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Govt signs loan agreements worth $350 million with ADB

28 Feb 2012 Evaluate

The government has signed three loan agreements worth $350 million with the Asian Development Bank to help develop power infrastructure in the country. Out of the $350 million, $200 million will go towards developing the rural electrification infrastructure of Madhya Pradesh, $100 million to finance the solar power transmission system in Gujarat and $50 million to the Power Sector Enhancement Investment Programme in Assam.

The loan to Madhya Pradesh is the second and final $200 million tranche of an ADB loan to support the provision of reliable, 24-hour electricity to rural households. At present the overuse of electricity for irrigation provided through a single distribution feeder leaves households short of power for much of the day. Ageing and overloaded distribution lines and transformers also result in large transmission losses.

ADB’s loan funds will establish separate power feeders for households and agricultural use, install high-voltage distribution systems, provide new power connections and improve the financial sustainability of the distribution companies. It is also expected to open up business, employment and better educational opportunities for the poor.

An agreement worth $100 million has also been signed to develop a transmission system that will distribute 500 megawatts of solar power from the Charanka Solar Park in Gujarat.

The third and final $50 million tranche of an ADB loan to Assam’s Power Sector Enhancement Investment Programme has also been signed. The programme is designed to meet growing demand of electricity in one of India’s poorer states, where the large rural population relies mainly on the agriculture and manufacturing sectors for income. Weaknesses in the transmission of power have affected the competitiveness of businesses. This loan is expected to help strengthen the state’s transmission and distribution system, and reduce technical and commercial losses.

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