ADB sanctions $300 million for Assam’s power sector Financial Services

External funds enters Assam’s power sector with the approval of $300 million loan by Manila-based Asian Development Bank (ADB) to increase the capacity and efficiency of distribution and generation systems.

The multi-million loan funding, which is part of a wider 10-year, $3.5 billion state investment program, will help in upgrading generation and distribution sectors, covering the construction of a 120MW hydropower plant. It will also facilitates building up of new distribution lines and substations, financial management training and other support for staff of the state power companies, Assam Power Generation Corporation and Assam Power Distribution Company.

Assam Power Distribution Company’s finances by permitting it to lower purchases of expensive electricity from independent power producers is likely to be boost up by the ADB fund.

According to the bank, the planned Lower Kopili run-of-the-river hydel plant in central Assam is likely to facilitate the state avoid over 530,000 tons per annum carbon dioxide emissions that would otherwise be produced by fossil fuel-driven generation.

Daily load shedding of 5 to 6 hours are faced by more than a third of households in the state, affecting many prime businesses including the tea gardens, which are still aren’t linked to the grid, and in summer Assam has to purchase up to 15 per cent of its power from independent producers at a very high cost. The new loan is expected to aid over 2.7 million consumers. ADB has been supporting Assam’s power sector since 2003 with five loans totalling $450 million, which have backed the state execute key reforms and enhance transmission and distrubution systems, says, Herath Gunatilake, lead energy specialist with ADB's South Asia Department.

The new loan will carry on past efforts to build up the capacity of power companies and regulatory agencies, and to further reduce distribution losses, which have decreased from 40 per cent in the fiscal year to the end of March 2002 to 24 per cent in financial year 2012.The funds are to be distributed in three tranches with the project set to be done by the end of 2023.

The first installment of $50 million has been approved for the replacement of aging gas turbines at the Lakwa Gas Power Plant in northern Assam. The second tranche will also be for $50 million and the third for $200 million.