 through 1991/92 indicate a satisfactory trend, assuming that tariffs are adjusted as necessary to maintain a 2 < contribution to investment. The operating ratio is reasonably stable, at around 76%, as is the debt service coverage, at about 1.3 times. Tariffs would increase from Rs 0.37 per kWh in 1982/83 to Rs 0.58 per kWh in 1991/92. Project Justification and Risks 81. The proposed project is justified as the least-cost solution for providing up to 600 incremental MW and about 1,900 incremental GWh per year in the Eastern Region grid. Compared to the only practical alterna- tive--an extension of the existing pit-head Talcher thermal power sta- tion--the proposed project has the lowest present-value cost at any dis- count rate within a reasonable range. The economic rate of return for the project, using average retail tariffs and quantifiable consumers surplus as benefit proxies for consumers willingness to pay for continuous power supply, is about 12%. This must be regarded as well below the true economic rate of return for the project, since additional expected benefits from the project which are difficult to quantify--for example, the derived consumers' and producers surpluses of industrial, agricul- tural, and commercial output made possible by the alleviation of power shortages--are not included. 82. There appear to be no risks other than those normally associated with this type of project. The major structures are all of types that have been frequently and customarily built in the past, and there is adequate understanding and experience of their design and construction. No earthquake of any significance has been recorded in the area, and there is no known fault or fracture zone in the vicinity of the dams. Further surveys have still to be made to confirm that there will be no significant leakage from the reservoir and more detailed studies of siltation to be expected in the reservoir are required, but these considerations do not pose a threat to the project.  -29- PART V - LEGAL INSTRUMENTS AND AUTHORITY 83. The draft Loan Agreement between India and the Bank, the draft Development Credit Agreement between India and the Association, the draft Project Agreement between the Bank, the Association and the State of Orissa, the Report of the Committee provided for in Article III, Sec- tion 4(iii) of the Articles of the Agreement of the Bank, and the Recomn- mendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 84. Special conditions of the project are listed in Section III of Annex III. Receipt of the report resulting from the review of construc- tion management and accounting procedures of the Orissa Irrigation and Power Department is a condition of effectiveness of the loan and credit (Section 5.01(a) of Development Credit Agreement). 85. I am satisfied that the proposed loan and credit would comply with the Articles of Agreement of the Bank and the Association. PART VI - RECOMENDATION 86. I recommend that the Executive Directors approve the proposed Loan and Credit. A. W. Clausen President by April 18, 1983 E. Stern  I  ANNEX I INDIA - SOCIAL INDICATORS DATA SHEET Page 1 of 5 INDIA REFERENCE GROUPS (WEIGHTED AIERAGES AREA (THOUSAND SQ. KM.) MOST RECENT ESTIMATE- TOTAL 3287.6 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1818.2 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC GNP PER CAPITA (US$) 70.0 110.0 240.0 261.4 890.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.2 152.5 194.4 448.7 701.7 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUS.) 434850.0 547569.0 673207.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.3 17.3 32.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 994.1 STATIONARY POPULATION (MILLIONS) 1694.4 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. EM. 132.3 166.6 200.6 158.1 255.9 PER SQ. KM. AGRICULTURAL LAND 247.0 307.8 362.8 355.9 1748.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.9 42.7 40.2 36.8 39.9 15-64 YRS. 54.5 54.2 56.8 59.7 56.8 65 YRS. AND ABOVE 4.6 3.1 3.0 3.5 3.3 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.0 2.3 URBAN 2.5 3.3 3.3 3.3 3.9 CRUDE BIRTH RATE (PER THOUSAND) 43.7 40.0 35.6 29.3 31.8 CRUDE DEATH RATE (PER THOUSAND) 21.8 16.7 13.6 11.0 9.8 GROSS REPRODUCTION RATE 2.9 2.7 2.4 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 19.3 36.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71=100) 98.0 102.0 99.0 108.1 115.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.6 90.4 88.8/c 97.3 106.4 PROTEINS (GRAMS PER DAY) 53.6 49.7 48.4/c 56.9 54.4 OF WHICH ANIMAL AND PULSE 17.2 14.8 13.1/i 20.0 13.9 CHILD (AGES 1-4) MORTALITY RATE 26.2 20.7 17.4 10.9 6.7 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 43.2 48.1 51.8 57.8 59.8 INFANT MORTALITY RATE (PER THOUSAND) 165.0 139.0 123.4 89.1 63.7 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 17.0 33.0 32.9 32.0 URBAN .. 60.0 83.0 70.7 51.9 RURAL .. 6.0 20.0 22.2 20.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL *- 18.0 20.0 18.1 37.7 URBAN .. 85.0 87.0 72.7 65.7 RURAL *- 1.0 2.0 4.7 24.0 POPULATION PER PHYSICIAN 4850.4 4889.0 3630.6 3297.8 8540.4 POPULATION PER NURSING PERSON 10975.3/d 8296.5 5696.1 4929.3 4829.4 POPULATION PER HOSPITAL BED TOTAL 2178.7 1612.9 1311.0/e 1100.4 1047.5 URBAN .. .. 362.3/i 301.3 651.6 RURAL .. .. 10432.8/e 5815.7 2597.6 ADMISSIONS PER HOSPITAL BED .. .. .. .. 27.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN 2.6 2.8 .. RURAL 2.6 2.8 .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN RURAL .. .. ..  ANNEX I Page 2 of 5 INDIA1-SOCAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVE2g:ZS MOST RECENT ESTIMATESZR MOST RECENT LOW INCOME MIDDLE INCO11 1960 /b 1970 Lb ESTIMATE Lb ASIA & PACIFIC ASIA 6 PACIFIC EDUCATION DU8E-D ENROLLtZENT RATIOS PRIMARYt TOTAL 61.0 73.0 78.0/c 97.4 96.2 MALE 80.0 90.0 92.0/! 101.0 99.8 FEMALE 40.0 56.0 63.0/ci 87.8 92.1 BECONDARY: TOTAL 20.0 26.0 27.0/c 53.0 37.6 MALE 30.0 36.0 36.0/5 63.8 41.1 FEMALE 10.0 15.0 17.0/i; 41.3 34.1 VOCATIONAL ENROL. (X OF SECONDARY) 8.0 1.0 0.7/f 1.7 20.8 PUPIL-TEACHER RATIO PRIMARY 46.1 41.5 51.8/c 37.7 35.5 SECONDARY 16.0 20.9 ,. 20.2 25.0 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.1 73.1 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.6 1.1 1.3/c 1.5 9.8 RADIO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 33.6 35.4 116.5 TV RECEIVERS PER THOUSAND POPULATION 0.0 0.0 1.0 3.2 37.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 10.6 16.0 19.8 16.4 53.7 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.1 4.1 3.7 3.6 2.8 LABOR FORCE TOTAL LAOR FORCE (THOUSANDS) 185951.1 219194.2 264204.4 FEMALE (PERCENT) 30.7 32.5 31.8 29.5 33.6 AGRICULTURE (PERCENT) 74.0 74.0 69.3 70.0 52.2 INDUSTRY (PERCENT) 11.0 11.0 13.2 15.0 17.9 PARTICIPATION RATE (PERCENT) TOTAL 42.8 40.0 39.2 40.0 38.5 MALE 57.0 52.4 51.8 51.8 50.5 FEMALE 27.3 26.9 25.9 23.8 26.6 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.7 26.3/S 22.2/f HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48. 97j 49.4/i LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.77j 7.0/i- LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.27j 16.2/f POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 133.8 194.7 RURAL .. .. 114.0 111.1 155.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 178.2 RURAL .. .. .. .. 164.9 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 40.3 43.8 24.4 RUJRAL .. .. 50.7 51.7 41.1 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Moat Recent Estimate, between 1978 and 1980. /c 1977; /d 1962; /! 1976; If 1975; It 1964-65. May, 1982  ANNEX I Page 3 of 5 DEFINITIONS OF SOCIAL INDICATORS Note: Although the data ore dresn from sources generally judged the ppat euthorit-tive and reliable, in should also hr ooted that they may -ot bh inter- nationally comparable be-.use of thu lack of stasderdieed definitiose sod concepts ussd by different countriea iS collocting rho dote. The duta arc, ease- thblea.. useful to d-ssrihe orders of -ngritede. indicate trends, asd tharatcterise ortais cej-r differesce bett.een coantrirs. The eefer-ene groups are (1) the eas. couetry groop of the auhsct country asd (2) e coustry Sroup with so-otthet highoc average inco=e than rho country group of the subjeet eountry (except for "Rigfh Inoum Oil loportees" group chore "Middle Incocr North Afrira and Middle lest' ischosen beeause of stronger eooio-eultuonl offinitiOs). Is thr refereece group data tho ns-rogen are pupuleies weighted arithmetic meaus for each indicator and shown only chro _jo rity of tho cutsi- in a ugroup has data for thor indicator. Sircr thc coverage of countries umoog the irdicat-rs depends on the availahiltiy of data end is nor o siftor.s eauono ntus he cxercised in relatingsienr ege of nor iodicsror to onother. Those anrerBe arc only useful Sr computing the value of ese indicetor at o sine emueg the country and referrnce groups. ARRA fiboosand nq.he.) Population per Uospital Bed - rural, urban, and rural - Poplation (t tal Total - To-tl _ur_acr area coxprising lend area and inlaed eaters; 1979 fur, arbor, end rural) divided by thein respecive number ef hospital beds Agricultural - Estipxte of ugricultural area used tropurarily or permanently avaishbc On public and private genral and specialied hospital and ro- for crops, posnures. tanket and hirehen gardeno ot to lie fallow; 1979 dare. habilirationcenretrs. Hspirals ret rstablishments pernanretly staffed hp or least nore physician. Esteblishpents pruviding principally cunco- GNP PER CAPITA (USO) - GNe per capita estipateos at current markct yrices. cal- dia care are not included. Eiral huspitals. howevet, isulude health cslared by samr conrerion methsod as-acrld bani Atlas (1978-HO basis); 1960, and medital centers nun pernonently staffed by a physician (hoc bp a 1970, and 1980 data. ptdcal9 essisrant, nurse, midrifr, etc.) ehich offrr ln-patient accumpp- datioc and providr a limited range of siedical facilities. Fur scarfs- ENERGY COHIiItPTEOS PIER CAPITA -. Anueal conusuptian of noemerniul energp (coal tical purposes urhan hospitals include WldOs principal/geteral bospitsls, end lignite, poroeluc. nattral gas and bydrn-. nuclest and gentheorl elon- and rural hospitals, local or rural houpitels and =edical and _. nernity triciry) in hilogra=s of coal equivalent prr capita; 1960, 1970, and 1979 centers. Oprciulteed honpitalt arr included only under total. data. Adtmissoespera Hositalded by total unstrt fr