ADB, India sign $500 million loan agreement to expand power connectivity

The Dollar Business Bureau

What could give a fillip to Prime Minister Narendra Modi’s energy mission, India and the Asian Development Bank (ADB) on Thursday signed a $500 million loan agreement to enhance inter-regional power connectivity and expand transmission system to generate rooms for renewable energy generation capacity.

"Expansion of inter-regional connectivity enables bulk power transfer to the southern region which has, at times, been affected by power shortages. This loan will also help strengthen the transmission system to accommodate renewable energy generation capacity," said Leonardus Boenawan Sondjaja, Deputy Country Director of ADB's India Resident Mission.

The project is likely to be completed by 2020 and will help India build 320 kilovolt (kV) and 800 kV High Voltage Direct Current (HVDC) converter stations, in addition to a 765 kV power transmission systems in India, Manila-headquartered agency said in a statement.

The loan amount will assist Power Grid Corporation of India (Powergrid) add 6,000 MVA transmission capacity from Raigarh in Chhattisgarh to Pugalur in Tamil Nadu, and then 2,000 MVA transmission capacity from Pugalur in Tamil Nadu to North Trichur in Kerala and then 3,000 MVA transmission capacity to channalise renewable energy flows via Bikaner in Rajasthan.

The statement said that $500 million loan from ADB's ordinary capital resources make up about 19% of the total project cost, standing at $2.581 billion, with Powergrid providing counterpart financing of $2.081 billion.

The loan has been given on a 20-year term, which also includes a five-year grace period, with a yearly interest rate decided in accordance with ADB's LIBOR-based lending facility, the statement said.

The ADB program in India has been involved in providing grants, loans and technical assistance to help grow the country’s economy and improve the lives of the poor, children, women and other vulnerable groups.

Since commencing its operation in India in 1986, ADB has sanctioned loans totalling $36.8 billion.