India: Bihar Power System Improvement Project

Sovereign Project | 41626-013

Summary

Electric power is an essential item for economic development and improvement of social wellbeing of India. It faces formidable challenges in achieving balanced infrastructure development, where the provision of adequate energy plays an essential role in reducing poverty through sustainable economic growth. The Government of India (GOI) has confirmed its `Power for All' initiative to provide universal power supply by 2012, which will require 100,000 megawatt (MW) of new generation capacity and related transmission and distribution facilities. Cognizant of the vast impact on the global environment and energy security, the GOI developed the Integrated Energy Policy, 2006. The policy encapsulates the vision to meet the demand for energy services of all sectors reliably with safe, clean, and convenient energy in a technically efficient, economically viable, and environmentally sustainable manner.

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Project Name Bihar Power System Improvement Project
Project Number 41626-013
Country India
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2681-IND: Bihar Power System Improvement Project
Ordinary capital resources US$ 132.20 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector Energy - Electricity transmission and distribution
Gender Equity and Mainstreaming No gender elements
Description

Electric power is an essential item for economic development and improvement of social wellbeing of India. It faces formidable challenges in achieving balanced infrastructure development, where the provision of adequate energy plays an essential role in reducing poverty through sustainable economic growth. The Government of India (GOI) has confirmed its `Power for All' initiative to provide universal power supply by 2012, which will require 100,000 megawatt (MW) of new generation capacity and related transmission and distribution facilities. Cognizant of the vast impact on the global environment and energy security, the GOI developed the Integrated Energy Policy, 2006. The policy encapsulates the vision to meet the demand for energy services of all sectors reliably with safe, clean, and convenient energy in a technically efficient, economically viable, and environmentally sustainable manner.

The past poor performance of state electricity boards was a roadblock to private sector investment in the power sector. In 2001, the GOI adopted a program of unbundling, open access, tariff restructuring, and rationalization. An independent central regulatory body was established, and the formation of state-level regulatory bodies was made mandatory. The Electricity Act, 2003 was intended to improve governance in the power sector through continued institutional restructuring and improved management of sector entities to ensure long-term sustainability.

In the late 1990's, many government finances were constrained by its payables to the state electricity board for electricity subsidies to agricultural consumers which had escalated to 20 percent of total revenues in some cases. Bihar was not an exception. This adversely affected resource availability for important areas of infrastructure as well as for social services caused Bihar State to lag behind in socioeconomic indicators compared with other economically advanced states in India.

ADB's power sector program for India focuses on reforms to make the sector financially viable, operationally efficient, and conducive to private sector investments. Power sector reforms required by Electricity Act, 2003 and National Electricity Policy, 2005 are yet to evolve in Bihar and a comprehensive restructuring of the power sector is essential to the state's overall economic and social development. The Government of Bihar (GOB) is in the process of organizational restructuring for the power sector through evaluating different options for unbundling of Bihar State Electricity Board (BSEB) into generation, transmission and distribution companies. Subsequently, a financial restructuring plan will be developed. Although a three member Bihar Electricity Regulatory Commission (BERC) has been set up in 2006 thus far rules and regulations for the BERC have to be finalize for BERC's to assume responsibilities as a regulatory agency.

Rapid augmentation of generation capacity is an overwhelming priority for Bihar to meet existing shortfall as well as the impending demand growth in the future years. Achieving minimal levels of self-sufficiency in generation is an important objective of the Bihar's power policy. The transmission infrastructure available in the state is not satisfactory, and its limitations have had an adverse impact on reliability and quality of power. The current power distribution scenario in Bihar, which is characterised by about 47% Aggregate Technical and Commercial (AT&C) losses, warrants a radical change in the way electricity distribution is managed. Fundamental restructuring and institutional development of distribution operations in Bihar is crucial to the reforms envisaged in the power sector as a whole. In summary, challenges faced in the power sector are: (i) insufficient generation capacity to meet peak demand, necessitating scheduled and unscheduled load shedding, (ii) transmission capacity is barely adequate and security of supply is at risk, and (iii) in the absence of a framework for long term distribution planning and a lack of funding, there has been significant underinvestment in the distribution network and poor maintenance of equipment. Consequently, the network is overstretched, losses are high and reliability and quality of supply is poor.

The provision of a reliable, affordable electricity supply is a prerequisite for economic and social development in Bihar. The GOB is cognizant that power sector reforms are essential with the core objection of strengthening the ability of public and private entities to deliver such an electricity supply to all consumers. The reform plans is coupled with a realistic investment program, designed to remove current constraints and to meet forecast demand growth though capacity augmentation and loss reduction, and a tariff regime that recognizes actual and reasonable operating costs and encourages efficient use of capital.

Short-term development goals are; (i) meet the GOI's 'power for all by 2012' objective, (ii) develop run-of-river hydropower to meet Bihar's generation gap, and (iii) expand and rehabilitate transmission and distribution lines, substations to improve reliability of power.

Assistance to a poor state such as Bihar is fully consistent with ADB's strategy for India.

Project Rationale and Linkage to Country/Regional Strategy Bihar's power sector is in dire need of investment. Bihar's transmission network suffers from insufficient capacity, resulting in power reliability, quality and stability issues. Bihar's electricity distribution network has failed to keep pace with demand growth. Power transformer capacity is inadequate to meet diversified demand on 11 kV feeders in many areas, 33 kV and 11 kV feeders are being loaded in excess of thermal limits, and distribution transformer failure rates are about 19%. Power quality is poor due to undersized conductors, long low voltage circuits, and distribution transformer overloading. Overall, system losses exceed 40%. This is a considerable drag on sector finances and sustainability.
Impact A more sustainable state power sector providing better services to end users
Project Outcome
Description of Outcome Improved and expanded transmission and distribution (T&D) capacity, increased T&D system efficiency, and enhanced quality and reliability of service in Bihar.
Progress Toward Outcome Project implementation activities are on-going.
Implementation Progress
Description of Project Outputs

1. Transmission expansion:

a. Expansion of transmission substation capacity

b. Construction of new transmission lines.

2. Distribution rehabilitation and expansion:

a. Increased distribution system capacity in the 7 towns in Bihar (via installation and R&M of distribution substations and distribution transformers)

b. Increased distribution line capacity (via re-conductoring of over-loaded 33 kV and 11 kV lines and installation new lines)

c. Increased consumer metering.

3. Non-Physical Investments

a. Project implementation support

b. Institutional and/or capacity development of BSEB

Status of Implementation Progress (Outputs, Activities, and Issues)

1. Transmission expansion:

All contracts for power substations have been awarded and works for transmission substations at Pusauli 220/132 kV Grid Substation, Dhanha 132/33 kV substation, and Gangwara 132/33 kV substation are under advanced stages of implementation.

All contracts for transmission lines (TL) have been awarded and works for 220kV and 132kV TL are ongoing.

2. Distribution rehabilitation and expansion:

All contracts for distribution works have been awarded and they are under advanced stages of implementation.

3. Non -Physical Investments:

Procurement, financial management and safeguard monitoring consultants were hired.

Under capacity development component, EA staff are been trained.

Geographical Location Bihar, India
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The project is classified under environment category B. Initial environmental examinations were prepared in accordance with ADB's Safeguard Policy Statement, which are disclosed on ADB website. There are adequate budgetary provisions for implementation of the environment management plan (EMP). The EMP is part of the bidding documents, and the executing agency is supervising the EMP implementation.
Involuntary Resettlement The project is classified under involuntary resettlement category B. Resettlement plan (RP) was prepared in accordance with ADB's Safeguard Policy Statement, which is disclosed on ADB website. The executing agency is supervising the RP implementation.
Indigenous Peoples The project is classified under indigenous people's category C.
Stakeholder Communication, Participation, and Consultation
During Project Design Consultations were undertaken in accordance with ADB's SPS.
During Project Implementation Consultations are part of the project implementation.
Business Opportunities
Consulting Services TBD
Procurement TBD
Responsible ADB Officer Shalini Singh
Responsible ADB Department South Asia Department
Responsible ADB Division India Resident Mission
Executing Agencies
Bihar State Electricity Board_(BSEB)Vidyut Bhawan, Bailey Road
Patna-800 021
Bihar, India
Timetable
Concept Clearance 26 Apr 2010
Fact Finding 17 Jun 2010 to 25 Jun 2010
MRM 10 Aug 2010
Approval 19 Oct 2010
Last Review Mission -
PDS Creation Date 16 Nov 2007
Last PDS Update 20 Mar 2015

Loan 2681-IND

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
19 Oct 2010 15 Jun 2011 21 Oct 2011 30 Jun 2016 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 153.90 Cumulative Contract Awards
ADB 132.20 19 Oct 2010 61.24 0.00 46%
Counterpart 21.70 Cumulative Disbursements
Cofinancing 0.00 19 Oct 2010 38.21 0.00 29%

Evaluation Documents

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