India - Rihand Power Transmission Project

Document of The World Bank FOR OMCLAL USE ONLY Report No. 12640 PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) DECEMBER 29, 1993 Energy Operations Division Country Department II (India) South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  COUNTRY EXCHANGE RATES AND ABBREVIATIONS Currency Unit = Rupee (Rs.) Rs. 1 = Paise 100 Rupee (Rs.)/US$ Exchange Rates and CPI (Yearly Averages) Consumer Price Index Fiscal Year Rupees/US$ FY80/81=100 FY83 (Project appraisal & approval) 10.10 /a FY84 11.36 FY85 12.37 133.3 FY86 12.61 141.2 FY87 12.96 148.0 FY88 13.92 163.2 FY89 16.23 176.3 FY90 17.50 190.6 FY91 22.74 216.3 FY92 26.20 237.0 (estimate) /a Conversions in the Staff Appraisal Report were made at Rs 9.5/US$. Government of India and National Thermal Power Corporation Fiscal Year: April 1 - March 31 Measures and Ecquivalents 1 Ton (t) = 1 metric ton=1,000 kg.=2,200 lbs. 1 Kilovolt (kV) = 1,000 volts (V) 1 Kilovolt ampere (kVA) = 1,000 volt-amperes (VA) 1 Kilowatt-hour (kVh) = 1,000 watt-hours 1 Megawatt-hour (MWh) = 1,000 kilowatt-hours 1 Gigawatt-hour (GWh) = 1,000,000 kilowatt-hours Abbreviations and Acronyms CEA Central Electricity Authority DESU Delhi Electric Supply Undertaking GOI Government of India IBRD International Bank for Reconstruction & Development IDA International Development Association MOU Memoranda of Understanding NHPC National Hydroelectric Power Corporation NPTC National Power Transmission Corporation NTPC National Thermal Power Corporation POWERGRID Power Grid Corporation of India ROR Rate of Return SEBs State Electricity Boards  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A Office of Director-General Operations Evaluation December 29, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on India Rihand Power Transmission Prolect (Loan 2555-IN) Attached is the "Project Completion Report on India - Rihand Power Transmission Project (Loan 2555-IN)" prepared by the South Asia Region. Part II was prepared by the Borrower. The US$250.0 million loan increased the transmission grid between the National Thermal Power Company (NTPC) and the regional power companies. Disbursements reached US$185.9 million and the balance was canceled after three extensions. In 1991 a power transmission company took over the fixed assets created under the project. After revision in scope, all project components were implemented albeit with substantial delays. The re-estimated economic rate of return was 111 (not directly comparable with the initial figure because of the change in scope). The project generated additional benefits (i.e., transfer of technology, industrial production of high-voltage equipments, streamlining of procurement procedures, spin off of transmission activities to a new company). NTPC maintained its good financial health in spite of persistent problems in bill collection from the State Electricity Boards. The PCR gives a thorough account of project preparation and implementation which was mostly uneventful except for the initial delays. Overall, the project is rated as satisfactory, its sustainability as likely, and its institutional impact as substantial. A recent audit of five NTPC projects (OED Report No. 10854) postponed the need to audit this project. 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.1   FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) Table of Contents Page No. REFACE ....................................................... EVALUATION SUMMARY ............................................ii PART I PROJECT REVIEW FROM BANK'S PERSPECTIVE .1 Project Identity .1 Project Background .1 Project Objectives and Description. 3 Project Design and Organization. 4 Project Implementation. 5 Environment, Resettlement and Rehabilitation 9 Physical Results. 9 NTPC's Financial Performance .10 Compliance with Loan Covenants .14 Sustainability and Internal Economic Rate of Return .14 Bank Performance .14 Borrower Performance .15 Performance of Consultants and Contractors 16 Project Relationship .16 Project Documentation and Data .16 PART II PROJECT REVIEW FROM BORROWER'S PERSPECTIVE ... ....... 17 PART III STATISTICAL SUMMARY ................................. 21 ANNEXES 1 Project Description .30 2 Project Revision .32 3 Availability of Transmission Lines .33 4 Maximum Power Flow on Lines .34 5.1 Income Statement ...................................... 35 5.2 Sources and Application of Funds ...................... 36 5.3 Balance Sheet ......................................... 37 This document has a restricted distribution and may be used by recipients only in the performance of their offlcial duties. Its contents may not otherwise be disclosed without World Bank authorization.   PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) Preface This is the Project Completion Report (PCR) for the Rihand Power Transmission Project, for which Loan 2555-IN in the amount of US$250.0 million was approved on May 28, 1985. The loan was made to India, acting by its President, for on-lending to the National Thermal Power Corporation (NTPC). The original loan closing date of December 31, 1989, was extended three times and the loan was closed on December 31, 1992. On December 5, 1991, an amount of US$48 million of savings was cancelled from the loan account. The loan was closed on December 31, 1992; disbursements were completed on May 12, 1993. On July 15, 1993, US$7,279,424.78 (the balance in the Special Account) were refunded by the Government of India (GOI). Then US$16,090,946.84 remaining undisbursed in the loan account were cancelled effective July 15, 1993. Thus disbursements under the Loan were US$185,909,053.16. On August 16, 1991, the management of the project (operation and maintenance of the assets in service and implementation of those still under construction) was transferred from NTPC to the National Power Transmission Corporation (NPTC), the newly established utility responsible for transmission and grid operations, under a Management Contract signed between the two Corporations. NPTC was later named Power Grid Corporation of India Ltd. (POWERGRID). On January 8, 1993, an Ordinance providing for all the rights, titles and other interests related to the transmission systems of NTPC and two other centrally-owned utilities , to be transferred to POWERGRID, with effect from April 1, 1992, was promulgated by the President of India. At the time of preparation of this PCR, the Bank was in the process of finalizing the modifications on the Development Credit, Loan and Project Agreements to formalize the transfer of the Bank loans and IDA credits from NTPC and NHPC to POWERGRID retroactively with effect from April 1, 1992. With regard to Loan 2555-IN, assets and liabilities for about US$6.2 million remained with NTPC and assets and liabilities for about US$179.7 million have been transferred to POWERGRID. The amounts will be finalized after accounts between NTPC and POWERGRID are settled. The PCR was prepared by the Energy Operations Division of the Country Department II (India) of the South Asia Regional Office, and by NTPC and POWERGRID. The former prepared the Preface, Evaluation Summary and Parts I and III of the PCR, while the implementing agencies prepared Part II. Preparation of Parts I and III of the PCR was based on information in the Staff Appraisal Report, the Loan and Project Agreements, and material on the project in Bank files and that provided by NTPC and POWERGRID. The preparation was also based on discussions with some of the Bank staff who were involved with the project and the officials of the Government of India (GOI), NTPC, POWERGRID and the project beneficiaries (i.e., State Electricity Boards) during a PCR mission to India in February 1993. 1/ National Hydroelectric Power Corporation (NHPC) and North-Eastern Electric Power Corporation (NEEPCO).   - ii - PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) Evaluation Summary Obiectives The objectives of the project were: (a) to meet the electricity demand in the Northern Region by providing the transmission linkage between the thermal power generation plants in the Singrauli-Rihand complex in the south east of the region and the main load centers of the western parts of the region; and (b) to ensure the evacuation of power from these plants at least cost to the economy. The project was also to serve as a vehicle for the introduction of a new technology (long distance HVDC links) needed for the expansion and reinforcement of EHV transmission grid. As in the previous Bank-financed projects with NTPC, another objective was to improve, in the long run, the operational, institutional and financial performance of the State Electricity Boards (SEBs), by assisting in the development of a financially sound, and technically and institutionally competent centrally- owned power utility which would serve as a model to SEBs (Part I, para. 3.1). Implementation Experience NTPC (and since August 1991, POWERGRID) successfully implemented the project, albeit with substantial delays. Implementation of the HVDC components took over a year and half longer than that envisaged because of delays in obtaining environmental clearance for a section of the transmission line which had to pass through a forest and fire damage (and subsequent replacement of damaged parts) to HVDC terminal at Rihand during the testing of the terminal. Implementation of the 400 kV transmission lines and substations was completed generally some nine months later than envisaged because of project revision, slow mobilization of one of the contractors, and long time taken to evaluate the bids. Construction of the transmission line extension from Panipat to Malerkotla and the associated substation (which were subsequently added to the project) were completed in July 1992. At appraisal, all the project components were scheduled to be commissioned by December 1988. At the time the Bank closed the loan on December 31, 1992, the project was not completed. Supplies and works amounting to US$7.6 million remained - these expenditures are being funded under Loan 3577-IN (Part I, paras. 5.2, 5.3 and 5.10). Results Overall, the project achieved its objectives. The project has been a major component in the establishment of centrally owned regional grids and intra-regional connections. The power transmission capacity from the Singrauli-Rihand-Vindhyachal complex to the western parts of the Northern  - iii - Region has been increased in a manner which helps optimal utilization of the installed thermal capacity in the said coal-fired power plants complex, by transmitting over a very long distance large amounts of power with minimum transmission losses. The project also helped NTPC (since August 1991, POWERGRID) to get acquainted with the HVDC technology (Part I, para. 7.1). The project contributed in making NTPC an efficient utility but failed in its sectoral objective in inducing improvements in the operational, institutional and financial performance of SEBs (Part I, para. 7.1). NTPC's financial rate of return on historically valued net fixed assets declined from a high 171 in FY86 and FY87 to 15% in FY92 against the covenanted rate of return of 9.5%. The IERR for the project as implemented was estimated at 8.2% (Part I, paras. 8.1 and 10.2). Sustainability The project is sustainable, even though at present its main component (i.e., the Rihand-Delhi Area HVDC link) is not yet being fully utilized. Sustainability will be assured with the strengthening of the transmission ring around metropolitan Delhi and growth in power demand. It is certainly assured for the future, as the facilities built under the project are integral components of POWERGRID'S system development program (Part I, para. 10.1). However, insufficient generation and transmission tariffs and an unchecked increase of NTPC's and POWERGRID's accounts receivable could endanger such sustainability. The Bank, GOI, NTPC and POWERGRID have been taking actions to avoid such occurrence (paras. 8.1 - 8.7). Findings and Lessons Learned Major findings are as follows: a) The project was not completely finalized when the Bank approved it. This fact is clearly demonstrated by the subsequent revision of the description (Part I, paras. 5.1 and 5.2); b) The project contributed to the enhancement of NTPC's (later POWERGRID's) expertise in the area of high voltage transmission, created employment of local labor and helped to the development of local manufacturing industry (Part I, paras. 5.5 and 5.6); c) The average time taken from bid opening to the award of the contract (including Bank acceptance of the proposed award) was about ten months, in some cases over a year. In an effort to speed up procurement, standard bidding documents will in future be used by NTPC and POWERGRID. They would also give further emphasis to finishing promptly the payments for the contracts, so that the closing dates of new loan(s) would not need to be extended (Part I, para. 5.7);  - iv - d) In addition to the conventional financial rate of return (ROR) on average historic fixed assets in operation, a covenant about NTPC's accounts receivable was introduced for the first time under the project. This covenant immediately focussed on NTPC's principal difficulties and poor bill collection was the only area where NTPC's performance fell considerably short of expectations (Part I, paras. 8.2, 8.6 and 12.2); e) GOI interventions through the central appropriations helped NTPC resolve, albeit for limited periods, its accounts receivable problem. These interventions aimed at having NTPC operate efficiently, thus keep the electric energy supply in the country at an adequate level. It is doubtful that GOI's actions have led to SEBs improving their operational efficiency and their billing and collection procedures and practices. What is equally important, but so far received little attention, is the need for energy conservation on the customer (SEBs) side through adoption of appropriate tariffs and tariff structure at SEBs and through end-use efficiencies (Part I, para. 8.4); f) Another appropriate covenant would have been a cash generation covenant, e.g. "contribution towards investment" which would have also highlighted the deterioration in NTPC's performance (Part I, para. 8.6); and g) Bank's position (only partially shared by GOI) is that electricity industry provides a service which has to be fully paid through user-charges. The perception of the State Governments and SEBs, perhaps for political reasons, is that provision of electricity is partly a social service. The transfer of funds to NTPC through central appropriations is but another subsidy (whether it comes from GOI or from SEB), and not a direct payment through tariffs (Part I, para. 12.4). Major lessons learned from this project are summarized below: a) As a precondition for further Bank loans, more emphasis should be given to improving the commercial arrangements between NTPC and its clients. However, this has proved to be difficult to achieve in practice unless the financial performance of the SEBs is improved (Part I, para. 12.4); b) To enable NTPC to operate on a purely commercial basis, GOI should allow NTPC to sell to other customers the allocated shares of the SEBs which do not comply with their agreements with NTPC. In cases where technical reallocation (by limiting availability of power to a particular SEB) cannot be implemented, commercial reallocation can be done. This can be done by limiting allocations to a defaulting SEB and charging a stiff penalty for drawals exceeding the reduced allocation (Part I, para. 12.2); and  - v - c) As a result of the changes in the overall economic policy environment within which NTPC is operating, its financial policies need orientation. Under the circumstances, it would be appropriate to change the existing rate of return covenant into a self financing ratio covenant, because it would not only provide a better monitoring mechanism for NTPC's financial performance, but also provide better support to NTPC towards meeting its development challenges (Part I, para. 8.6). The lessons drawn from this and previous projects implemented by NTPC have been used in the preparation, appraisal and negotiations of the NTPC Power Generation Project, which was approved on June 29, 1993: a) GOI has adopted new investment and commercial policies and electricity tariffs allowing NTPC to shut-off or restrict power supply if its clients are in default with their bulk supply agreements. These policies are designed to introduce better commercial discipline at SEBs, along with improving NTPC's own operational and financial performance, including improving revenue collection (para. 12.3); b) NTPC has agreed with the Bank on an internal cash generation covenant (para. 8.6); c) GOI established POWERGRID to: (i) improve the efficiency in power transmission and systems operations, through an extensive restructuring of the transmission sector; and (ii) complement its policy initiatives to encourage private generation and competition in power generation (para. 2.6); and d) The Bank and NTPC agreed on standard bidding documents whose use would curtail the procurement period (para. 5.7). The last two points were also taken into account under Loan 3577- IN for the POWERGRID System Development Project.  PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Proiect Identity Name Rihand Power Transmission Loan No Loan 2555-IN RVP Unit South Asia Region Country India Sector Energy Sub-sector Power 2. Pro-ect Background 2.1 In India, the responsibility for electricity supply is shared constitutionally between the Government of India (GOI) and the states. In addition, India is one of the few developing countries with a vibrant, if small, private sector presence in public power supply. At independence, private utilities and licensed local authorities, located in urban areas, provided about 80% of public electricity supply. GOI opted to embark on an ambitious electrification program to support the development of power- intensive industries for a rapid industrial development and expansion of irrigation. The Electricity (Supply) Act of 1948 (the Act) created the state electricity boards (SEBs) and entrusted the state governments and the boards with primary responsibility for public power supply. The coordination of SEBs' activities within the national power development policy, and the formulation of longer-term plans for power development is the responsibility of Central Electricity Authority (CEA), established in 1950. 2.2 Between 1960 and 1980, power demand grew twice as fast as the economy, and the generating capacity increased almost five-fold from about 5,600 MW to about 32,000 MW. Yet, for the entire period the country faced power shortages, frequent power interruptions, wide variations in system frequency, and large drops in voltage at the consumer level because SEBs could not fulfill their responsibilities. Though set up as autonomous bodies, SEBs have been under the stringent control of their state governments in vital matters such as changes to tariffs and tariff structure, with the result that they have not developed commercial and financial disciplines, and their financial performance generally has been poor, to the extent of depending on the state governments for operational subsidies. 2.3 In mid-1970s, GOI reoriented its strategy in order to supplement efforts of SEBs in increasing installed capacity and establishing high voltage transmission networks. Emphasis was put on: (a) accelerating the development of the hydro power potential and large coal-fired power plants both at pithead and in the proximity of load centers; (b) improving the efficiency of thermal power plants and reducing losses in the transmission and distribution networks; (c) expanding the rural electrification program; and (d) strengthening the organizational and management capabilities of the SEBs.  -2- 2.4 GOI established in 1975 two power generating companies, the National Thermal Power Corporation (NTPC), and the National Hydroelectric Power Corporation (NHPC) to construct and operate large thermal and hydro power stations and associated transmission systems. The rapid increase in generation necessitated to expand the transmission networks and also to increase the voltage level to handle the transfer of large blocks of power from generating stations to load centers. Simultaneously, for the first time in India a need was felt for power planning and development on a regional basis to ensure the optimum utilization of natural resources which are rather unevenly distributed over the country and also for enhancing the reliability and security of the power transmission systems. The country was divided into five contiguous regions (Northern, North Eastern, Eastern, Western and Southern) with a view to build regional integrated grids. Regional Electricity Boards (REB) were established to integrate the operations of each grid through regional load dispatch centers and to improve collaboration among the SEBs. 2.5 By the time the Rihand Power Transmission Project was approved in May 1985, IDA/Bank had financed 11 operations implemented by NTPC. Ten were for the construction of an aggregate of 7,800 MW of pithead coal-fired thermal power plant (TPP) capacity in four sites (Singrauli, Korba, Ramagundam and Farakka) and associated transmission lines to evacuate the power generated at these power stations into the networks owned and operated by SEBs. The eleventh project was the Central Power Transmission project (Loan 2283-IN; FY83) whose primary objective was to support GOI's strategy to extend and improve power supply through the establishment of centrally owned regional grids and intra-regional connections leading to the promotion of a national grid. The project was the 38th Bank/IDA operation in the sector, and 12th operation with NTPC. As in the previous NTPC projects, India, acting by its President, was the borrower and NTPC the implementing agency. The project was developed from studies conducted by CEA and NTPC with assistance by Hydro Quebec International, consultants from Canada. 2.6 In 1989, GOI established the National Power Transmission Corporation Ltd. (NPTC), to improve the efficiency in power transmission and systems operations, through an extensive restructuring of the transmission sector, and complement its policy initiatives to encourage private generation and competition in power generation. On August 16, 1991, the management of the transmission assets (operation and maintenance of the assets in service and implementation of those still under construction) of NTPC, including the Project, was transferred to NPTC, under a Management Contract signed between the two Corporations. Subsequently, two other GOI-owned utilities (NHPC and the North-Eastern Electric Power Corporation - NEEPCO) which had transmission lines and substations in operation or under construction, signed similar management contracts with NPTC. NPTC was later named Power Grid Corporation of India Ltd. (POWERGRID). On January 8, 1993, an Ordinance providing for all the rights, titles and other interests related to the transmission systems of NTPC, NHPC and NEEPCO, to be transferred to POWERGRID, with effect from April 1, 1992, was promulgated by the President of India. The Bank supports the establishment and development of POWERGRID under the US$350 million Loan No. 3577-IN for the POWERGRID System Development Project, approved on March 23, 1993. At the time of preparation of this PCR, the Bank was working on the finalizing of the modifications on the Development Credit, Loan and Project Agreements to formalize the transfer of the Bank loans and IDA credits from NTPC and NHPC to POWERGRID, retroactively with effect from April 1, 1992. With regard to Loan 2555-IN, assets and liabilities for about US$6.2 million remained with NTPC and assets and liabilities for about US$179.7 million have  been transferred to POWERGRID. The amounts will be finalized after accounts between NTPC and POWERGRID are settled. 3. Project Objectives and Description 3.1 Project Obiectives. The objectives of the project were: (a) to meet the electricity demand in the Northern Region by providing the transmission linkage between the thermal power generation plants in the Singrauli-Rihand complex in the south east of the region and the main load centers of the western parts of the region; and (b) to ensure the evacuation of power from these plants at least cost to the economy. The project was also to serve as a vehicle for the introduction of a new technology (long distance HVDC links) needed for the expansion and reinforcement of EHV transmission grid. As in the previous Bank-financed projects with NTPC, another objective was to improve, in the long run, the operational, institutional and financial performance of the State Electricity Boards (SEBs), by assisting in the development of a financially sound, and technically and institutionally competent centrally-owned power utility which would serve as a model to SEBs. 3.2 Original Project Description. The project, as approved by the Board on May 28, 1985, is detailed in Annex 1 and comprised: (a) installation of a 500 kV HVDC bi-polar transmission line of about 910 km, connecting Rihand and Karawalnagar near Delhi, associated AC/DC converting stations for an initial capacity of 1,000 MW, and related auxiliary equipment at Rihand and Delhi; (b) construction of about 1,350 km of 400 kV single circuit (s/c) and 87 km of 400 kV double circuit (d/c) AC lines (total 1,437 km) connecting Rihand and Singrauli power stations with Kanpur, Delhi, Panipat and Jaipur; (c) construction of three new and extension of four existing substations with their auxiliaries; and (d) technical assistance for engineering, testing and commissioning of the project. The project cost was estimated at about Rs 6.9 billion (about US$579 million equivalent) with the Loan providing $250 million (Table 1 for details on estimated and actual costs). It was assumed that GOI would secure co- financing of about US$135 million equivalent for equipment for HVDC terminals. 3.3 Revised Project Description. After the appraisal of the project, NTPC found necessary to introduce three modifications to the project description: (i) changes of grid configuration around the Delhi area caused by environmental constraints - the most important was the relocation of the HVDC terminal from Karawalnagar to Dadri, resulting in a shorter line; (ii) redesign of the HVDC line to take into account longer-term capacity demand growth and higher efficiency; and (iii) an extension by about 250 km of the 400 kV Delhi Area-Panipat line from Panipat to Malerkotla in Punjab to meet NTPC's contractual obligations with the Punjab State Electricity Board. The first two changes were a consequence of a change in location of the 4x210 MW coal-fired National Capital Thermal Power Project of NTPC from Muradnagar to Dadri, and of detailed design of the transmission system. The project, as  - 4 - modified, was found by the Bank to remain consistent with the Bank's strategy in the power sector which had been encouraging integrated planning and coordinated operation of the country's electricity systems to satisfy long term demand projections and regional demand patterns in a context of maximum system reliability and minimum cost. The Bank agreed on the new scheme on June 5, 1987. The revised project was then expected to be completed by June 30, 1991. Its description is detailed in Annex 2 and summarized as follows: (a) installation of a 1,500 MW capacity 500 kV HVDC bi-polar transmission line of about 814 km", connecting Rihand and Dadri (near Delhi), and associated AC/DC converting stations and related auxiliary equipment at Rihand and Dadri; (b) construction of about 1,509 km of 400 kV single circuit (s/c) and 185 km of 400 kV double circuit (d/c) AC lines (total 1,711 km) connecting Rihand and Singrauli power stations with Kanpur, Delhi, Panipat, Malerkotla and Jaipur; (c) construction of five new and extension of one existing substations with their auxiliaries; and (d) technical assistance for engineering, testing and commissioning of the project (this component was not modified). The total cost of the project was estimated to be increased. The new project description was still within the overall objectives of the project as originally approved by the Board. Thus the Management considered that the approval of the Board for the said changes was not necessary. 4. Pro-ect Desicrn and Organization 4.1 Proiect Desiqn. The project was the second Bank operation with NTPC solely to strengthen the transmission systemn. NTPC had already acquired adequate experience in the area of 400 kV transmission line and substation design and engineering during the construction of the transmission lines and substations associated with the Singrauli, Korba, Ramagundam and Farakka power plant projects<. The basic and detailed engineering work for the 400 kV lines and substations was thus carried out by NTPC in-house. As the long distance HVDC link technology was new to India and NTPC2, the 2/ originally the length of the HVDC line from Rihand to Karawalnagar in the Delhi area was 910 km. 3/ The first such transmission project was the Central Power Transmission Project (Ln. 2283-IN) approved on May 19, 1983. 4/ All these coal-fired power plant projects were partly funded under IDA credits and Bank loans. 5/ The Central Power Transmission project included the construction of various 400 kV transmission lines and substations and that of a back-to- back HVDC system at Vindhyachal, in the Singrauli-Rihand-Vindhyachal complex. At the time NTPC initiated the Rihand Power Transmission Project, it had not yet obtained full experience in HVDC technology.  preliminary engineering of HVDC line, its conductor and voltage optimization, etc., were carried out by Hydro Quebec International, Canada. Teshmont Inc., Canada, were appointed as consultants responsible for work related to HVDC terminals. NTPC was responsible for the preparation of all specifications, bidding documents, bid evaluation reports and construction supervision. 4.2 Proiect Organization". At the time of appraisal, NTPC had already adopted its current three-tier organizational structure at corporate, regional and project levels. The Corporation is headed by a Chairman and Managing Director (CMD), who is assisted by five full time functional directors, namely, Director (Projects), Director (Operations), Director (Technical), Director (Finance) and Director (Personnel). At the Corporate Office, corporate planning and central procurement functions are headed by Executive Directors reporting to the CMD. For the purpose of the administration and execution of work at the sites, the Corporation is divided into five regions (Northern, Western, Eastern, Southern and National Capital Regions) with headquarters at present located at Allahabad, Nagpur, Patna, Hyderabad and Delhi, respectively. These regions are under the control of Regional Executive Directors who are responsible for the implementation, operation and maintenance of power plants in their respective regions. Each power plant is headed by a General Managerx. The structure has shown the advantage of optimizing the span of control of the CMD and provided for the decentralization of line responsibility while retaining centralized systems in areas such as long-term planning, basic engineering, procurement of critical equipment and spares, quality assurance, co-ordination with the World Bank and other financing agencies and inspection. Parts of the Project were located in the Northern Region and were thus managed by the Executive Director for this Region. 5. Prolect ImDlementation 5.1 Loan Effectiveness. Loan 2555-IN was approved on May 28, 1985; the Loan and Project Agreements were signed on September 16, 1985. It was expected that the loan would be declared effective by December 16, 1985. Signing of a Subsidiary Loan Agreement between GOI and NTPC, satisfactory to the Bank, was the condition for loan effectiveness. The loan was declared effective on February 20, 1986, a delay of two months from the date of effectiveness originally determined at signing. 5.2 Prolect Start-uD and Implementation Schedule. At appraisal, the project was expected to be completed by December 1988. At the time the Bank agreed on the revisions to the project (para. 3.3), it was expected that, because of the extension of the 400 kV line to Malerkotla, the project completion date would be delayed by one year to December 1989. Quarterly Progress Reports and other communications in Bank files show that NTPC proceeded with the procurement of equipment for the project components while 61 As NTPC was the legal implementing agency of the project during the life of Ln. 2283-IN, NTPC's project organization and management is reviewed in this section. 7/ Until August 16, 1991, NTPC's regional transmission units were also headed by a General Manager (para. 2.6).  - 6 - the Loan Documents were being processed - the first contract was awarded on June 14, 1985. 5.3 Implementation Process. The HVDC transmission line and terminal stations which were projected at appraisal to be commissioned in December 1988, were put into service in September 1991. Implementation of the HVDC components took over a year and half longer than that envisaged because of: (a) delays in obtaining environmental clearance for a section of the transmission line which had to pass through a forest; (b) collapse of one of the transmission towers which was sited in a river bed; (c) and fire damage (and subsequent replacement of damaged parts) to HVDC terminal at Rihand during the testing of the terminal. Modifications were subsequently introduced by the manufacturer of the HVDC terminals8. Implementation of the 400 kV transmission lines and substations was completed generally some nine months later than envisaged because of project revision, slow mobilization of one of the contractors, and long time taken to evaluate the bids. Construction of the transmission line extension from Panipat to Malerkotla and the associated substation (which were subsequently added to the project; para. 3.3) were completed in July 1992. 5.4 Extensions of the ClosinQ Date. The loan was scheduled to be closed on December 31, 1989. While agreeing to GOI's request to revise the project, the Bank recognized that extension of the loan closing date to December 31, 1990, would be required. Because of the reasons mentioned above, implementation of the project was substantially delayed. The Bank reviewed progress of implementation annually and agreed extending the closing date by one year each time, for a total of 36 months to December 31, 1992. The Bank did not extend the closing date of the loan beyond December 31, 1992, but informed GOI that it would be willing to consider to include funding the completion of the ongoing contracts retroactively under the then-proposed POWERGRID System Development Project. The latter project was approved by the Board on March 23, 1993 (Loan 3577-IN; para. 2.6) and includes US$7.6 million for the completion of the contracts of the Rihand Power Transmission Project. Disbursements for these expenditures under Loan 3577-IN would be completed during FY94. 5.5 Procurement. The equipment and materials financed under the loan were split into 61 packages, most of which were procured under international competitive bidding (ICB) procedures in accordance with Bank guidelines. Contractors who supplied transmission line tower structure were in charge of the erection of the towers, insulators and hardware, and stringing of the line conductors, on a supply and erect basis. Suppliers of main equipment for the substations and the HVDC terminals were also in charge of the erection of the substations. NTPC procured, always under ICB, the conductors, line material such as insulators and hardware and the electrical equipment including metering and instrumentation and had these equipment erected by the above mentioned contractors. The relatively large number of contracts and the above forms of packaging created a significant workload on NTPC as well as Bank staff to monitor and supervise these contracts. However, the above two 8/ These modifications which were installed in other such projects on other parts of the world as well, included the introduction of highly sensitive smoke detection system and creation of compartments in the system in order to contain fire - should one occur.  - 7 - characteristics helped NTPC staff to acquire valuable experience in preparing contract documentation, reviewing and evaluating bids, and in managing the engineering of the project, since they were responsible for proper interfacing of project materials and equipment from different suppliers. Most of the said NTPC staff have been transferred to POWERGRID. However, it is noted that the above procurement system applied by NTPC, which required drawing up of specifications for tenders, preparation of bidding documents and carrying out of bid evaluations swamped NTPC staff who at one point had to handle some 1,200 contracts valued at over US$1 billion. On the other hand, dividing the project material/equipment into numerous contract packages, promoted participation from a range of large and medium sized local manufacturers/ suppliers which, in turn, has contributed to the development of local manufacturing industry. 5.6 Of the 61 contracts (total value: US$197 million equivalent) put out for ICB, 10 contracts (valued at US$59 million or about 30% of the total) were awarded to foreign manufacturers/suppliers. Of the two highest value contracts (one for the supply of conductors and the other for the supply of insulators) were awarded to a local and to a foreign manufacturer/supplier, respectively. The local industry was fairly competitive where the size of contract packages was within its manufacturing and/or supply capability. NTPC followed its practice of specifying the qualification requirements of the prospective suppliers on the bidding documents; this was not objected to by the Bank and worked reasonably. 5.7 For all contracts estimated to cost over US$3.5 million equivalent, NTPC submitted for Bank's review and comments the bidding documents and evaluation reports. Bank files show that there were long delays in procurement. On some occasions, there was need to amend the bid documents, and also to re-bid in some cases. Based on the available documentation, the average time taken from bid opening to the award of the contract (including Bank acceptance of the proposed award) was about ten months, though the said period for six contracts took over a year. The Bank brought to NTPC's attention the long delays in procurement, particularly in bid evaluation. In an effort to speed up procurement, standard bidding documents will in the future be used by NTPC and POWERGRID. Under the NTPC Power Generation Project9 and Loan 3577-IN for the POWERGRID System Development Project, NTPC and POWERGRID respectively agreed on standard bidding documents, whose use would reduce the procurement period substantially. They would also give further emphasis to finishing promptly the payments for the contracts, so that the closing dates of new loan(s) would not need to be extended. 5.8 Proiect Costs (Part III, Table E). The total cost of the original project, including contingencies, taxes and duties, was estimated in the SAR at about Rs. 8,315 million (US$666.0 million equivalent). The actual cost of the revised project was Rs. 13,440 million (US$734.6 million equivalent). In US dollar equivalent and in Rupee terms, respectively, the actual project cost was 10% and 621 higher than the appraisal estimate. The difference between the two increases was due to substantial devaluation of the Rupee from Rs.12/US$ at appraisal to Rs.30/US$ in December 1992, when the loan was closed. During the implementation period, the weighted average rate for this project was Rs 18.3/US$. While inflation increased project costs in local 9/ This project was approved on June 29, 1993.  currency, the devaluation resulted in the loan proceeds generating a substantially larger amount in local currency than had been expected. Although a detailed and realistic cost comparison between the appraisal estimates and the actual costs is not possible due to the major changes to some of the transmission lines and the associated substations, it is concluded that costs at appraisal were underestimated. 5.9 Proiect Financinq. The financing plan was changed substantially. That estimated at appraisal and the actual plan are summarized in the following table. Financing of the Project Sources SAR Actual (*)(**) (USS million) (%k) (US$ million) (%) * Bank Loan 250.0 36.1 185.9 25.4 * GOI (Loan & Equity) 308.0 44.44 254.5 34.6 * Credit from Sweden 135.0 19.46 164.5 22.4 * IBJ - - 15.3 2.1 * EXIM - 58.3 7.9 * Bonds 56.1 7.6 Total 693.0 100.0 734.6 100.0 (*) Excludes US$7.6 million to be disbursed under Loan 3577-IN (para. 2.6). (**) It is noted that the actual figures available against some of the funding sources, as obtained from NTPC, are available only in Rupees, which are as follows: Rs. Million GOI (Loan & Equity) 4,833.0 Credit from Sweden 3,193.5 IBJ 297.9 EXIM 1,133.0 Bonds 1,089.2 These were converted into US$ using suitable rate of exchange. 5.10 Disbursements. The estimated and actual disbursements, and the original and revised allocation of the loan proceeds are given in Part III, Tables E and F, respectively. By the time of the original closing date (December 31, 1989), cumulative disbursements were US$133.6 million, 53% of the original loan amount. The closing date of the loan was extended three times by one year each, to December 31, 1992 (para. 5.4). In December 1991, US$48 million of savings were cancelled from the loan amount. The loan was closed on December 31, 1992; disbursements were completed on May 12, 1993. On July 15, 1993, US$7,279,424.78 (the balance in the Special Account) were refunded by GOI. Then US$16,090,946.84 remaining undisbursed in the loan account were cancelled effective July 15, 1993. Thus disbursements under the Loan were US$185,909,053.16. India began repaying the proceeds of the loan on January 15, 1991, and will continue to do so until July 15, 2005. It is noted that by the time disbursements were completed, India had already repaid US$38,118.600, about 21% of the loan amount utilized.  -9- 6. Environment. Resettlement and Rehabilitation 6.1 While project implementation was delayed awaiting the clearance of the Ministry of Environment and Forests of GOI, and in the meantime, in parallel with the re-siting of the proposed coal-fired NCTPP project its description had to be amended (para. 3.3), the project itself did not create any significant environmental and resettlement and rehabilitation problems. NTPC selected the line routings so as to minimize infringement on forest land. Where trees had to be felled in order to provide access to the lines, trees of a corresponding number were planted in the vicinity. The question of relocation of people affected by the project did not arise because transmission line routes and substation sites were selected in un-inhabitated areas remote from the population centers. 7. Physical Results 7.1 Project Obiectives. Overall, the project has achieved its objectives (para. 3.1). The project has been the second component'' in the establishment of centrally owned regional grids and intra-regional connections. The power transmission capacity from the Singrauli-Rihand- Vindhyachal complex to the western parts of the Northern Region has been increased in a manner which helps optimal utilization of the installed thermal capacity in the said coal-fired power plants complex, by transmitting over a very long distance large amounts of power with minimum transmission losses. The project also helped NTPC (since August 1991, POWERGRID; para. 2.6) to get acquainted with the HVDC technology. The project contributed in making NTPC an efficient utility but failed in its sectoral objective in inducing improvements in the operational, institutional and financial performance of SEBs, as seen in the disappointing operational, financial and institutional performances of many SEBs. It is not clear how, if any, NTPC's institutional development helped those performing SEBs, such as the Maharashtra and Andhra Pradesh SEBs. The failure in obtaining improvements at SEBs while supporting the development of NTPC as a model utility can be traced to the fact that the Bank had not fully appreciated the extent of the interference by the state governments in the affairs of SEBs (para. 12.4). 7.2 Physical Results. The individual components of the revised project were commissioned at various dates given in Part III, Table D. Since their commissioning, the project components have in general functioned satisfactorily. The problems which did arise were invariably of a minor nature and were resolved without seriously affecting the transmission of power. The availability of the individual components has been almost 100l in 1992 (Annex 3). Furthermore, the daily power amounts transmitted through the 400 kV lines are well in line with the design capacity of the lines. Annex 4 shows the maximum power flow and energy transmitted in 1992, on a monthly basis, under the Rihand system. Each line of the HVDC system has been successfully operated at 750 MW + 10%, and the maximum load on the entire line has been around 1,100 MW, which was injected to the western parts of the Northern region and helped improving voltage problems in this part of the Region. However, until the 400 kV transmission ring around Delhi is constructed, the power transmitted through the HVDC line would be limited to 10/ In addition to the HVDC back-to-back system built at Vindhyachal under the Central Power Transmission Project (Loan 2283-IN).  - 10 - about 1,000-1,100 MW. Other reasons for the underutilization of the link are: (i) suboptimal operation of generating plant on a regional basis; and (ii) indifferent or unresponsive power generation tariff structure. Generation plants are not operated optimally because individual SEBs do not observe cost merit order in power generation. The power generation tariff structure of NTPC in effect up to November 1992 did not encourage merit-order plant dispatch in the regional grids. The actual NTPC tariff in application since November 1992 is on two part basis as per the recommendations of GOI's K.P. Rao Committee. This tariff is conducive to the introduction of merit order operation. POWERGRID is pursuing further tariff improvements in transmission. Assistance is being provided under Loan 3577-IN. 8. NTPC's Financial Performance 8.1 From 1982 when NTPC started its commercial operation to the present, NTPC's financial performance has been satisfactory, except for the large accounts receivable (para. 8.2). NTPC's financial statements for the period FY85 to FY92 are given in Annexes 5.1-5.3 and a summary for the last five years is given in the Table 8.1 below. NTPC's operating data reflect the growth the Corporation experienced since 1982. Key financial parameters, e.g., assets in operation, revenue from electricity sales, total operating revenues, and operating income before interest, increased some five-fold since 1987. The rate of return on net average fixed assets (historically valued) for this period was high, generally around 15% (between 13t and 171), well in excess of the 8* between FY85-FY90 and 9.51 starting from FY91, as was stipulated in the project agreement.  Table 8.1: Key Financlet indicatore 19B5 1986 1987 1988 1989 1990 1991 1992 ,,,,........ .......... .................. ...... .......... ................ ................ ................ .............. ............... . '................ DESCRIPTION\FY Forecast Actual Forecast Actual Forecast Actuat forecast Actual Forecast Actuat Forecast Actual Forecast Actual Forecast Actual ........ ............. .................. ...... ........ ........ ........... ..... ..... ............ , ,,, ,,,_,.......... ....... .......... ........ ........... ....... .......... ........ ........... ....... ....... ............ ....... .. Electricity Sates (Gwh) 7,984 8,316 11,687 12,839 13.644 14,408 17,720 17,533 25,422 24,875 33,759 35,421 43,565 40,306 54,241 56,657 Average Butk Tariff (P/Kwh) (Generati 42.37 37.00 47.96 37.61 50.60 39.81 56.02 41.07 60.20 46.07 63.81 51.88 67.95 52.73 73.07 60.62 TOTAL OPERATING REVEUES 3,383 3,438 5,605 5,294 6,904 6.453 9,927 8,622 15,305 12,748 21,541 20,573 29,602 24,206 39,632 39,929 Rate of Return n Hlstoric Assets (1) 12.70 12.74 13.50 16.77 12.70 17.03 12.50 16.39 10.10 14.79 9.40 14.95 11.30 12.76 12.00 15.34 Return on Capital Employed 9.53 13.30 12.70 12.11 10.52 10.61 9.71 11.93 Operating Ratlo (1) 49.30 59.40 50.50 55.60 51.90. 54.58 50.30 54.65 53.00 59.30 56.60 61.08 54.60 60.22 54.20 60.44 Contrlbution to Construction (Anmual) X 9.07 3.42 9.66 39.81 -1.78 18.79 17.03 31.26 Contrlbution to Construction (3 year Ava.) X 8.73 3.44 10.43 38.64 -1.78 17.55 14.16 45.80 Debt Service Coverage 3.30 3.32 3.60 4.87 3.00 3.96 3.00 3.89 2.10 2.37 2.00 2.49 2.20 2.54 2.40 2.36 Debt:Equity Ratlo 27/73 32/68 28/72 36/64 31/69 42/58 34/66 43/57 34/66 47/53 34/66 47/53 31/69 43/57 26/72 48/52 Current Ratio 1.02 1.62 1.58 1.68 1.81 1.79 1.90 1.54 Accontt Receivable (# of days) 184 163 164 177 175 210 233 154 FH H  - 12 - 8.2 Bill collection and accounts receivable have been persistent problems for NTPC, because of the poor financial situation of many SEBs. NTPC's accounts receivable increased at a far greater pace than its revenues and operating income in successive years. The receivables, which represented some 5.2 months of billing in 1987, steadily increased to 7.5 months in 1991, compared to less than one month (27 days) projected in the SAR for the entire period. A covenant specifying the level of accounts receivable not to exceed an amount equivalent to the proceeds of its sales of power for the two preceding months, was first introduced for NTPC under this Loan, with effect from the end of FY86. The covenant immediately pointed out to the large arrears accumulated by SEBs. The covenant was repeated in three subsequent Bank loans"/, but NTPC has never been able to comply. In 1991, the increase in accounts receivable (over 1990) was some Rs 3.53 billion, while the corresponding increases in electricity sales revenue and in total operating revenues were Rs 2.88 billion and Rs 3.63 billion respectively; in practical terms, NTPC collected virtually no additional revenue in FY91, even though it sold an additional 4,800 GWh of energy. In 1986, NTPC internal cash generation barely met its debt service requirements and the increase in working capital (Annex 5.2). A liquidity crisis was averted by the cash received by NTPC from its first issue of medium-term bonds. Since then NTPC has been issuing such medium-term bonds every year, mostly to help finance the expansion of its facilities. The levels of its accounts receivable have also been increasing every year in absolute terms as well as a percentage of its annual billings. The funds raised from these bonds have helped NTPC to bridge finance its increasing working capital requirements. 8.3 Increasing bill collection and accounts receivable problems led to several interventions by GOI on behalf of NTPC during the period FY88 to FY92. At each of these interventions, GOI assumed the responsibility to clear some of the arrears from SEBs by transferring to NTPC corresponding amounts from its allocations to the respective states. Such payments are carried out over a period of four years. In February 1992, NTPC acquired the Unchahar power station in lieu of arrears of the Uttar Pradesh SEB. As indicated in the Table 8.1 above, NTPC has received over Rs 11 billion from the transfers through the central appropriations from 1988 to January 1993. Combined with other bill collection efforts, NTPC was able to reduce its level of accounts receivable despite the rapid increase in sales. At the end of FY93, the overall level of accounts receivable was 3.3 months of sales equivalent, but excluding the amount still to be paid through the central appropriations, it was 1.4 months of sales equivalent. More encouraging is that during the last three months of FY93, 93% of billing was realized directly from the SEBs. During the negotiations of the NTPC Power Generation Project, agreement was reached that NTPC would maintain the level of its accounts receivable at two months of sales equivalent excluding the amount still to be paid through the central appropriations for which a specific payment schedule was also agreed. 8.4 GOI's interventions through the central appropriations helped NTPC avert financial crises and resolve, for limited periods, its accounts receivable problem. These interventions aimed at having NTPC operate efficiently, thus keep the electric energy supply in the country at an 11/ Loan 2674-IN for the Gas-Based Combined Cycle Project (FY86); Loan 2844-IN for the National Capital Power Project (FY87); and Loan 2845-IN for the Talcher Thermal Power Project (FY87).  - 13 - adequate level. It is doubtful that GOI's actions have resulted in SEBs improving their operational efficiency as well as their billing and collection practices from their own customers. What is equally important, but so far received little attention, is the need for energy conservation on the customer (SEBs) side through adoption of appropriate tariffs and tariff structure at SEBs and through end-use efficiencies. 8.5 The accounts receivable as of March 1990 were about Rs 11.5 billion (some US$500 million equivalent, and represented over six months of current billings). It was around the same time that the Bank took the exceptional step of cancelling the processing of a loan of US$375 million to NTPC for a project which had already been negotiated, primarily because of the inability of NTpc to reduce its accounts receivable. Since October 1992, GOI adopted new investment and commercial policies and electricity tariffs for NTPC. They are designed to introduce better commercial discipline at SEBs, along with improving NTPC's own operational and financial performance, including revenue collection. New two part bulk supply tariffs for NTPC coal fired stations became effective in November 1992. Further reforms in bulk power and transmission tariffs will be studied and implemented under Loan 3577-IN. The process of establishing commercial contracts between the SEBs and the central utilities is cumbersome, but progress is being made with strong Bank support under Loan 3577-IN and the NTPC Power Generation Project. The new commercial policies and bulk power supply agreements should enable NTPC to reach a level of bill collection close to 100% during FY94. 8.6 The legal documents of the Loan also adopted the conventional rate of return (ROR) on average historic fixed assets in operation. An important objective of this conventional ROR indicator is to serve as a measure of the adequacy of revenues compared to the cost of capital. Therefore, it has more appropriate application with mature utilities, and where the investment, which is not included in the rate base, is a fraction of the utility's net fixed assets in operation (or the rate base). Table 8.1 indicates that throughout the entire project implementation period i.e., FY86-FY92, the projected "Works in Progress" (WIP) was a substantially high proportion of the rate base; through 1987, WIP was higher than the Gross Assets in Operation; for practical purposes the rate base was insignificant relative to the annual investment. A utility could well have a very high rate of return performance but be faced with liquidity crisis, and the computation of other standard financial indicators such as operating ratio would not provide meaningful information. One could therefore conclude that such a performance indicator was not appropriate for NTPC at the time. A more appropriate financial indicator under such circumstances is the "contribution to investment", because it targets at generating from internal sources a pre-determined level of funds towards the on-going investment after taking into account debt service and working capital requirements. Under the NTPC Power Generation Project, NTPC agreed that it would produce, starting from FY95, funds from its internal cash generation equivalent to not less than 20% of its capital expenditures on a three-year moving average. The amount for FY94 would be 15% of the average of NTPC's capital expenditures for the FY93-FY95 period1'. 12/ The most recent analysis of NTPC's finances is given in the SAR for the NTPC Power Generation Project (Report No. 11827-IN; Dated June 4, 1993).  - 14 - 9. Compliance with Loan Covenants 9.1 The key institutional and cost recovery covenants introduced in the Loan and the Project Agreements and the extent they were complied with are listed in Part III, Table H. NTPC was not in compliance with the accounts receivable covenant (para. 11.2). 10. Sustainability and Internal Economic Rate of Return 10.1 The project is sustainable, even though at present its main component (i.e., the Rihand-Delhi Area HVDC link) is not yet being fully utilized (para. 7.2). Sustainability will be assured with the strengthening of the transmission ring around metropolitan Delhi and growth in power demand. It is certainly assured for the future, as the facilities built under the project are integral components of POWERGRID's system development program. However, insufficient generation and transmission tariffs and an unchecked increase of NTPC's and POWERGRID's accounts receivable could endanger such sustainability. The Bank, GOI, NTPC and POWERGRID have been taking actions to avoid such occurrence (paras. 8.5 and 8.6). 10.2 Because of the changes agreed by the parties on the project description, it is not possible to make a reasonable comparison between the internal economic rate of return (IERR) of the original and revised project scopes. The IERR for NTPC/POWERGRID's time-slice investments for the FY84- FY92 period has been estimated at 111. Under Loan 3577-IN, the IERR for POWERGRID's time-slice investments during the FY93-FY2002 period was estimated at 22%. The difference is explained by improvements in tariff setting parameters v and the unusually high inflation encountered in India in late 1980s and early 1990s, which brought down tariff revenues in real terms (Part I, Table G). 11. Bank Performance 11.1 It is difficult to provide a judgement for a project whose description was substantially amended, albeit within its original objectives, and its completion was delayed by about 3 1/2 years. Instead of agreeing to the revision of the project description, the Bank might have cancelled Loan 2555-IN. It might also have cancelled Loan 2283-IN for the Central Power Transmission Project during the hiatus of this project in 1984-1987"'. But it might thus have lost an opportunity to influence transmission development in India. Instead the Bank opted to continue its dialogue with GOI, CEA, NTPC and POWERGRID on transmission system development and operations. The dialogue has culminated with the recent approval of Loan 3577-IN (para. 2.6). 11.2 On another front, the Bank opted not to suspend disbursements under this Loan and other loans to NTPC, when NTPC fell into default of the accounts receivable covenant and substantial arrears from SEBs began creating problems for this Corporation's financial and overall future (para. 8.2). The 13/ The return on equity for projects started before FY90 was 10; for those projects started in FY91 and FY92 it was 121. The return has since been adjusted to 16% for future projects. Depreciation was also increased. 14/ See the PCR for the Central Power Transmission Project.  - i5 - Bank decided to continue its dialogue to encourage GOI to adopt for NTPC new investment and commercial policies, and electricity tariffs. It alerted GOI and NTPC that the Bank's continued funding for their projects would no longer be possible unless actions to correct NTPC's finances are taken. In 1990, the Bank decided not to present to the Board the then-negotiated Regional Power Systems Project, because GOI and NTPC were unable to fulfill the conditions for Board presentation within a reasonable time period. Other multilateral and bilateral agencies followed the Bank in limiting their financing of NTPC projects. All these actions helped GOI to initiate reforms in the power sector and adopt new investment and commercial policies for NTPC. If the Bank had suspended disbursements, it might have lost another opportunity, this time to influence reforms in power generation. In view of GOI's, POWERGRID's and NTPC's recent actions prior to the approval of Loan 3577-IN and negotiations of the NTPC Power Generation Project, the Bank's above decisions bore their fruits. 11.3 Bank's supervision effort was concentrated mainly on the procurement issues as well as other important areas such as physical progress including problems in implementation, in disbursements performance, etc. The Bank provided valuable help to NTPC. However, visits to the work sites by each mission could not be undertaken because each mission covered supervision of all Bank funded NTPC projects. It is concluded that the Bank's performance under the project was satisfactory. 12. Borrower Performance 12.1 The performance of NTPC in the technical and managerial activities was satisfactory. Bank missions have reported delays in preparation of specifications, bidding documents and bid evaluations, and in preparing its quarterly progress reports in a timely manner; these shortcomings, however, have been mainly due to the large workload of NTPC at the time and because the information needs to be collected from various sites which are located in remote placesl. The project provided continuing opportunity for NTPC to enlarge its skills and experience in procurement under ICB procedures, in designing the transmission systems and in supervising their implementation and construction. The PCR mission was advised that the services of NTPC staff, involved in implementation of the HVDC substation, were subsequently used by the supplier, on a consultancy basis, in the installation of HVDC substation in another country. 12.2 The only area where NTPC's performance fell considerably short of expectations was in bill recovery. The accounts receivables condition was first introduced under this Loan and immediately focussed on the substantial arrears by SEBs. These large arrears affected NTPC's financial position adversely. NTPC maintained it had little recourse against the defaulting SEBs, because of its understanding that it could not cut off the power supply to the defaulting SEBs even if it wanted to. At present NTPC is carrying out more systematic and aggressive efforts at all levels of the organization (from the regional managers to the CMD) to obtain letters of credit from SEBs for 15/ Furthermore, after the transfer of the management of NTPC's transmission assets to POWERGRID, the information relating to the transmission system are collected from this Corporation. Stabilization of a proper coordination system between the two Corporations has taken some time.  - 16 - the appropriate amounts of energy sales. These actions include seeking the intervention of the Minister of Power in order to collect dues from SEBs. GOI's new commercial policies and revised bulk power supply agreements should enable NTPC to reach a level of bill collection close to 100% during FY94. 12.3 GOI has recently adopted new investment and commercial policies and electricity tariffs allowing NTPC to shut-off or restrict power supply if its clients are in default with their bulk supply agreements. These policies are designed to introduce better commercial discipline at SEBs, along with improving NTPC's own operational and financial performance, including improving revenue collection (para. 8.5). 12.4 There appears to be a difference in the positions of the Bank, GOI and the State Governments. The Bank's position is that the electricity industry provides a service which has to be fully paid for by each customer category (cross-subsidization permitted) through user charges. GOI seems to be moving towards the Bank's position shown by the measures and incentives taken in recent years including recommendations to the state governments to increase tariffs. The states appear to perceive (sometimes for political purposes) the provision of electricity as a social service. Furthermore, in an economy, where the public perception of a public utility often is to provide primarily a social service, the use of a profit criterion as the sole measure of the utility's financial performance is not generating adequate public support. 13. Performance of Consultants and Contractors 13.1 The performance of consultants engaged in the design and construction of HVDC and 400 kV facilities was satisfactory. There was a positive transfer of technical know-how from these consultants to NTPC staff. Barring a few problems and some minor delays, overall the performance of the contractors/suppliers was also satisfactory. The packaging of contracts in appropriate sizes promoted participation from local manufacturing industry, and the Bank's and NTPC's involvements resulted in improvement in the quality of the product. 14. Proiect Relationship 14.1 A good working relationship was maintained between the Bank and GOI and NTPC, and later also with POWERGRID. 15. Project Documentation and Data 15.1 The project's legal agreements adequately reflected the objectives of the project and the Bank's interests. The staff appraisal report provided a relatively useful framework for the Bank and NTPC during project implementation. Bank supervision missions appear to have been adequate in terms of their frequency. However, most of the missions had to supervise and/or prepare other projects. It is therefore likely that the missions were not able to make visits to some of project sites. Some of the important project documentation (e.g. supervision mission reports, aide-memoires), project progress reports and annual financial statements was not found in the Bank files.  - 17 - PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE Comments by NTPC and Endorsed by the Government of India A. Preface 1. The loan was made to India in May 1985 for on-lending to the National Thermal Power Corporation (NTPC). The objectives of the project were: (a) to meet the electricity demand in the Northern Region by providing the transmission linkage between the thermal power generation plants in the Singrauli-Rihand complex in the south-east of the region and the main load centers of the western parts of the region; and (b) to ensure the evacuation of power from these plants at least cost to the economy. The project was also to serve as a vehicle for the introduction of a new technology (long distance HVDC links) needed for the expansion and reinforcement of EHV transmission grid. Another objective was: (c) to improve, in the long run, the operational, institutional and financial performance of the State Electricity Boards (SEBs), by assisting in the development of a financially sound, and technically and institutionally competent centrally-owned power utility which would serve as a model to SEBs. On August 16, 1991, the management of the project was transferred from NTPC to National Power Transmission Corporation Ltd., under a Management contract signed between the two corporations. On January 8, 1993, an ordinance providing for all the rights, titles and other interests related to the transmission systems of NTPC to be transferred to POWERGRID (NPTC was later renamed as Power Grid Corporation of India) was promulgated by the President of India. B. Comments on the Analysis in Part-I 2. The analysis made by the Bank under Part-I is comprehensive and has covered the important aspects. The analysis is generally in order. Nevertheless, there are certain issues which need to be further examined keeping in view the background of developments as they took place to better appreciate the events. These are as follows: Preface (reference para. 1) 3. It may be mentioned here that savings of US$48 million has arisen mainly on account of the exchange rate variations. Procurement (reference para. 5.7 of Part-I) 4.1 In an effort to speed up procurement and after having extensive discussions, NTPC had finalized with the World Bank a standard bidding document in April 1992. However, the Bank withdrew its "No-Objection" to this standard bidding document in December 1992 and wanted certain modifications to be included. NTPC has now finalized standard bidding documents with the Bank based on the suggested modifications and further discussions. NTPC will use this document for procurement under the recently negotiated loan for NTPC  - 18 - Power Generation Project. This is expected to reduce the procurement time. Further, the proposed NTPC Power Generation Project, negotiated with the Bank in May 1993 would be under time slice concept which would help in bringing about timely disbursements. 4.2 NTPC has started giving further emphasis to finishing promptly the payments to the contractors. Physical Results - Project Oblectives (reference para. 7) 5. Under NTPC's new commercial and investment policies: (a) NTPC has been permitted to shut-off or restrict power supply from its concerned power stations, whenever physically and technically feasible, in case of non- compliance with the agreed terms, including appropriate payment coverage by letters of credit (LCs), of the bulk power supply agreements (BPSA) with the SEBs; (b) if the above is not possible, the defaulting state(s) would be charged penal rates for drawals (power imports) exceeding LC coverage; (c) for new power stations, NTPC and POWERGRID have been instructed to design the system in such a way that it would allow the shut off or diversion of supplies in case of non-compliance with the BPSA; (d) NTPC would delay new investments in a state if that state is not in compliance with the BPSA; and (e) NTPC is permitted to undertake projects in one region with a substantial part of the output to be allocated to other regions. In addition, NTPC was authorized in January 1993 to enter into joint ventures with foreign and local private partners and to develop with those partners power projects either from its own investment program or those offered by others. Financial Performance (reference paras. 8.2 to 8.5 of Part-I) 6. In the discussions on accounts receivable presented in Section 8 of the Part I, the Bank has included the amount due to NTPC by way of Central Appropriation in the accounts receivable. GOI has in the past ordered Central Appropriation of plan assistance funds to State sectors for offsetting their dues to Central sector agencies like NTPC. Such amounts are being paid to N'TPC as per agreed schedules and the Bank had been kept informed about the arrangement since August 1990. Considering that these were committed payments from GOI, the amounts were set off against the dues of the SEBs and NTPC's accounts receivable reduced by the total amount of Central appropriation. As has been mentioned in para. 8.3, during the negotiations of the proposed NTPC Power Generation Project, agreement was reached that NTPC would maintain the level of its accounts receivable at two months of sales equivalent excluding the amount still to be paid through the Central appropriations for which a specific payment schedule was also agreed. 7. The Operations Evaluation Department of the World Bank conducted the performance audit of few Bank-funded projects, namely Korba (Credit 793- IN), Ramagundam (Credit 874-IN and Loan 1648-IN), Singrauli-II (Credit 1027- IN) and Farakka (Credit 1053-IN and Loan 1887-IN). In its report No. 10854 published in February 1993, the Audit Mission has summed up NTPC's financial policy in a paragraph as below: "NTPC has reached its large size (it is India's largest corporate entity in terms of fixed assets) in a record time without jeopardizing or compromising its financial viability, even in spite of the accounts  - 19 - receivable issue. This is a performance that very few utilities in the same situation are able to achieve. The performance is even more impressive since NTPC is still in a major investment mode. A good part of NTPC's above-par performance is to be credited to GOI's original design (e.g., debt-equity ratio set at a conservative 1:1; tariff formula to pass on all investment, operation, and financial costs.)" 8. As is common practice in transaction of a commodity like electricity, the agreements allow the beneficiary of its energy supply a period of 30 days from issue of the bills for making payments. Therefore, outstanding should be reckoned after expiry of this period of 30 days. Sustainability (reference Para. 10.1) 9. Regarding transfer of assets from NTPC to POWERGRID, GOI has informed World Bank vide letter dated January 12, 1993 that all transmission assets shall be transferred to POWERGRID and while it had been decided to transfer the Rihand-Dadri HVDC link with terminals, because of contractual matters, the terminals would be transferred a little later. It was also informed that the Vindhyachal HVDC back to back system would be transferred straightway being quite clearly a part of the transmission system. It was also clarified that switchyards of existing NTPC power stations will not be transferred and all new stations will be designed to have switchyards owned and operated by POWERGRID. Bank Performance (reference vara. 11.2 of Part-I) 10. It has been stated that the Bank's decision not to present to the Board the then proposed Regional Power System Project because of GOI and NTPC's inability to fulfil the conditions for Board presentation within a reasonable time period, has helped GOI to promote reforms in the power sector. It is worth mentioning that the sectoral reforms are brought about gradually with time. It is easier to bring out such changes when they are accompanied by large development programmes such as the proposed US$1.2 billion time slice loan operation of World Bank for NTPC Power Generation Project. Comments by POWERGRID and Endorsed by the Government of India Environment, Resettlement and Rehabilitation 11.1 In the context of transmission projects there is no significant impact on environment except in the cases where the transmission lines involve any forest area. The impact of transmission line projects on environment is not considered as severe as in case of thermal, hydel, nuclear power projects. This is primarily because the effect on forest due to laying of transmission lines is reversible and can be nullified by planting more trees. 11.2 With the worldwide concern over the fast depleting forest reserves, due consideration is given to these aspects at the planning and designing stage itself. While identifying the transmission system for Rihand- I, detailed surveys were conducted by the executing agency in association with the state forest authorities to identify most suitable route having minimum infringement on forest land. Where trees had to be felled in order to provide access to the lines, trees of a corresponding number were planted in the vicinity as per guidelines from Ministry of Environment and Forest.  - 20 - 11.3 Sites for construction of the sub-stations were generally selected in uninhabitated areas remote from the population centers. Hence, the resettlement and rehabilitation of people did not arise. Final Payments 12. The loan was originally scheduled to be closed on December 31, 1989. But as a consequence of a change in location of the 4x210 MW coal fired NCTPP project of NTPC from Muradnagar to Dadri, the project configuration underwent major revision. After appraising the revised scheme, Bank decided to extend the loan closing date by one year each time, for a total of 36 months to December 31, 1992. The total disbursement of loan till March 1992 was US$191.5 million. Further, Bank has included funding the balance portion of the on-going contracts amounting to US$7.6 million retroactively under the new POWERGRID System Development Project (Loan No. 3577-IN). Procurement 13. It generally takes 3 to 4 months before the bids are invited are opened for evaluation. Further, all major packages were awarded within a period ranging from 5 to 7 months. Therefore, a total procurement period varied from 8 months to 11 months. Keeping in view the complexities involved in some of the contract packages, the time taken seems to be reasonable. Evaluation of the Borrower's Own Performance 14.1 The project has overall achieved its objectives. The project has been a major component in the establishment of centrally owned regional grids and intra-regional connections. With the satisfactory completion of the project the power transmission capacity, security and reliability in the Northern Region has increased. 14.2 Since NTPC had already acquired sufficient experience in the area of design and engineering of 400 kV transmission lines and substations, entire basic and detailed engineering work for the 400 kV transmission lines and substations was carried out by NTPC/POWERGRID in-house. 14.3 This project also provided an opportunity for NTPC/POWERGRID to gain valuable experience in procurement under ICB procedures, which was later used for other Bank financed projects. Also the introduction of HVDC technology helped NTPC staff to enlarge its skills and to gain valuable experience in the execution of HVDC substation, which was later used, on a consultancy basis, in the installation of HVDC stations in other countries.  - 21 - PROJECT COMPLETION REPORT INDIA RIHAND POWER TRANSMISSION PROJECT (LOAN 2555-IN) PART III: STATISTICAL SUMMARY A. Related IDA Credits and Bank Loans Cr./Loan No. Year of and Title Purpose Approval Status Comments Cr. 685-IN To help reduce the power April 1977 Closed The project Singrauli shortage in the Northern on June was successfully Thermal Power Region through the con- 30, 1984 completed Project struction of the 3x200 MW initial phase of the NTPC's first large coal fired thermal power plant with associated 400 kV transmission lines. Cr. 1027-IN Assist NTPC to mitigate May 1980 Closed The project Second power shortages in the on June was successfully Singrauli Northern Region through 30, 1989 completed. Thermal the construction of Power 2x200 MW and 2x500 MW Project coal-fired units and associated 400 kV transmission lines. Sectoral Objectives Common to the Above Projects In addition to the This purpose above project-wide was not fully objectives, the sectoral attained objective was to assist NTPC become an efficient utility (implementation of projects, operation of power plants, institution- and finance-wide) to form a model to the poor performing SEBs.  - 22 - B. Project Timetable Activitv Date Planned Revisions Date Actual Appraisal 08/ /84 08/16/84 Loan Negotiations 03/26/85 04/22/85 Board Approval 05/15/85 05/28/85 Loan Signature 09/16/85 09/16/85 Loan Effectiveness 12/16/85 02/20/86 Completion 12/31/88 Loan Closing 12/31/89 12/31/90 12/31/91 Final Disbursement 12/31/89 05/12/93  - 23 - C. Loan Disbursements Cumulative Disbursements (Estimated and Actual) (US$ million) Dec. 31 198S 1986 1987 1988 1989 1990 1991 1992 1993 Estimated 12.0 53.5 125.5 187.5 250.0 Actual 0 1.9 49.3 104.2 133.6 172.6 191.5* 191.5* 185.9** Actual as i of Estimated 0 4 39 56 53* * US$48 million from loan account was cancelled on December 5, 1991. Includes replenishments of the Special Account. The outstanding balance was refunded on July 15, 1993. ** Following refund of the balance of the Special Account.  - 24 - D. PROJECT IMPLEMENTATION AND COMMISSIONING A. 400 kV AC Transmission System Scope Commissioned In 1. Rihand-Singrauli (S/C) 42 km March 1988 2. Rihand-Kanpur (POWERGRID) (S/C) 498 km December 1988 3. LILO of Singrauli-Kanpur (D/C) 20 km I & II (UPSEB) at Kanpur (POWERGRID) 4. Kanpur (POWERGRID)-Ballabhgarh (S/C) 410 km October 1988 5. Ballabhgarh-Jaipur (POWERGRID) (S/C) 217 km September 1988 6. Jaipur (POWERGRID)-Jaipur (RSEB) (S/C) 20 km August 1990 7. Dadri-Malerkotla (S/C) 302 km July 1992 8. Ballabhgarh-Dadri (D/C) 53 km November 1990 9. Dadri-Mandaula (D/C) 46 km November 1990 10. LILO of Muradnagar (UPSEB) (D/C) 59 km June 1989 Panipat at Dadri 11. LILO of Agra-Jaipur (RSEB) (D/C) 7 km July 1990 at Jaipur (POWERGRID) 12. Shifting of Kanpur (UPSEB) (S/C) 20 km Agra line to Kanpur (POWERGRID) TOTAL (S/C): 1,509 km (D/C): 185 km B. 500 kV HVDC System 1. 500 kV HVDC, 1500 MW bi-polar 815 km December 1990 transmission line Rihand to Delhi September 1991 2. 500 kV HVDC, 1500 MW bipoles at December 1990 Rihand and Delhi C. 400 kV AC Sub-Station/SwitchYard 1. Kanpur October 1988 2. Jaipur (RSEB) (Extension) 3. Ballabhgarh September 1988 4. Malerkotla July 1992 5. Jaipur September 1988 6. Mandaula November 1990 LILO: Line in, line out connection of an existing line to an existing substation.  - 25 - E. PROJECT COSTS Estimated and Actual Rs Million Diff. US$ Million Diff. Components Est.'/ Act. % Est." Act. % 400 kV AC lines 1,986 2,583.1 30% 166 122.5 (26%) 400 kV AC substations 1,484 2,187.3 47% 124 133.4 8% HVDC line 1,276 2,082.6 63% 106 119.2 12% HVDC terminal 2,980 5,490.9 84% 248 287.7 16% Consultancy 73 105.3 44% 6 6.9 Eng. and Adm. 516 990.8 92% 43 64.9 51% TOTAL 8,315.0 13,440.0 62% 693 734.6 6% /a Physical and Price contingencies and IDC are allocated to each project component in proportion to its cost.  - 26 - F. Allocation of Loan Proceeds (Original and Actual) (US$ million) Loan Agreement Actual (1) Civil Works & Erection 25,000,000 10,968,183.78 (2) Equipment & Materials 200,000,00 173,849,350.21 (3) Consultants' Services 5,000,000 1,262,525.62 (4) Unallocated 20,000,000 Difference due to cross exchange rates on Special Account transactions ( 171,006.45) Total disbursed 185,909,053.16 Amount cancelled (December 5, 1991) 48,000,000.00 Amount cancelled (July 15, 1993) 16,090,946.84 Original Loan Amount 250,000,000 250,000,000.00  - 2 7 - G. Summary of the Internal Economic Rate of Return Computations /a OUTFLOW INFLOW NET Discounted @ Investment 0 & M Revenue OUTFLOW 11.10% 0 1985-86 3155.8 10.0 135.0 3030.9 3030.9 1 1986-87 1965.8 15.8 214.3 1767.3 1590.7 2 1987-88 2495.6 21.9 286.5 2231.1 1807.4 3 1988-89 2184.9 34.9 359.0 1860.7 1356.7 4 1989-90 1673.3 77.8 773.2 977.9 641.7 5 1990-91 1402.5 86.2 962.9 525.9 310.6 6 1991-92 1254.0 110.4 1370.9 -6.4 -3.4 7 1992-93 207.9 133.4 1740.7 -1399.4 -669.6 8 1993-94 718.8 204.9 2210.4 -1285.7 -553.7 9 1994-95 204.9 2210.4 -2005.5 -777.4 10 1995-96 204.9 2210.4 -2005.5 -699.7 11 1996-97 204.9 2210.4 -2005.5 -629.8 12 1997-98 204.9 2210.4 -2005.5 -566.9 13 1998-99 204.9 2210.4 -2005.5 -510.2 14 1999- 0 204.9 2210.4 -2005.5 -459.2 15 2001- 1 204.9 2210.4 -2005.5 -413.3 16 2002- 2 204.9 2210.4 -2005.5 -372.0 17 2002- 3 204.9 2210.4 -2005.5 -334.8 18 2003-4 204.9 2210.4 -2005.5 -301.4 19 2004- 5 204.9 2210.4 -2005.5 -271.3 20 2005- 6 204.9 2210.4 -2005.5 -244.1 21 2006- 7 204.9 2210.4 -2005.5 -219.7 22 2007- 8 204.9 2210.4 -2005.5 -197.8 23 2008- 9 204.9 2210.4 -2005.5 -178.0 24 2009-10 204.9 2210.4 -2005.5 -160.2 25 2010-11 204.9 2210.4 -2005.5 -144.2 26 2011-12 204.9 2210.4 -2005.5 -129.8 27 2012-13 204.9 2210.4 -2005.5 -116.8 28 2013-14 204.9 2210.4 -2005.5 -105.2 29 2014-15 204.9 2210.4 -2005.5 -94.6 30 2015-16 204.9 2210.4 -2005.5 -85.2 31 2016-17 204.9 2210.4 -2005.5 -76.7 32 2017-18 204.9 2210.4 -2005.5 -69.0 33 2018-19 204.9 2210.4 -2005.5 -62.1 34 2019-20 204.9 2210.4 -2005.5 -55.9 35 2020-21 204.9 2210.4 -2005.5 -50.3 36 2021-22 204.9 2210.4 -2005.5 -45.3 37 2022-23 204.9 2210.4 -2005.5 -40.8 38 2023-24 204.9 2210.4 -2005.5 -36.7 39 2024-25 204.9 2210.4 -2005.5 -33.0 40 2025-26 204.9 2210.4 -2005.5 -29.7 The internal rate of return of the project is computed as 11.1 %. /a Detail tables have been forwarded to Asia Information Center.  - 28 - H. Covenants/Undertakings Monitorinq Total List Document/Section/ Summary of Undertaking (Covenant) Status Paragraph LA 2.02(b) amended GOI shall maintain a special account Complied in US dollars LA 3.01 (b) GOI relending to NTPC under terms Complied acceptable to the Bank (not less than 12.5 % per annum) LA 3.01(c) Amounts withdrawn by GO from loan Compliance not determined account in any quarter are to be made available to NTPC in the first month of the following quarter LA 3.04 amended GOI to furnish Audit on Special Complied Accounts (due within 6 months of FY end) PA 3.04 NTPC shall by March 31, 1986, enter Complied. Contracts being into 3-year bulk supply contracts, revised following introduction with customers in Northern, Western of new bulk tariffs in November Southern and Eastern Regions 1992 PA 4.01 (b) Furnish to the Bank within seven Complied months after the end of each financial year, financial statements audited by independent auditors LA 4.02 Take necessary measures to achieve Not complied (Part I, paras. 9.1 by March 31, 1986 and thereafter and 11.2) maintain, its accounts receivable at a level not exceeding an amount equivalent to the proceeds of its sales of power for the two preceding months LA 4.031a) Achieve a rate of return of not less Complied than 7% from FY85 through FY90; 9-1/2% from FY91 through FY95  - 29 - I . Use of Bank Resources I . 1 Staff Inputs Staff inputs in carrying out the various tasks through the project cycle from preparation in FY83 to completion in FY93 were as follows: Task Input (Staff-weeks) Project Preparation 1 3.6 Project Appraisal 39.3 Loan Negotiations 05.6 Project Supervision 40.5 Project Administration 00.1 TOTAL 99.1 I . 2 Missions Project Cycle Month/ Number of Days Specialization Performance Type of Year Persons in /a Rating /b Problems /c Field Throuah Aporaisal Identification /d Preparation /d Pre-appraisal Id Appraisal 10/82 Suwervision Supervision 1 10/08/86 to 10/17/86 4 E; FA; EC; C 1 Supervision 2 03/20/87 to 04/01/87 2 FA; E 1 Supervision 3 09/02/87 to 09/23/87 3 E; FA; C 1 Supervision 4 02/07/91 to 02/26/91 1 E 2 Supervision 5 07/22/91 to 07/30/91 3 E; FA; FA 2 /a E: Engineer; LO: Loan Officer; FA: Financial Analyst; EC: Economist; C: Consultant /b 1 = No or minor problem; 2 = moderate problem; 3 = major problem /c I: Implementation delays; PR: Procurement problems and delays /d Identification was made by GOI in 1974. Preparation and pre-appraisal were made by NTPC in 1978.  - 30 - Annex 1 INDIA RIHAND POWER TRANSMISSION PROJECT PROJECT DESCRIPTION 1. The project consists of the following major physical components. I . 400-kV Transmission Lines The expansion of the 400-Kv network would be comprised of: (a) Rihand-Singrauli, single circuit: 40 km; (b) Rihand-Kanpur, single circuit: 450 km; (c) Kanpur-Ballabgarh, single circuit: 450 km; (d) Ballabgarh-Jaipur, single circuit: 310 km; (e) Ballabgarh-Muradnagar, double circuit: 20 km; (f) Muradnagar-Karwalnager, double circuit: 17 km; (g) Muradnagar-Panipat, single circuit: 100 km; (h) Muradnagar (NTPC)-Muradnagar (UPSEB): 10 km; (i) Jaipur (NTPC)-Jaipur (RSEB), double circuit: 20 km; (j) Kanpur (NTPC)-Kanpur (UPSEB), double circuit: 20 km. II . 400-kV AC Substation Rihand: Modifications to the already ordered substation of NTPC to make it compatible with requirements of the HVDC terminal Sinprauli: Extension of the existing substation located at the site of Singrauli power plant to allow for connection of the Rihand-Singrauli line at the substation. Kanpur: New substation to connect the Rihand-Kanpur-Ballabgarh lines as well as the Singrauli-Kanpur-Agra-Jaipur lines of NTPC. This substation would also be connected to the existing 400-kV Kanpur substation of UPSEB. Provision for a reactance would also be made at this substation. Muradnapar: Extension to the proposed 400/200-kV substation to connect the Ballabgarh, Muradnagar (UPSEB) and Panipat line and accommodate off take from Delhi HVDC terminal as well as a new substation being created to feed power from HVDC bipole to the Delhi grid. Provision has been made for 2 x 31 5 MVA 400/220-kV transformers. Ballabqarh: Extension to the proposed 400/200-kV substation at Ballabgarh to connect the Muradnagar, Jaipur and Kanpur lines. KarwalnaQar: Extension to the proposed 400/220-kV substation at Karwalnagar to connect the Muradnagar line. JaiDur: New substation to connect NTPC's Ballabgarh and Kanpur-Agra lines. This substation would be connected to the RSEB's 400-kV substation at Jaipur. PaniDat: Extension to the existing Panipat 400-kV substation of BBMB to terminate the Muradnagar line.  - 3 1 - III . HVDC Transmission Line Voltaqe Selection 2. The voltage in HVDC links ranges between + 450-kV and + 600-kV. Voltages above or below these figures would require multi-conductor bundles either because of excessive losses (below + 450-kV) or excessive corona (above + 600-kV). The voltage selected for the project is + 500-kV. HVDC Terminals 3. The terminal at Rihand would be connected by two 400-kV AC feeders to the 400-kV AC substation at Rihand power station and the terminal at Delhi by two 400-kV AC feeders to the 400-kV AC substation at Muradnagar. The salient details of the HVDC terminal equipment are given below: Converter Transformers 4. The converter transformers would be three phases or single phase units appropriately connected. They would be designed to withstand the combined DC and AC stresses that would be subjected to while in operation. They would have appropriate number of taps we well as an adequate tap range so as to ensure desired flexibility in the operation of the bipole. Thyristor Valves The HVDC converter stations would comprise one 12 pulse valve group per pole which would be initially equipped for a nominal continuous rating of 1000 MW in bipolar operation but which would be upgradable at a later date to 1500 MW. The multiple valve units would be water-cooled and will be the indoor air insulated type. They would be of modular design comprising different thyristor levels of identical construction. They will be triggered by optically instigated electrical firing, separately light triggered thyristor firing or direct optical firing. Each valve would be protected against overload, over voltage, and other variations in current and voltage.  - 32 - Annex 2 PROJECT REVISION Chanae in the Scope of the 400 kV AC Line (a) Inclusion of a 400 kV double circuit (D/C) line from Dadri to Ballabgarh and from Dadri to Karwalnagar. (b) Extension of the Dadri-Panipat 400 kV single circuit (S/C) line to Malerkotla (250 km S/C line). (c) Three additional river crossings (two in the Dadri-Malerkotla and one in the Kanpur- Ballabgarh line). (d) Conversion of 35 km in the Rihand-Kanpur line through forest from S/C to D/C). {e) Shifting of the receiving substation for the NTPC Kanpur-Agra line from the Kanpur- UPSEB substation to the Kanpur-NTPC substation. (f) Addition of a line-in, line-out (LILO) at the Muradnagar-UPSEB substation for the Dadri- Panipat NTPC line. (g) Miscellaneous change including LILO at the Kanpur and Jaipur substations. Chanaes in the ScoDe of the 400 kV Substations (a) Inclusion of three substations in the Delhi region (karwalnager, Ballabgarh and Dadri) against one substation originally envisaged. (b) Addition of one static var compensator (SVC) terminal at Kanpur, due to reassessment of reactive power requirements. (c) Miscellaneous minor changes for detailed engineering in revised system configuration. Changes in the Design of the 500 kV HVDC System (a) Change from an original triple "Moose" to a quadruple "Bersimis" conductor design. (b) Upgrading of insulators to counteract pollution problems. (c) Stronger tower construction to accommodate heavier conductors and insulators. (d) Partial upgrading of terminal stations in view of future capacity increase from 1000 MW to 1500 MW.  - 33 - Annex 3 Availability of Transmission Lines under the Project No Line Jan 92 Feb 92 Mar 92 Apr 92 May 92 Jun 92 Jul 92 Aug 92 Sep 92 Oct 92 Nov 92 Dec 92 1. JPR-JPR1 100.00 100.00 100.00 100.00 99.94 100.00 100.00 97.12 100.00 100.00 100.00 2. JPR-JPR2 100.00 100.00 98.01 100.00 100.00 94.38 100.00 99.20 100.00 100.00 100.00 3. SIN-RIH 100.00 100.00 81.17 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 4. RIH-KNP 100.00 100.00 81.15 100.00 100.00 99.55 100.00 99.97 100.00 100.00 100.00 5. KNP-BLG 100.00 99.81 99.97 100.00 99.86 98.76 99.95 70.75 99.98 100.00 100.00 6. BLG-JPR 100.00 99.69 100.00 ' 99.49 100.00 94.57 99.95 99.41 100.00 100.00 99.94 7. BLG-DAD1 100.00 99.56 100.00 100.00 100.00 100.00 100.00 98.96 100.00 74.21 100.00 8. BLG-DAD2 98.68 94.78 100.00 100.00 100.00 100.00 100.00 100.00 100.00 98.34 100.00 9. DAD-MDL1 100.00 98.97 77.19 99.79 100.00 100.00 98.74 100.00 100.00 100.00 100.00 10. DAD-MDL2 100.00 100.00 100.00 * 100.00 100.00 100.00 98.78 100.00 100.00 100.00 100.00 11. DAD-MAL Line commissioned on July 1, 1992 93.5 99.48 98.70 100.00 100.00 100.00 * Data not available.  - 34 - Annex 4 MAXIMUM POWER FLOW ON LINES UNDER RIHAND TRANSMISSION SYSTEM CALENDAR YEAR 1992 Name of Line Jan. Feb. Mar. ADr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. JPR-JPR1 +500 +400 +490 +500 +520 +740 +760 +52 +600 +560 +700 +700 JPR-JR2 KNP-BLG +490 +440 +440 +360 +410 +420 +350 +420 +380 +420 +480 +490 BLG-JPR + 290 +190 +160 + 340 +160 + 370 + 360 + 320 + 390 + 200 + 330 + 260 BLG-DAD(I+II) +220 +300 +280 +180 +160 + 90 +110 +100 +150 +420 +300 +200 -200 -290 -100 -160 -120 -240 -300 -210 -140 - -240 -340 DAD-MND(I + II) + 520 +460 + 520 + 520 +480 + 580 +440 + 520 + 600 + 580 + 620 + 650 DAD-MAL - - - - - - - - - + 220 + 270 + 310 - - - -100 - 60 - SIN-KNP +850 +260 +860 +800 +810 +700 +675 +640 +665 +725 +920 +810 HVDC + 900 +1000 +1000 + 900 +810 + 900 + 900 + 700 + 700 +1000 +1000 + 1100  Annex 5.1 INDIA RIHAND POWER TRANSMISSION PROJECT - PROJECT COMPLETION REPORT VTPCse Forecast and Actual Incom Statement 985 1916 1987 1988 1989 1990 1991 1992 ......... ............ . . ......... . . . .............. ......... . . . ................ .. . . . . . . . .. . .. . . .. DESCRIPTION\FY Forec st Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecaet Actuat Forecast Actual Forecast Actual ----------- _ . .-.-. . . . ------- ....... ------- ... --- . ------- . .. Electricity Generation (GUh) 8,871 9,248 12,986 14,174 15,154 15.921 19,574 19,378 27,917 27,296 36,956 38,595 47,606 43,965 59,222 61,197 Less: Aux Cons.(GIA) 887 932 1,299 1.335 1,510 1,513 1.854 1,845 2,495 2,421 3,197 3,174 4,041 3,659 4,981 4,540 Electricity Sates (Cwh) 7,984 8,316 11,687 12,839 13, 644 14,408 17,720 17,533 25,422 24,875 33,759 35,421 43,565 40,306 54,241 56,657 Avers" Bulk Teriff (P/KwEh) (Generati 42.37 37.00 47.96 37.61 50.60 39.81 56.02 41.07 60.20 46.07 63.81 51.88 67.95 52.73 73.07 60.62 operating Revenues: Electricity Sates 3,077 4,829 5.736 7,201 11,460 18,376 21,254 34,347 Transmission Charge 148 284 555 1,176 93 1,691 2,404 3,742 Electricity Duty 111 111 87 93 179 294 347 455 Other Income 102 70 75 152 116 212 201 1,384 TOTAL OPERATING REVEIUES 3.383 3,438 5,605 5,294 6,904 6,453 9,927 8,622 15,305 12,748 21,541 20,573 29,602 24,206 39,632 39,929 Operating Expenses: Fuel Cost 1,070 1,252 1,716 1,952 2,171 2,360 3,033 3.165 4,737 5,285 6,863 8,985 9,752 9,760 13,376 16,424 O A N- Employeeee Cost 898 -Repairs & Naintairnnce 1,672 -AIntstration S Others 974 Total Operation *rd Maintenance 292 404 487 483 595 616 926 807 1,631 1,175 2,195 1,745 2,672 2,105 3,464 3,544 Depreciation 305 265 628 377 809 448 1,038 579 1,743 912 3,140 1.396 3,730 2,251 4,629 3,625 Electricity Duty 112 Il 87 93 179 294 347 455 Interest On Working Capital others 10 21 5 11 69 a 147 113 86 TOTAL OPERATING EXPENSES 1,667 2,042 2,831 2,943 3,580 3,522 4,997 4,712 8,111 7,559 12,198 12,567 16,154 14,577 21,469 24,13$ operating Inca Before Interest 1,716 1,396 2,774 2,350 3,324 2,931 4,930 3,910 7,194 5,189 9,343 8,006 13,648 9,630 18,163 15,794 Interest Chargeable to Revenue 616 492 955 570 1,334 866 1,899 1,248 3,525 1,791 5,316 2,730 6,624 3.472 8,057 5,643 Deferred Expenses Written Off 5 - 16 - - - - - - Profit before Tax 1,095 904 1,803 1,751 1,990 2,065 3,031 2,662 3,669 3,398 4,027 5,276 7,024 6,158 10,106 10,151 Add :Prfor Period Income (Not) (28) 50 53 362 (90) 90 851 69 Less: Tax 1 1 0 : Misc. Provision 149 Net Profit after Tax Ilisc. Prosn. 904 1,780 2,065 2,662 3,308 5,366 7,009 10,071 Avere Net Fixed Assets (Historic) 13,486 10,957 20,582 14,016 26,246 17.209 39,553 23,854 71,033 35,078 99,863 53,567 118,660 75,482 150,926 102,945 Rate of Return on Historic Assets tX) 12.10 12.74 13.50 16.77 12.70 17.03 12.50 16.39 10.10 14.79 9.40 14.95 11.30 12.76 12.00 15.34 Return on Capital Eaplayed 9.53 13.30 12.70 12.11 10.52 10.61 9.71 11.93 operatino latio MX) 49.30 59.40 50.50 55.60 51.90 54.58 50.30 54.65 53.00 59.30 56.60 61.08 54.60 60.22 54.20 60.44  Annex 5.2 INDIA RIHAND POWER TRANSMISSION PROJECT - PROJECT COMPLETION REPORT NTPC's Forecast wnd Actuat Sources and Apptlcations of Funds 1985 1986 1987 19S8 1989 1990 1991 1992 DESCRIPTION\FY Forecast Actual Forecast Actual forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actuat Forecast Actual SOJURCES Of FLONDS Operating Income before interest 1,716 1,396 2.774 2,350 3,324 2,931 4,930 3,910 7,194 5,189 9,343 8,006 13,448 9,630 18,163 15,794 Prior Period Income (Net) (28) 50 53 362 (90) 90 851 Depreciation(M) 305 265 628 377 809 448 1,038 579 1,743 912 3,140 1,396 3,730 2,251 4,629 3,625 Total Internat Cash Generatlon 2,021 1,632 3,402 2,77 4,133 3,432 5,968 4,851 8,937 6,011 12,483 9,492 17,178 12,732 22,792 19,419 Equity Contributions 8,159 4,859 13,369 6,808 16,673 5,909 13,177 6,879 19,239 3,682 18,294 6,594 25,601 12,812 26,799 6,667 Capital Receipt 26 0 114 24 - 87 - 21 - 117 - 26 Borrowings 7,9S4 Lowna Contrected* 4,416 5,731 5,865 4,836 11,972 6,712 5,019 25.451 Bonds 0 1,634 4.300 4,394 1,499 4,346 4,000 2,800 Loans to be Contracted- ISR0 D 0 O Loans to be Contracted- MULTI.SBILATERAL Louns to be Contracted- EXPORT CREDIT Total Borrowlngc 3,405 4,416 6,895 7,365 10,512 10,165 12,520 9,230 12,313 13,471 12,801 11,058 8,971 9,019 4,036 28,251 TOTAL SOURCES 13,585 10,933 23.666 16,950 31,318 19,620 31,665 20,984 40,489 23,251 43,578 27,165 51,750 34,680 53,627 54,363 APPLICATION OF FtNDS Proposed projects Other new projects on-going projects Total Investment 11,747 10,011 22,179 14,048 29,697 17,806 29,606 17,630 34,808 19,064 36,048 20,397 42,259 26,079 42,122 47,570 Debt Service Interest Charged to Operation 616 492 955 570 1,334 866 1,899 1,248 3,525 1,791 5,316 2,730 6,624 3,472 8,057 5,643 Amortization of Lomns - - - - 22 - 87 801 747 933 1,087 1,233 1,542 1,500 2,595 Total Debt Service 616 492 955 570 1,356 866 1,986 1,248 4,326 2,538 6,249 3,817 7,857 5,015 9,557 8,238 Increase (Decrease) In Working Capita 1,222 430 532 2,332 265 947 73 2,106 1,355 1,649 1,281 2,951 1,634 3,586 1,948 (1,594 Increase (Decrese) In Cash 1 Bank ba - - - - - - - - rax A Misc. Provision - - - I - I - - - - - 149 TOTAL APPLICATION OF FUXDS 13,585 10,933 23,666 16,950 31,318 19,620 31,665 20,984 40,489 23,251 43,57a 27,165 51,750 34,679 53,627 54,363 Contribution to Construction (Amusl) X 9 3 10 40 -2 19 17 31 Contribution to Construction (3 year Avg.) X 9 3 10 39 -2 l8 14 46 Debt Service Cowerae 3.30 3.32 3.60 4.87 3.00 3.96 3.00 3.89 2.10 2.37 2.00 2.49 2.20 2.54 2.40 2.36 Net Resources 13812 Average Investment( 3 Years) 32468  Annex 5.3 INDIA IIHAND POIER TRANSMISSION PROJECT PROJECT COMPLETION IEPORT NTPC s Forecast and Actuat Belwnce Sheet 1985 1986 1987 1988 1989 1990 1991 1992 DESCRIPTION\FY Forecast Actual Forecast Actual Forecast Actuat Forecast Actual Forecast Actuat Forecast Actuat Forecast Actuat Forecast Actuat ASSETS Gross Block 18,424 13,363 24,317 16,047 31,193 20,689 52,774 30,508 96,934 44,784 115,318 69,972 141,398 92,422 188,200 131,136 Less:Deprecfation 475 476 1,103 903 1,912 1,416 2,950 2,069 4,693 3,068 7,833 4,554 11.563 6,877 16,184 10,?91 Net Fixed Assets In Operation 17,949 12,887 23,214 15,1" 29,281 19,273 49,824 28,439 92,241 41,716 107,485 65,418 129,835 85,546 172,016 120,344 Capitat Works in Progress 16,287 19.656 32,573 31,069 55,394 44,302 63,419 52,187 54,067 57,062 71,731 52,360 87,910 56,039 83.222 70,080 Totat Fixed Assets 34,236 32,543 55,787 46,213 84,675 63,575 113,243 80,626 146,308 98,T78 179,216 117,778 217,745 141,584 255,238 190,424 Current Assets Cash and Bank Batance 37 84 60 48 76 134 108 5,973 174 2 248 291 340 684 461 1.742 Short-term deposits - 395 - 637 - 1,053 - 737 - 4,544 - 5.364 - 5,279 - 6,465 Receivables 564 1,626 934 2,284 1,151 2,828 1,655 4,058 2,551 5,981 3,590 11,561 4,934 15,102 6,605 16,085 Inventories 229 704 379 940 470 1,322 710 1,742 1,222 2,639 1,668 3,632 2,096 5,414 2.752 7,306 Loans & Advances 51 326 75 4 90 3,642 122 783 178 2,614 242 1,824 325 2,088 427 2,497 Other Current Assets/Debtors 4 17 4 13 4 148 4 178 4 104 4 125 4 231 4 399 Totat Current Assets 885 3,151 1,452 6,293 1,791 9,127 2,599 13,L69 4,129 15,884 5,752 22,797 7,699 28,799 10,249 34,494 Misc.Csp1tat Expenditure 16 19 19 - 16 - 17 - 18 - 19 41 - 39 TOTAL ASSETS 35,137 35,713 57,239 52,526 86,466 72,718 115,842 94,112 150,437 114,680 184,968 140,594 225,444 170,424 265,487 224,957 LIABILITIES Equity Share Capital Issued 24,173 20,632 37,542 26,685 54,215 32,851 67,392 37,658 86,631 44,073 104,925 49,640 130,528 59,237 157,327 69,841 Share Deposit - 236 - 990 734 - 2,806 - 73 - 1,100 - 4,314 - 377 Retained Earnings 1,590 1,402 3,393 3,231 5,383 5,463 8,414 8,511 12,083 11,906 16,110 17,293 22,934 24,420 33,040 34,526 Total Equity 25,763 22,269 40,935 30,906 59,598 39,047 75,806 48,974 98,714 56,052 121,035 68,033 153,462 87,971 190,367 104,744 Total Long-term Debt 9,352 10,364 16,247 17,729 26,737 27,894 39,170 37,124 50,682 49,848 62,550 59,819 70,286 67,296 72,822 97,766 Less: Current Maturities - - - - - - - - Totat long-term Liabifites 9,352 10,364 60,713 17,729 93,801 27,894 39,170 37,124 50,682 62,550 70,286 97,766 Current Liabilities 22 3,081 57 3,891 131 5,778 866 8,014 1,041 8,780 1,383 12,742 1,696 15,158 2,298 22,448 Add: Current Maturities - - - - - - - - Totat Current Liabilities 22 3,081 57 3,891 131 5,778 866 8,014 1,041 8,780 1,383 12,742 1,696 15,158 2,298 22,448 Totat Debt 9,374 13,445 16,304 21,620 26,868 33,671 40,036 45,138 51,723 58,628 63,933 72,561 71,982 82,454 73,120 120,214 TOTAL EQUITY AND LIABILITIES 35,137 35,713 57,239 52,526 86,466 72,718 115,842 94,112 150,437 114,680 184,968 140,594 225,444 170,425 265,487 224,957 Debt:Equity Ratio 27/73 32/68 28/72 36/64 31/69 42/58 34/66 43/57 34/66 47/53 34/66 47/53 31/69 43/57 28/72 48/52 Current Ratio 1.02 1.62 1.58 1.68 1.81 1.79 1.90 1.54 Accounts Receivable (9 of days) 184 163 164 1T7 175 210 233 154