$500 mn World Bank loan for India’s Power Grid Corporation

October 22nd, 2008 - 10:12 am ICT by IANS  

Washington, Oct 22 (IANS) The World Bank has approved a $400 million loan to the Power Grid Corporation of India, designed to increase reliable power exchange between regions and states. Power Grid is the world’s third largest transmission utility.The loan, from the International Bank for Reconstruction and Development (IBRD), approved Tuesday is backed by a Republic of India guarantee, the Bank said. It has a 30 year maturity which includes a four-year grace period.

The additional financing to the Fourth Power System Development Project (PSDP IV), which was approved by the World Bank on March 18 this year, will finance the completion of selected transmission schemes intended to expand transmission system and capacity.

“The power sector has improved significantly in recent years, but demand for electricity continues to outstrip supply,” said Julia Fraser, World Bank senior financial analyst.

“This project will help the government achieve its goal of expanding power generation capacity to more than 200 gigawatts (200,000 megawatts) by 2012 through enhancing the country’s power transmission capacity and enabling power to be transmitted across regions and states. It will also help reduce transmission losses and, subsequently, cut the cost of energy.”

The World Bank has been actively involved in the reform and development of the transmission sector in India, and specifically in the creation and strengthening of the Power Grid Corporation of India, the Bank said.

This is the fifth direct loan the Bank has made to Power Grid since 1993. During this period, the company has nearly tripled its transmission network, its assets have grown more than ten-fold to $8.9 billion, and revenues have increased more than eight times to $1.3 billion. Today, Power Grid is the world’s third largest transmission utility.

Despite a fast growing economy, India’s growth potential is constrained by inadequate electricity services and limited power generation and transmission infrastructure, the Bank said. Over forty percent of the population is without electricity, and the cost of erratic and insufficient power supply is high for industry as well as households.

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