Completion Report

Project No. 36318 Loan Number: 2036/2037 November 2010

INDIA: Assam Power Sector Development Program

CURRENCY EQUIVALENTS

Currency Unit – Indian rupee/s (Re/Rs)

At Appraisal At Program Completion 1 November 2003 11 June 2009

Rs1.00 = $0.02 $0.02 $1.00 = Rs45.30 Rs47.26

ABBREVIATIONS

ADB – Asian Development Bank AEGCL – Assam Electricity Grid Corporation Limited AERC – Assam Electricity Regulatory Commission APDRP – Accelerated Power Development and Reforms Program APGCL – Assam Power Generation Corporation Limited ASEB – Assam State Electricity Board DISCOM – distribution company FRP – financial restructuring plan GOA – Government of Assam MFF – multitranche finance facility NEEPCO – North Eastern Electric Power Corporation PMU – project management unit SCADA – supervisory control and data acquisition SDP – sector development program SPU – strategic policy unit TA technical assistance T&D – transmission and distribution

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WEIGHTS AND MEASURES kWh – kilowatt-hour (1,000 watts) MW – megawatt (1,000 kilowatts) GWh – gigawatt-hour (1,000 megawatt-hours) kV – kilovolt (1,000 volts) kVA – kilovolt-ampere km – kilometer

NOTES

(i) The fiscal year (FY) of the government ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2008 ends on 31 March 2008.

(ii) In this report, "$" refers to US dollars.

Vice-President X. Zhao, Operations 1 Director General S. Hafeez Rahman, South Asia Department (SARD) Director Y. Zhai, Director, South Asia Energy Division (SAEN) Team leader Team members

K. Takebayashi, Energy Specialist, SARD T. Limbu, Energy Economist, SARD

C. Roque, Project Officer, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROGRAM DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Program Outputs 3 C. Program Costs 6 D. Disbursements 7 E. Program Schedule 7 F. Implementation Arrangements 8 G. Conditions and Covenants 8 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 10 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 11

A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13

A. Overall Assessment 13 B. Lessons 14 C. Recommendations 14

APPENDIXES

1. Chronology of Main Events 16

2. Update of Policy Matrix 17

3. Program Framework 20

4. Cost Breakdown by Project Components 26

5. Annual Average Exchange Rates 27

6. Summary of Contracts 28

7. Project Financing Plan 29

8. Projected and Actual Disbursements of Loan Proceeds 30

9. Implementation Schedule 31

10. Organization Chart of Assam State Electricity Board 32

11. Status of Compliance with Major Loan Covenants 33

12. Financial and Economic Evaluation 37 43

13. Quantitative Assessment of Overall Program Performance 47

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BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Program Title 4. Borrower 5. Executing Agencies a. Program Loan b. Project Loan 6. Amount of Loan a. Program Loan b. Project Loan 7. Program Completion Report Number B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions

6. Closing Date a. Program Loan

– In Loan Agreement – Actual

b. Project Loan – In Loan Agreement – Actual – Number of Extensions

India 2036/2037 Assam Power Sector Development Program India Finance Department and Power Department, Government of Assam Assam State Electricity Board Power Department, Government of Assam $150 million $100 million IND 1187 26 August 2003 11 September 2003 5 November 2003 7 November 2003 10 December 2003 11 December 2003 12 December 2003 12 December 2003 None 30 June 2005 28 June 2005 30 June 2007 11 June 2009 2

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B. Loan Data

6. Terms of Program Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

7. Terms of Project Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

8. Terms of Relending (if any) Project Loan

– Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

London interbank offered rate-based 15 years 3 years London interbank offered rate-based 20 years 5 years 10.5% 20 years 5 years Assam State Electricity Board

9. Disbursements a. Dates

(i) Program

Initial Disbursement 16 December 2003 Effective Date 12 December 2003

Final Disbursement 28 June 2005 Original Closing Date 30 June 2005

Time Interval 18 months

Time Interval 18 months

(i) Project

Initial Disbursement

20 April 2005 Effective Date 12 December 2003

Final Disbursement 11 June 2009 Original Closing Date 30 June 2007

Time Interval 50 months

Time Interval 42 months

b. Amount ($ million)

(i) Program Loan

Amount

Tranche Number Date Disbursed Disbursed

First Tranche 16 December 2003 90

Second Tranche 28 June 2005 60

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(ii) Project Loan

Category

Original

Allocation

Amount

Disbursed

Undisbursed

Balance

01A Turnkey Contracts- Transmission System

48.00

66.49

-

01B Turnkey Contracts- Rural Electrification

1.70

1.80

-

01C Turnkey Contracts- Revenue Management System

21.04

20.74

-

02A Equipment- Transmission System

02B Equipment-Revenue Management System

03 Consulting Services 05 Unallocated

10.70 1.06

4.50 13.00

5.63 1.33

4.00 0

-

-

Total 100.00 100.00 -

Cost Actual*

(i) Program Loan Foreign Exchange Cost 150.0 Total (ii) Project Loan Foreign Exchange Cost 100.00 Local Currency Cost 219.63 Total 319.63

2. Project Financing Plan ($ million)

Source Appraisal Estimate Actual*

ADB Government of India

100.0 116.5

100.00 159.80

Government of Assam and ASEB 27.0 59.83

Total 243.5 319.63

ADB = Asian Development Bank, ASEB = Assam State Electricity Board.

*Includes $40.3 million Government of Assam counterpart to be disbursed by November 2010.

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3. Cost Breakdown by Project Component ($ million)

Project Component I.

Appraisal Estimate Actual*

FC LC Total FC LC Total

A Transmission System Improvement 58.70 14.30 73.00 72.12 52.68 124.80 B Distribution System Improvement 0.00 94.80 94.80 0.00 146.31 146.31 C Rural Electrification 1.70 5.90 7.60 1.80 1.62 3.42 D Revenue Management System 22.10 12.10 34.20 22.07 8.74 30.81 E Consulting Services 2.70 1.80 4.50 4.00 1.49 5.49

Sub Total Base Cost 85.20 128.90 214.10 99.99 210.84 310.83

F Contingencies

1. Physical 8.10 3.80 11.90 0.00 0.00 0.00 2. Price 4.90 3.80 8.70 0.00 0.00 0.00 Sub Total 13.00 7.60 20.60 0.00 0.00 0.00

Front End Fee 0.50 0.00 0.50 0.50 0.00 0.50

Interest/Commitment Charge During Construction 7.10 1.20 8.30

7.10

1.20

8.30

Total 105.80 137.70 243.50 107.59 212.04 319.63

FC = foreign exchange cost, LC = local currency cost.

*Includes $40.3 million Government of Assam counterpart to be disbursed by November 2010.

4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants Component 1 Component 2 Component 3 Technical Assistance Completion of Engineering Designs Civil Works Contracts

April 2004 April 2004 April 2004 April 2004

27 June 2005 30 Nov 2005 11 Dec 2004

9 Mar 2004

Date of Award Nov 2004–Feb 2005 Oct 2005–Dec 2007 Completion of Work

Feb 2006–Dec 2006 July 2008–Nov 2010

Equipment and Supplies Dates First Procurement Oct 2004 May 2005 Last Procurement Nov 2004 Dec 2007 Installation Start of Operations Completion of Tests and Commissioning

Feb 2006–Dec 2006

Jan 2007–Oct 2010

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5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

Program Loan From 31 Dec 2003 to 30 Jun 2004 S HS From 1 Jul 2004 to 30 Nov 2004 S HS From 1 Dec 2004 to 30 June 2005 S HS From 1 July 2005 to 31 Dec 2005 S HS Project Loan From 31 Dec 2003 to 30 Jun 2004 S S From 1 Jul 2004 to 31 Dec 2004 S S From 1 Jan 2005 to 30 June 2005 S S From 1 July 2005 to 31 Dec 2005 S S From 1 Jan 2006 to 30 Jun 2006 S S From 1 Jul 2006 to 31 Dec 2006 S S From 1 Jan 2007 to 30 Jun 2007 S S From 1 Jul 2007 to 31 Dec 2007 S S From 1 Jan 2008 to 30 Jun 2008 S S From 1 Jul 2008 to 15 Dec 2008 S S From 1 Jan 2009 to 31 May 2009 S S From 1 Jun 2009 to 31 Jul 2009 S S From 1 Aug 2009 to 31 Dec 2009 S S HS = highly satisfactory, S = satisfactory

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-

Days

Specialization of Members

Program and Project Inception 4-12 Feb 2004 4 31 b, c, d, e Program Review 1 21-27 Apr 2004 1 6 b/c Project Review 1 24-27 Aug 2004 1 4 a Program Review 2 29 Sep-5Oct 2004 1 4 b/c Program Review 3 14-17 Dec 2004 1 2 b/c Program Review 4 25-28 Feb 2005 1 4 c Program Review 5 4-12 May 2005 1 10 b Project Review 2 24-29 Jun 2005 2 12 a, f Project Review 3 9-16 Nov 2005 2 16 a, b Project Review 4 19-26 Apr 2006 2 16 a, e Project Review 5 13-20 Nov 2006 2 16 a, b Project Review 6 14-21 May 2007 2 22 a, e Project Review 7 14-18 July 2008 1 5 b Project Review 8 Project Completion

8-12 Dec 2008 23-27 Aug 2010

1 4

5 20

b a,b,e,f

a = project specialist, b = energy specialist, c = financial specialist , d = project engineer, e = project analyst, f = consultant

I. PROGRAM DESCRIPTION

1. On 10 December 2003, the Asian Development Bank (ADB) approved a sector development program (SDP) loan comprising a policy loan of $150 million, and an investment loan of $100 million, for a total of $250 million, to support the reforms and restructuring of the State of Assam’s power sector and to meet part of its investment needs. The SDP was designed to improve the state’s objective of creating an efficient, self-sustaining, and competitive power sector, ensuring and improving the service quality and coverage, while achieving financial viability and economic efficiency of the sector. The immediate objective of the Assam Power Sector Development Program was to ensure that electricity will be supplied in adequate quantities, in an efficient manner, and at reasonable cost to all consumers in the state. This objective was in line with the Government of India’s Electricity Act of June 2003. 2. The program assisted the Government of Assam (GOA) and the Assam State Electricity Board (ASEB) in (i) developing the policy and regulatory framework for the planned growth of the power sector, (ii) enhancing sector efficiencies by establishing a commercial and competitive business environment, and (iii) improving the financial viability of the sector. The objectives of the policy loan were to (i) reorganize ASEB, (ii) restructure the finances of the power sector, (iii) strengthen the functions and capacity of the Assam Electricity Regulatory Commission (AERC) to undertake tariff reforms, and (iv) develop policies to support the implementation of the sector reforms. These policies were underpinned by investments to improve the technical and financial efficiency of the power system, and supported by technical assistance (TA) grants to facilitate reorganization of ASEB, institutional development for rural electrification, and capacity building of AERC. 3. The project loan assisted ASEB in improving the quantity and quality of the power supply by meeting peak demand and reducing system losses. This entailed five components: (i) Component A: Improvement of the Transmission System; (ii) Component B: Improvement of the Distribution System; (iii) Component C: Intensification of Rural Electrification; (iv) Component D: Revenue Management System; and (v) Component E: Consulting Services. The project loan included improvement of various transmission and distribution (T&D) systems and intensification of rural electrification in 24 areas1. Component B was implemented from the central government’s own resources under the Accelerated Power Development and Reform Program (APDRP)2. During implementation, additional works under Components A and B were included under ADB and central government funding, and to utilize the price and physical contingencies due to award of contracts at higher prices than estimated at appraisal. 4. In the 1990s, the Indian power sector began to tackle the problems of state electricity boards, which did not have the financial capacity to meet the country’s growing demand for electricity. Accordingly, GOA initiated a comprehensive reform process to improve ASEB’s efficiency, service quality, and governance. In 1998, the Electricity Regulatory Commission Act enabled establishment of independent national and state regulation bodies to rationalize tariff structures and issue licenses. The Electricity Act 2003 provided a legal framework for implementing the sector reforms, which included the functional unbundling of the state electricity boards, establishment of state regulators, and licensing and antitheft provisions. In 2006, the

1 Six transmission lines in: Gormur-Bokakhat, Lanka-Diphu, Nazira-Sibsagar Rangia-Depota, Sarusajai-Kalipara, Tinsukia-

Namrup; construction of 132/33-kilovolt substations in Biswanath, Bokakhat, Boko, Charali, Diphu, Golaghat, Majuli, Moran, Nalbar, Narangi, Sibsagar, Silchar, Sipajhari; and augmentation or upgrading of substations in Agia, Barnagar, Depota, Dhemaji, Dibrugarh, Gauripur, Gormur, Gosaigaon, Haflong, Kahilipara, Lanka, Namrup, Nazira, Pailaphol, Rangia, Rowta, Samaguri, Sarusajai, and Tinsukia.

2 APRDP, launched by the Ministry of Power, financed the upgrading of the subtransmission and distribution network.

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central government formulated the Integrated Energy Policy to ensure adequate and reliable energy supplies in a technically efficient, economically viable, and environmentally sustainable manner. GOA was assisted by the central government through the APDRP for the distribution system. 5. At appraisal, ASEB’s own system produced only 120 megawatts (MW) against the peak demand of 614 MW. The deficiency was partly covered by central public sector undertakings and neighboring states. The T&D losses were estimated at 38.94% in 20043 due to lack of investments, and technical and commercial losses. Thus, power shortages, poor quality of supply, and frequent load shedding across the state undermined industrial competitiveness and agricultural potential. By 2021–2022, (peak) demand for electricity has been estimated to be 3,985 MW4, which requires adequate sources of power and matching augmentation of T&D and distribution facilities. To meet this, ADB adopted an SDP approach to support GOA’s twin objectives of implementing the required sector reforms and improving access, quality, and quantity of power supply to its consumers. 6. Three attached technical assistance (TA) grants were provided under the SDP: (i) TA 4241-IND: Reorganization of ASEB; (ii) TA 4242-IND: Institutional Development for Rural Electrification; and (iii) TA 4243-IND: Policy and Legal Support for Power Sector Reforms.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

7. The main events in the program implementation are presented chronologically in Appendix 1. A. Relevance of Design and Formulation

8. The program was highly relevant to government sector strategies at the time of appraisal and completion. It was consistent with the central and state government policies to (i) reform and restructure the state power sector to achieve the long-term goal of an efficient, self-sustaining, and competitive power sector; (ii) undertake energy efficiency enhancement and renewable energy development; and (iii) reduce technical and commercial losses of state T&D utilities to provide sufficient power of adequate quality to support the state’s economic and social development. The SDP was also consistent with ADB’s strategy for India’s energy sector. At appraisal, ADB’s country operational strategy for India was to support the policy and provide investment support to those state governments committed to the sector reforms. ADB’s assistance aimed to (i) help GOA undertake the reforms, restructure, and institutional strengthening of ASEB, and (ii) bolster the T&D systems to enable the state power utilities to transmit and distribute enough power to meet demand. Constraints of the power sector in Assam included load restriction and system limitations, lack of accountability, and the critical financial position of the sector. 9. The sector loan modality was a highly relevant approach at the time of appraisal and completion. The program covered part of an approved investment plan to be implemented over a period of 4 years. The sector modality also offered an opportunity to pursue policy reforms to strengthen the long-term sustainability of the sector, which still remain highly relevant at loan completion. Owing to a high cost structure, coupled with GOA’s tariff setting, poor billing and collection system, the sector was not in a position to meet the demand for power, and the

3 ADB. 2003. Report and Recommendation of the President to the Board of Directors on Proposed Loans and Technical

Assistance Grants to India for the Assam Power Sector Development Program. Manila (RRP: IND 36318). 4 Assam Electricity Grid Corporation. 2002. Vision 2020.

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quality and reliability of power supply had deteriorated. GOA had also been unable to help bridge ASEB’s revenue gap. The demands on the state budget for the power sector had resulted in suboptimal allocation of funds. The state government undertook the reforms, and sought ADB’s intervention in the form of an SDP. Thus, an SDP design to support GOA's reform agenda was necessary and highly relevant. The SDP was formulated in close coordination with, and was supported by, ASEB, GOA, and the central Ministry of Power. 10. The SDP provided incentives to improve sector performance and the functional unbundling of ASEB. The SDP intended to augment public resource allocation in Assam by increasing ASEB’s operational efficiencies and delivery capacity. Given the inability of ASEB to meet the growing demand for energy, the sector strategy focused on (i) rationalizing the tariff structure; (ii) pursuing 100% metering, (iii) improving billing and collection efficiency, and (iv) installing efficient operational management at power sector companies. The SDP was designed to assist GOA and ASEB through transitional support and capacity development. Through the physical capacity expansion, the SDP project loan has contributed to the significant reduction of T&D losses from 38.94% in 2004 to 29.61% in 20085. 11. The SDP was thus realistically and comprehensively designed, addressing the key development needs of the Assam power sector. The design also ensured close monitoring of progress through the release of the policy loan in two tranches, subject to tranche conditions being met. The SDP continues to be highly relevant even now, given the priority accorded to a reform agenda by both the central and state governments. B. Program Outputs

12. The status of policy compliance under the program loan is in Appendix 2. The program loan (i) contributed to initiating structural reforms to improve the performance of ASEB; (ii) facilitated the unbundling of ASEB into five companies; and (iii) provided funding for part of the debt restructuring adjustment costs required during the reform. The program also assisted the state government in strengthening its institutional capacity so as to establish the state’s regulatory regime. The state’s policies for the sector have been guided by the financial restructuring plan (FRP)6. 13. Before loan effectiveness on 12 December 2003, 10 policy actions of the program's policy matrix were completed, fulfilling the conditions for the release of the first tranche on 16 December 2003. Another 14 conditions were met subsequently, which enabled ADB to disburse the second tranche on 28 June 2005. 14. Appendix 3 compares the performance of the program with the program framework included in the report and recommendation of the President. To a large extent the SDP succeeded in (i) establishing a fully functional regulatory body (AERC) in the state, (ii) unbundling ASEB, and (iii) improving the financial condition of the sector. AERC has established tariff rules and regulations that serve as the basis for the revenue requirements of the power utilities. AERC has so far revised retail tariffs three times and has issued performance standards for generation and T&D licensees to improve operating efficiencies. 15. The institutional restructuring of ASEB into a generation, transmission, and three distribution companies (later amalgamated into one distribution company)7 has refocused the

5 ASEB, Commercial Tariff Section, August 2010.

6 The FRP involved cleaning-up of ASEB’s balance sheet, offsetting of unpaid subsidies and subventions, settlement of

receivables, securitization of dues, and the transfer of defaulted loans to the state government. 7 The state government merged the three companies into one so as to have a single tariff for consumers.

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sector, strengthened management through decentralized decision making, and improved accountability. To some extent, however, ASEB still retains the investment planning and financial management function of the companies8. 16. The Project improved power supply to about 1.7 million consumers at completion (2009), from 1.1 million at appraisal (2004). It entailed socioeconomic and environmental monitoring of works listed below to ensure compliance with ADB social safeguards for affected communities, and provided training to ASEB in these matters. 17. A brief review of the status of the completion of project components follows.

1. Component A - Improvement of the Transmission System

18. At appraisal, this component consisted of (i) construction of 220 kilovolt (kV) and 132 kV transmission lines; (ii) construction of 12 substations (132/33 kV) and augmentation of existing 220/132 kV and 132/33 kV substations to increase capacity enough to meet peak demand and reduce T&D losses; and (iii) improvement of the supervisory control and data acquisition (SCADA) 9 system for the transmission system. The transmission-line part includes the construction of 39.75 kilometers (km) of 220 kV double-circuit (D/C) transmission line and 339 km of 132 kV transmission line (for which towers have been erected); 3,975 km of 132 kV line (Kahelipara-Sarusajai section) is not yet charged due to non-completion of one span10, which was expected to be done in November 2010. In total, a capacity of 908 megavolt-amperes (MVA) was added to 31 grid substations. To maintain the 33 kV bus voltages11 within prescribed levels, installation of capacitor banks on 33 kV bus of 16 substations (132/33 kV and 66/33 kV) was included. Protection, communication, and switchgear equipment was modernized to improve the operational efficiency and reliability of the system. At implementation, however, the 132 KV transmission line component excluded 64 km of 132 kV D/C (Garmur-Nazira line) due to the existence of a line sufficient to meet requirements. Because of funding constraints, the following scope changes occurred: (i) reduction from 13 to 12 new 132/33kV substations; (ii) augmentation of an existing 220/132 kV substation in lieu of a new 220/132 kV substation (Namrup); (iii) modification of the 132/33 kV (2x16 MVA) new substation (Majuli) to 132/33 kV (4x5.5 MVA), because demand was lower than expected; (iv) cancellation of one 22/132 kV with 50 MVA transformer at Samagui substation; and (v) removal of the Umrangsu 1x16 MVA, 132/33 kV substation (augmentation) under the project and its relocation to North Eastern Electric Power Corporation (NEEPCO) premises. With the exception of a line span12 and a portion of the SCADA system, the transmission-line component was completed in June 2010, with changes approved by the ADB. The renovated SCADA (State Load Dispatch Center (SLDC) system was commissioned in July 2008. Remaining works of SCADA (remote terminal units) and Power Line Carrier Communication (PLCC)13, financed by GOA, were expected to be completed by November 2010, and the SCADA system is eventually to be expanded to 51 substations. The Component A component helped (i) enhance the transformation capacity, (ii) meet the peak demand without any grid disturbances, and (iii) maintain grid frequency within 49.0–50.5 hertz in 2010.

8 The companies continue to be partially autonomous and still operate under a centralized cash-flow system. 9 Assam’s SCADA system was established in 2003, in line with the central government’s efforts to automate the power grid.

10 Refer to footnote 12.

11 Voltage at the machine’s terminal.

12 Litigation issues are expected to be resolved, and the transmission-line span will be completed by November 2010.

13 PLCC is mainly used for telecommunication, tele-protection and tele-monitoring between electrical substations through

power lines at high voltages.

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2. Component B - Improvement of Distribution System

19. This component involved (i) replacement of conductors of 33 kV and 11 kV lines for 4,979 km with high-capacity conductors; (ii) construction of 51 substation (33/11 kV), and augmentation and renovation of 101 substations (33/11 kV and 11/0.4 kV); (iii) construction of 33 kV and 11 kV lines totaling 1,775 km associated with new substations; and (iv) installation of 161,730 energy audit meters. The APDRP was launched in 2002 (footnote 2) to finance (ii) the upgrading of the subtransmission and distribution network; (ii) achieve energy accounting and 100% system metering; and (iii) apply information technology in revenue and operation. At the project start, only 12 circles were proposed and project costs were estimated at $94 million (Rs. 4,085.4 million). The Ministry of Power approved an additional amount of Rs. 1,464.6 million in 2005. The APDRP works were completed on 31 March 2009. At completion, the following were achieved: (i) 100% computerized billing and collection; (ii) significant improvement in voltage, reliability index, load distribution, and service connection; (iii) consumers increased from 1.1 million in 2005 to 1.7 million in 2009; (iv) greater revenues; (vi) fewer T&D losses.

3. Component C - Intensification of Rural Electrification

20. Rural electrification was improved by (i) augmenting 15 substations (33/11 kV); and (ii) renovating 1,201 defective distribution transformers (11/0.4 kV), and associated 11 kV lines and low-tension lines for 4,030 km covering 1,201 villages. Item (i) was financed from GOA’s resources and item (ii) was financed by ADB. At appraisal, it was proposed to upgrade the capacity of 23 substations (33/11 KV). This was reduced to 15, since eight of the proposed augmentation works were funded from other sources. The component was completed on 30 June 2009.

4. Component D - Revenue Management System

21. At appraisal, the distribution network and the merged electricity distribution companies14 were proposed to be provided with: (i) a revenue management system; (ii) a communications system to support computerized billing 15 ; and (iii) the supply and installation of 600,000 consumer meters, and meter testing and maintenance equipment and facilities. Three distribution circles (Dibrugarh, Jorhat, and Guwahati-II) were provided with a computer billing system through APDRP funds, and the communication systems for these circles and Guwahati-II circle were financed by ADB. To meet requirements, 190,000 meters were procured under APDRP funding and 600,000 meters16 were to be financed by ADB. During implementation, the 600,000 meters were reduced to 372,185, as it was deemed sufficient. Due to cost overruns, the communication package was cancelled on 5 October 2008. Commissioning of all testing equipment was completed in April 2008, and meter installation was completed in December 2008 under ADB funding and in March 2008 under APDRP financing.

5. Component E: Consulting Services

22. There were four consulting contract packages envisaged under Component E: (i) Component 1: Project Implementation Support to assist ASEB in timely and adequate project implementation for all components under the loan; (ii) Component 2: System Study to establish ASEB’s transmission master plan; and (iii) Component 3: Program Implementation Support to develop the strategy, work progress, organizational structure, and culture of the successor

14 The original three distribution companies were amalgamated in May 2009 into the Assam Power Distribution Company. 15

A computerized billing system for all 14 distribution circles was provided under APDRP. 16

60,000 for unmetered registered consumers, 240,000 to replace electromechanical and defective meters at existing registered consumers, and 300,000 for unregistered consumers.

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companies of ASEB; and (iv) TA: Consultancy Services for Training and Support for Loss Estimation and Loss Reduction in Distribution, and Accounts and Financial Transfer Program. For component 1, consultants commenced work on 17 May 2005 and extended until 30 June 2009; for component 2, consultants commenced work on 1 January 2006 and ended in March 2008; for component 2, consultants commenced work on 3 January 2005 and ended on 30 April 2007; for the TA, consultants commenced work in April 2004 and completed in 28 February 2007. At appraisal, the consultant inputs were estimated at $4.5 million. This was revised to $5.49 million at loan closing. Consultant inputs were extended because of a delay in project implementation and expansion of the TA scope.

C. Program Costs

23. At appraisal, the cost of the SDP was $150 million. The amount was released in two tranches, without any changes. 24. At appraisal, the total cost of the Project was $243.5 million equivalent, comprising $105.8 million in foreign currency (43.4%) and $137.7 million equivalent in (56.6%) in local currency. The ADB loan was $100 million, of which $100.0 million (100%) was utilized (excluding front-end fee and interest during construction). Appendix 4 compares estimated project costs with actual project costs. The summary of contracts is in Appendix 5. Appendix 6 provides the average exchange rates used to convert local currency to the dollar equivalent. 25. Appendix 7 compares the estimated and actual project financing plan. After the project completion, total project expenditure was $319.63 million, comprising $100.0 million in foreign currency from the ADB loan and $219.63 million in local currency from ASEB and the Government of India. ADB’s share of financing decreased from 41.1% to 31.3%, due to the increase in government funding from $143.5 million to $219.63 million. The remaining, undisbursed amount of $40.3 million represents the government-funded portion of the project that will be completed in November 2010. 26. The foreign exchange cost saving of $15.1 million can be attributed to (i) the deletion of the communication system (Component D) amounting to $2.1 million, from ADB financing, and (ii) savings from unutilized contingency of $13.0 million. These savings were used to cover cost overruns incurred mainly in the transmission and consulting services components. The local currency cost increase of $74.4 million equivalent can be mainly attributed to (i) carrying out civil, construction, and commissioning works related to the distribution system improvement funded under APDRP; (ii) change in detailed system design relating to site conditions; and (iii) change in tax structure. The loan amount of $100 million including contingencies had to be spent on 10 of the 14 contract packages because of price escalation and physical variation. The amount required for the remaining four packages17 had to be provided by GOA, as ADB could finance only up to the amount stipulated in the loan agreement. At project completion, ADB financed $100 million (31.3%), the Government of India $159.8 (50.0%), and GOA and ASEB $59.83 million (18.7%). National funds were utilized for the costs of Component B and the metering-package cost for Component D. GOA and ASEB funds were used for freight and insurance, taxes, cost of infrastructure, conductors and cables for Component D, and compensation for land acquisition and resettlement.

17

Component A: SCADA (SLDC) and SCADA (remote terminal units), and communication equipment and communication system (Component D).

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D. Disbursements

27. As a contribution to GOA’s policy reforms, the program loan provided assistance in two tranches. The first tranche of $90 million was released at loan effectiveness on 16 December 2003. The second tranche was disbursed on 28 June 2005, six months later than envisaged due to late compliance with second tranche release conditions. The proceeds of the program loan were channeled through the Ministry of Finance. 28. Under the project loan, disbursements totaled $100.0 million18 out of the total amount of $100 million. Initial disbursement under the loan started on 20 April 2005, and the final disbursement was on 11 June 2009 (50 months later). Since the disbursements were mainly for goods and consulting services, direct payment procedures, as approved by ADB, were used for major disbursement purposes. ASEB expressed satisfaction with the disbursement procedures of ADB. The projected and actual disbursements are given in Appendix 8. E. Program Schedule

29. The loans were approved on 10 December 2003 and became effective on 12 December 2003. The program loan was to be implemented over 18 months and the loan funds were to be released in two tranches. The first tranche was released on 16 December 2003 after loan effectiveness, and the second tranche was released on 28 June 2005 upon government compliance with the 14 policy actions required for that release. 30. At appraisal, all components of the project were to be completed before the original closing date of 30 June 2007. The originally envisaged scope of the project components was completed in June 200919 except for parts of the SCADA system and transmission-line package (one span), which were expected to be completed by November 2010. The planned project implementation of various components as compared with the actual sequence of events is in Appendix 9. The first contract under the transmission component (Component A) was awarded in 11 May 2005 against the scheduled date of November 2004, as ASEB took time to prepare the bid documents. Although the contracts for transmission works (original scope) were to be awarded between November 2004 and September 2005, 10 packages were held up by the delay of specifications for a Component A component and awarded over a period of 31 months. The delay in contract awards meant that some government-funded contract packages in one transmission segment were completed only on 30 June 2010, against the scheduled date of 30 December 2006. Although contract awards in the case of rural electrification (Component C) occurred 12 months after the originally scheduled date, in May 2005, ASEB was able to complete Component C by June 2009. In the case of the revenue management system (Component D), the contract was awarded in January 2006 as against the originally scheduled date of January 2005. For the consultant services (Component E), the contract was awarded in January 2005, as against the scheduled date of February 2004. This component was completed in June 2009. As a result of the delays, ASEB requested a loan extension from 30 June 2007 to 30 December 2008; and a second extension to 30 June 2009. For ADB financing, contracts were reduced so as not to exceed the committed loan amount; ASEB, state government and central government financed the exceeding portions from their own resources.

18

The utilized balance of $0.02 was cancelled at loan closing date. 19

Component A was completed in July 2010 except for 1 transmission-line span, Component B in March 2010, Component C in June 2009, Component D in December 2008, and Component E in December 2008.

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F. Implementation Arrangements

31. The Finance Department and the Power Department of GOA were the executing agencies for the program loan. GOA set up an institutional framework for managing the power sector reform process under a steering committee chaired by the chief secretary of GOA. The committee served as the top body with strategic and program overview throughout the reform process to ensure effective use of resources and to establish priorities. GOA also established a strategic policy unit (SPU) under the steering committee to handle the program implementation and define the critical path for reform, keeping in mind the institutional, financial and regulatory imperatives. SPU coordinated with ADB and various stakeholders in the sector. The establishment of the steering committee and SPU at the highest level helped the state government achieve the tranche conditions. 32. ASEB, or its successor entities and the state Power Department were the executing agencies for the project loan. The implementation arrangements were the same as envisaged at appraisal, and ADB found these to be adequate. The chairman of ASEB was responsible for the overall implementation, assisted by the project management unit (PMU). The PMU, established on 18 October 2003, was headed by a senior ASEB officer, who was assisted by a team of full-time engineers and associated support staff. The PMU was the main contact point for ADB and was responsible for coordinating all aspects related to the project. Land acquisition and environmental clearances were planned and executed in advance to avoid delays. The organization chart of ASEB is in Appendix 10. 33. The Project loan became effective on 12 December 2003 and the loan account was closed on 11 June 2009, 24 months after the originally scheduled closing date of 30 June 2007.

G. Conditions and Covenants

34. There were 24 policy measures in the policy matrix attached to the development of the policy loan. Ten of the policy measures were accomplished before loan effectiveness, and the other 14 were to be fulfilled during program implementation. Compliance with the second-tranche policy measures was delayed by 6 months. 35. The conditions for the effectiveness of the loan agreements were met as required. After GOA met the conditions for loan effectiveness, ADB declared the loans effective on 13 December 2003. No covenants were modified, suspended, or waived during implementation. The status of compliance with covenants is given in Appendix 11. ASEB and GOA are generally in compliance with major loan covenants. 36. Covenants relating to project implementation, operation, and maintenance of project-supported facilities were met satisfactorily. There were delays on two occasions in the submission of unaudited and audited financial statements, which ADB conveyed to ASEB. This was due to: (i) unbundling of ASEB, which delayed the submission of accounts by the successor companies; (ii) delay in appointing external auditors; and (iii) the shift from state electricity board accounting systems to company accounting. H. Related Technical Assistance

37. Three TAs amounting to $1.50 million and financed by the Department for International Development of the United Kingdom (DFID) supported the implementation of the SDP.

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38. TA 4241-IND 20 : Reorganization of Assam State Electricity Board was designed to (i) enhance sector efficiency and governance, and (ii) improve sector viability. The TA covered a debt restructuring plan; a funding plan for employees’ terminal benefits; commercial transaction agreements; regulations for licensing and tariffs; transfer schemes; and redesign of key processes in generation, transmission, and distribution. The TA scope was extended to support restructuring, implementation of the transfer scheme and piloting of process management, and communications with employees. It was rated highly successful in delivering achievements. The TA completion report was circulated to the Board on 4 June 2007.21 39. TA 4242-IND 22 : Institutional Development for Rural Electrification was designed to (i) study the rural power system, demography, and operational and financial feasibility; (ii) propose a structural model for rural electrification operations; and (iii) prepare a policy framework for rural electrification. At the request of ASEB and GOA, the TA was expanded to support implementation of initial formation and operations of new service providers under the pilot project. It was rated successful in delivering the outcome. The TA completion report was circulated to the Board on 10 July 2008.23 40. TA 4243-IND:24 Policy and Legal Support for Power Sector Reforms assisted GOA in evolving sector policies, and taking policy and legal actions required in the policy matrix. I. Consultant Recruitment and Procurement

1. Consultants

41. At appraisal, $4.5 million was allocated to consulting services for project implementation. The project engaged international and domestic consultants for four components. Component 1: Project Implementation Support involved the review and design of transmission and distribution systems, preparation of specifications for the SCADA and communication system, construction supervision, and monitoring social and environmental issues. Component 2: System Study involved the preparation of demand forecasts, development plans for T&D, master plans for rural development, system analysis and load-flow studies, and institutional strengthening. Component 3: Program Implementation Support involved strengthening of the human resource management policy, systems, and training. The TA Institutional Development for Rural Electrification was expanded to assist ASEB in establishing rural franchise performance management systems.

2. Procurement

42. In general, ASEB carried out all procurement activities for ADB-financed contract packages in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Owing to delays in consultant recruitment, ASEB was tasked to prepare bid documents for 10 of the 14 packages covering all components during the 17 months of loan effectiveness. ADB helped ASEB achieve important milestones by expediting necessary approvals. J. Performance of Consultants, Contractors, and Suppliers

43. The consultant recruitment process was slow and contributed to early delays. All up, 353.3 person-months of consultant services (83.5 international and 269.8 domestic) were

20

ADB. 2003. Technical Assistance Completion Report, Reorganization of Assam State Electricity Board. Manila . 21

ADB. 2007. Technical Assistance Completion Report, Reorganization of Assam State Electricity Board. 22

Approved on 10 December 2003 for $400,000. 23

ADB. 2008., Technical Assistance Completion Report, Institutional Development for Rural Electrification. 24

Approved on 10 December 2003 for $100,000.

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recruited for 3 components and one TA. The consultants were not fielded until January 2005, 11 months behind schedule. The consultant selection was delayed because of (i) failed bids due to proposals at higher costs than estimated at appraisal; and (ii) procedural delays by the executing agency. However, the consultants’ performance was satisfactory. There has been no major issue with design or quality of the technical service provided by consultants. To avoid such delays in future, the following are proposed: (i) earlier establishment of the PMU; (ii) engagement of social and environment specialists before loan signing; (iii) preparation of requests for proposals for consultants before loan effectiveness; and (iv) PMU training.

44. ASEB reported that the performance of all contractors was generally satisfactory. All goods and services under the project loan (ADB financed) were procured in accordance with ADB’s procurement guidelines. Bidding documents were prepared in a manner that ensured maximum competition under international competitive bidding (ICB). Packages that cost $1,000,000 or more were awarded through ICB. Some complex components under Components A, C and D were procured on a design, build and turnkey basis. The performance of the contractors in the supply of goods was generally satisfactory, except for one contractor, which provided services for Component A, SCADA (remote terminal units) and communications equipment. Significant delays in the civil works occurred due to design modifications, climatic conditions, and insurgencies in the locality.

K. Performance of the Borrower and the Executing Agency

45. The Government of India was the borrower. The Finance Department and the Power Department of GOA were the executing agencies for the program, and ASEB for the project. The overall performance of the borrower and ASEB was satisfactory. The Finance Department and the borrower regularly ensured that GOA took the necessary policy measures to fulfill the tranche conditions. All the components of the project were completed successfully, although there was an overrun of about 24 months in completing the ADB-financed portion of the works in June 2009, primarily due to delays in completing construction on sites. The SDP contributed to reducing serious peak power shortages from 18% to 10% during this period. Assam's peak power demand is forecast to grow to 1,883 MW by 2014, with an annual increase of 14.2%. To meet this growth, more power plants will be constructed and commissioned by 2014, with sufficient additional capacity. Under the APDRP, village electrification improved from 58% in 2003 to 77% in 2008, and household electrification from 17% in 2003 to 22% in 2008. A major outcome of the SDP was significant aggregate T&D loss reduction from 38.94% in 2004 to 29.61% in 2008. Transmission loss was reduced from 6.3% in 2005 to 5.1% in 2008, and distribution technical loss from 24.9% to 24.5%; both contributed to reducing annual greenhouse gas emissions by 0.48 million tons carbon dioxide equivalent. However, current T&D loss is still higher than the national average of 29%25. Overall, ASEB has satisfactorily demonstrated its capacity to formulate and carry out engineering, procurement, and construction according to approved standards and to the satisfaction of ADB. 46. The performance of borrower was satisfactory. The borrower completed the institutional set-up for project management including appointment of key staff before the loan became effective. These actions demonstrated by EA shows its commitment and its capability to undertake such projects.

L. Performance of the Asian Development Bank

47. The ADB’s overall performance was rated satisfactory. It monitored the project closely and regularly, and provided guidance on project management. ADB fielded 15 supervision

25

Source: Chairman, Planning Commission of India on 17th June 2010.

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missions to the project site. It promptly acted on proposals for change in scope, partial cancellation, reallocation, and extension of the loan closing date. ADB’s performance in jointly administering the project with the borrower is rated satisfactory. Although ADB procedure was quite new to ASEB, the project was completed successfully, except for SCADA (remote terminal units), communication packages, and a span of the Kahilipara–Sarusajai line. The $100 million funded by ADB was supported by its frequent missions and capacity development of ASEB.

III. EVALUATION OF PERFORMANCE

A. Relevance

48. The design of the SDP was highly relevant to the sector objectives of the central government and GOA, and ADB’s country and sector strategy for India. Since the central government initiated power sector reforms in the early 1990s, state policy reforms had been on its agenda. The power sector in Assam had deteriorated to such an extent that it seriously limited economic growth, and because of the state’s poor financial condition and regulatory environment, ASEB was unable to improve power supply. GOA then embarked on policy reforms and physical investments in the sector aimed at strengthening the T&D segments, enhancing energy efficiency, and developing renewable energy. Therefore, at appraisal, an SDP modality was considered to be best suited to supporting the initiatives by GOA and ASEB. At completion, ADB’s strategy for the power sector in India was in harmony with the 11th Five-Year Plan, which aims to develop infrastructure for economic growth and poverty reduction. ADB’s present strategy for the sector is to (i) promote clean and renewable energy; (ii) optimize T&D systems; (iii) support sector reforms; (iv) provide institutional strengthening; (v) promote private sector participation; (vi) encourage energy efficiency and rural electrification; and (vii) ensure environmental and social sustainability. The program and project outputs contributed to achieving these objectives. 49. The central and state governments are still pursuing (i) capacity expansion, (ii) reforms, (iii) provision of a T&D infrastructure, (iv) greater operational efficiencies, (v) better tariff setting, and (vi) private sector participation. To achieve these, the central government enacted a comprehensive Electricity Act in 2003. The project focused on boosting system capacity and efficiencies by strengthening T&D systems, improving revenue through a better revenue management system, and increasing the reach of electricity. The project will continue to be relevant in the future because of greater demand and scope for T&D efficiency improvements. AERC is guiding the state power utilities toward stronger infrastructure and operational efficiencies. Energy efficiency must be enhanced if the government target of 15% Aggregate Technical and Commercial (ATC) loss is to be met. The state power sector is projected to grow from 8.9% in 2007–2008 to 11.7% by 2021–202226. Given the policy reforms since ADB’s intervention, the sector is expected to be sustainable. B. Effectiveness in Achieving Outcome

50. The program achieved its immediate objectives of (i) developing a policy and regulatory framework for the organized growth of the sector by providing support for the implementation of reform measures envisaged in the legislation (the Electricity Act was enacted, ASEB was unbundled and new companies started functioning on 31 May 2005); (ii) establishing a competitive environment to promote efficiency gains and loss reduction (AERC was made functional in 2004; in its tariff orders AERC has fixed targets for reducing T&D losses); (iii) improving the sector’s financial viability (FRP was prepared in 2003 and completed in 2008).

26

Vision 2020, AEGCL, December 2009.

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51. Under the project, the state was able to (i) transmit and distribute 4.3 million kilowatt-hours (kWh) of energy in 2009, compared with 3.4 million kWh in 2004, and meet peak demand of about 912 MW in 2009, versus peak demand of 635 MW in 2004; and (ii) improve the collection efficiency from 94% in 2004 to 97% in 2009. Assam's peak power demand is forecasted to increase to 1,883 MW by 2014, at an annual rate of 14.2%. The project has not only achieved but also enhanced the physical targets at appraisal thanks to use of savings and increased government resources. ASEB’s losses after tax were reduced from Rs10,880 million in 2004 to Rs4,280 million in 2009. ASEB improved its cost recovery from 72% in 2004 to 91% in 2009 as a result of tariff adjustments, lower generation costs, and an increase in collection efficiency to 97%. The project is rated efficacious. C. Efficiency in Achieving Outcome and Outputs

52. The policy milestones of the program were implemented close to the target dates, and GOA and ASEB are pursuing the program reforms. Both program and project are rated efficacious. The project has been implemented efficiently and all the components have been operating from the date of commissioning. 53. The financial internal rate of return of all the components was well above ASEB’s weighted average cost of capital of 2.04%. The economic internal rate of return of all the components has been reevaluated at more than 12%. The financial and economic analyses were made using the world price numeraire. Major assumptions used in the financial and economic evaluation, and detailed calculations of rates of return are in Appendix 12. D. Preliminary Assessment of Sustainability

54. Preliminary assessment of the program shows many positive indications of its long-term sustainability. These include (i) the commitment shown by GOA in implementing the program, financially supporting the sector through timely payments of subsidies and subventions, and supporting the power utilities as per FRP; (ii) greater corporate efficiency of the utilities; and (iii) the effective functioning of AERC. 55. The design of all components and the technology adopted were robust and suitable given the technical parameters, the requirements of the Indian power sector, and the project’s long-term sustainability. It is envisaged that the regulatory regime and increased energy demand will ensure that funds to operate the system are available in the future. Given expected improvements, the distribution company should be generating profits from 2012. The power demand in Assam is projected to grow substantially, ensuring the full use of project investments. The project was financially viable (paragraph 53). All outputs are expected to be used optimally in the future. The SDP reforms and investments are sustainable. E. Impact

56. The project aimed to contribute positively to the economic development of Assam by ensuring sufficient supply of electricity and sustainable tariffs. 57. Most potential impacts are considered beneficial from an environmental point of view. Although one project package was implemented in proximity of a biodiverse region, no adverse impacts were identified. Adequate safety measures and periodic monitoring were in place, and ADB reviewed the environmental impact assessment reports. 58. In accordance with the Ministry of Environment and Forest guidelines on environmental clearance, construction of transmission lines in non-forest lands does not require clearance from

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government authorities. Based on the Forest (Conservation) Act 1980, power lines passing through ecologically sensitive areas require approval by the ministry, and from other agencies. The routes were finalized in consultation with authorities to ensure minimal damage to the forests and wildlife. For the 378.75 km of transmission lines, Rs7.6 million27 was paid to the Forest Department for compensatory reforestation. Compensation was also made to families affected by the project. 59. The transformers and other equipment used in the project are free from polychlorinated biphenyl. Used transformer oil, batteries, and scrap were collected and disposed of in compliance with Environmental Act 1986, and with the ministry’s rules and regulations. Social Assessment

60. The project is gender neutral with regard to beneficiaries. All electricity consumers derive benefits from greater power reliability in Assam. Annual per capita consumption increased from 175 kWh in 2005 to 210 kWh in 2009. Other benefits include job creation. 61. ASEB carefully chose the routes of power lines to avoid (i) human dwellings, (ii) threatening the survival of vulnerable communities, and (iii) common property resources. Component A involved 12 new 132 kV substations; land was acquired for five of them, covering 16.7 hectares and costing Rs4.5 million, the other sites were owned by ASEB, and there was no encroachment. ASEB paid Rs20.1 million for agricultural losses. 62. The resettlement plan for the transmission component (Component A) identified 825 project-affected persons. Funds for acquisition and resettlement were deposited with the district administration and pertinent departments. Public consultations and awareness building involved local officials, and community leaders and groups. 63. In 2004, AERC issued standards of performance regulating quality and quantity of power supply by T&D licensees that are closely monitored. Penalties apply to failure to meet the service standards and public awareness of these was raised across Assam.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

64. Overall, the outcomes of the program and project loans were successful, and if support to Assam continues, the long-term impacts are likely to be achieved. SDP design was consistent with ADB's country and sector strategy and with ASEB's objectives of developing a T&D network in the state capable of providing power reliably. The performance of ASEB, central and state governments, and contractors was generally satisfactory. Implementation of the SDP policy reforms was achieved with full involvement of both governments and ASEB. Project components were achieved as conceived at appraisal but with cost overruns. All the components were satisfactory, with full disbursement of the $100 million project loan at closing date28. ASEB and its successor companies have the capabilities to operate the components to derive maximum benefits. The SDP has generally met the objectives and is rated successful.

27

Afforestation cost Rs885,639; cost at net present value is Rs6,237,000; overhead cost was Rs442,820. 28

Refer to footnote 16.

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65. While the regulatory framework and institutional structure for efficient electricity generation and transmission have been established, there is pressing need to strengthen the distribution side. T&D losses, a high cost structure, and tariffs that do not ensure cost recovery have resulted in the suboptimal financial condition of ASEB.

66. To remedy the constraints, GOA requested further ADB assistance to the state power sector. On 18 November 2009, ADB approved a $200 million multitranche finance facility (MFF) to (i) meet the capital needs to strengthen transmission capacity to cover peak demand of 1,443 MW in 2011-2012 at growth rates of 14-15%; and (ii) improve operating efficiencies.

B. Lessons

67. Before ADB's support, ASEB had not taken on T&D projects of such magnitude due to financial constraints. However, the successful project implementation amply demonstrates that, if appropriate institutional support is provided, it can carry out such a project adequately. 68. ASEB, with the support of GOA, took advance action to acquire land and clear other statutory hurdles, which eased implementation. In earlier ADB-assisted power sector projects, land acquisition and resettlement issues generally caused delays. Although ASEB was initially not fully conversant with ADB procedures, timely support from ADB and willingness of ASEB staff to adopt these practices helped implement the project. ASEB and GOA fully supported the project and retained key PMU staff. 69. Like other state electricity boards, ASEB experienced difficulties in obtaining state government budgetary support, which badly constrained its operations. Since Assam’s financial condition is particularly serious, addressing financial issues upfront is key to successful reform. Investments under the MFF will include institutional development, ensuring a sustainable reform program. C. Recommendations

1. Program Related

a. Future Monitoring

70. Various steps taken by GOA in implementing reforms were well received by all stakeholders and there are signs of improvement in power supply, tariffs, and operating efficiencies. There is also consensus among the political establishment and consumers in India on the need for sector reforms. Based on the recognition that the reform process is irreversible, ADB will monitor the progress of reforms during implementation of the MFF and help strengthen the capacity of the executing agency. All SDP components were successfully implemented and are operating without major problems. ASEB has had a good track record in maintaining the system, so no further monitoring by ADB is required. 71. ASEB and its successor companies should continue to improve governance, accountability, and coordination for sustainability. In particular, there is a need to develop efficient management systems in ASEB and the companies. AERC should be more proactive in monitoring the performance of the entities and set targets annually to improve sector performance and ensure periodic tariff adjustments. 72. GOA and ASEB’s successor entities have developed a sector investment program for 2009–2014 at an estimated cost of $764 million. The program will strengthen transmission capacity; improve access through grid connectivity, and off-grid renewable and conventional

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energy-based electricity; enhance efficiency and quality of power supply; ensure the financial health of the power sector; promote private participation; and build management capacity. A part of these investments is financed under the MFF. As the power sector in Assam has improved since 2003, the state government should focus on capacity and staff development, information technology, and systems improvement.

b. Covenants

73. All the covenants were complied with.

c. Further Action or Follow-Up

74. As all the components of the project were successfully implemented and disbursements have been completed, no further follow-up is required.

d. Additional Assistance

75. As a follow-up action, ADB approved an MFF in 2009 that covers part of the investment needs of the sector until 2014 (para. 66).

e. Timing of the Program Performance Evaluation Report

76. A program performance evaluation mission may be undertaken in 2012 to prepare a program performance evaluation report.

16 Appendix 1

CHRONOLOGY OF MAIN EVENTS

Date Event

2003 11–25 June Fact-finding mission fielded. 28 July 2003 Approval of advance action for the project loan. 30 July Publication of the advance action in ADB Business Opportunities (ADBBO). 25 Aug–11 Sep Appraisal mission fielded. 2 Dec Publication of the general procurement notice in the online version of ADBBO. 10 Dec Loan approval. 11 Dec Loan signing. 12 Dec Loans declared effective. 16 Dec First tranche of $90 million released for program loan. 27 Dec First disbursement for consulting services.

2004 4–12 Feb Program and project inception mission fielded. 21–27 Apr First program review mission fielded. 18 May Publication of the Specific Notice for procurement of current and potential transformers in the ADBBO. 7–18 June First tripartite meeting. 29 June Publication of the specific notice for control and protection equipment in the ADBBO. 19 Aug Publication of the specific notice for supply of circuit breakers in the ADBBO. 24–27 Aug First project review mission fielded 29 Sep–5 Oct Second program review mission fielded. 14–17 Dec Third program review mission fielded.

2005 19 Feb Program consultation mission fielded. 25–28 Feb Contract for procurement of circuit-breakers under Component A awarded; fourth program review mission fielded. 4–12 May Fifth program review mission fielded. 28 June Program loan closing date and release of final tranche of $60 million. 24–29 June Second project review mission fielded. 5 July First disbursement for supply of goods. 7–8 July Project tripartite meeting between Department of Economic Affairs (DEA), ADB and the

executing agencies. 13 July Approval of the bidding documents for the repackaged rural electrification component. 9–16 Nov Third project review mission fielded. 21 Nov First disbursement for turnkey contract. 8 Dec Contract for procurement of current and potential transformers under Component A awarded.

2006 19–26 Apr Fourth project review mission fielded. 13–20 Nov Fifth project review mission fielded.

2007 14–21 May Sixth project review mission fielded.

2008 14–18 July Seventh project review mission fielded. 8–12 Dec Eighth project review mission fielded. 31 Dec First extension of the loan closing date originally scheduled for 30 June 2007.

2009 11 June Project loan closed and final disbursement.

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UPDATE OF POLICY MATRIX

Policy Actions/ Objectives

Conditions Fulfilled

Current Status and Observations First Tranche Release

(December 2003) Second Tranche Release

(June 2005) 1. Legal and

Regulatory Framework for Reform Measures

Notification of effectiveness date of Assam Electricity Bill 2003 as part of Central Electricity Act 2003 (10 June 2003)

GOA issues orders to establish the AERC with adequate staff and budgetary funds

AERC to issue rules and standards for independent tariff setting, including multi-year tariff principles and licensing

GOA to develop legal framework satisfactory to ADB for the power sector reform implementation

GOA constituted a statutory independent regulatory authority for the state electricity sector, AERC, under the Central Electricity Act 2003. AERC was established on February 2001 to regulate tariffs and power purchase, and promote competition in the sector. The regulatory rules on immediate matters were approved by GOA and notified on 25 February 2005. Reforms are ongoing and GOA continuously monitors progress.

2. Policy and Institutional Framework for Reform Measures

GOA developed and approved: (i) financial restructuring plan (FRP); (ii) Initial industry structure and reform road map; (iii) governance structure of new sector entities; and (iv) principles of personnel transfer; (v) policy on treatment of terminal benefits; (vi) policy to deal with the implications of the captive generation and multiple licensees in the context of applicable laws, the restructuring of ASEB, and FRP.

GOA to establish Power Sector Reform Steering Committee and strategic policy unit

GOA to approve ASEB’s proposal of HRD

GOA to develop and approve rural electrification policy, including institutional mechanism to outsource billing and collection to private parties.

GOA and ASEB to develop and launch stakeholder communication program

Policies and plans have been satisfactorily completed. GOA approved a policy paper on initial industry structure, reform road map and governance structure of the successor companies of ASEB on 28 October 2003. GOA approved ASEB’s HRD plan. GOA issued the Rural Electrification Policy on 25 February 2005. The aims are to (i) achieve more efficient management in loss control and revenue collection in rural areas and (ii) ease access to rural electricity services in accordance with the Government of India’s 2012 program, focusing on a gradual shift from management and ownership of distribution companies toward local consumer-owned associations. GOA took over the unfunded liability for the terminal benefits and General Provident Fund; it approved the terminal benefits plan on 4 February 2005.

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3. Reorganization of ASEB

GOA to take a decision on distribution reconfiguration based on the recommendations of ADB consultants, as mutually agreed between GOA and ADB

GOA to incorporate and register GENCO, TRANSCO and DISCOMs under the Companies Act 1956

ASEB to finalize draft service rules and conditions of the successor companies

GOA to constitute independent selection committee for selection and appointment of Chairman cum Managing Director (CMD) and part-time directors of GENCO, TRANSCO and DISCOMs

ASEB/GENCO, TRANSCO and DISCOMs to constitute proper selection committee with independent professionals to select senior management through competitive selection

ASEB to commence employee consultation on new service rules and conditions

GOA to transfer assets and liabilities of ASEB to GENCO, TRANSCO and DISCOMs

ASEB to delegate personnel to GENCO, TRANSCO and DISCOMs in new structure

To regulate the power of GOA over management selection in the companies, the articles of association of all five companies state that a chairman and a managing director shall be appointed to successor companies by an independent selection committee, with not more than one-third of the directors to be nominated by GOA. On 10 December 2004 GOA finalized and approved the statutory transfer scheme. The scheme legally defined the transfer of assets, liabilities, and personnel from ASEB to its successor companies.

AERC to approve application for bulk purchase of electricity by DISCOMs from GENCO and other generating companies

TRANSCO and DISCOMs to file license terms and conditions with AERC

TRANSCO and ASEB/GENCO to file application with AERC for approval of agreement with wheeling charges

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DISCOMs to file respective revenue requirements and tariff proposals with AERC

Complied. On 6 April 2005 the AERC issued the AERC (Terms and Conditions for Determination of Tariff) Regulations, 2005 under Section 61 and 181 of the Central Electricity Act. The aim of the regulations is to specify the terms and conditions for the determination of tariffs by the AERC for the supply of electricity by a generating company to a distribution licensee, transmission of electricity, wheeling of electricity, and retail sale of electricity.

4. Financial Restructuring of ASEB

GOA to commit to find avenues for or provide budgetary support to fill cash deficit of ASEB and its successor entities during transitional period till the operating expenses and obligations of liabilities on successor companies are met

Complete implementation of FRP

Settlement of MeSEB, WBSEB, and GRIDCO dues under deferred payment mechanism

Retirement of defaulted part of bonds and LIC loans

Budgetary allocation for cash deficit support to ASEB for FY2005

On 29 October 2003, GOA approved the FRP and signed an MOU with ASEB that focused on debt restructuring and transitional financial support to enable the new companies to start with a clean slate. The FRP indicated a total restructuring adjustment of Rs45.6 billion. Supported by the APSDP, GOA completed the FRP in

29

Charges for transporting electric power (megawatts or megavolt-amperes) over transmission lines

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GOA to make budget provisions for cash deficit support to ASEB for 2004

GOA to approve ASEB’s implementation plan for transfer of terminal benefits

2008.

GOA to commit to provide a guarantee to facilitate GENCO, TRANSCO and DISCOMs to raise working capital during transition period.

Initial implementation of FRP o Settlement of cross-liabilities

between GOA and ASEB o One-time settlement of

receivables from municipal bodies through securitization by GOA

o Issuance of GOA’s order to budget devolution for timely payment of current bills to municipal bodies

o Issue bond to securitize past CPSU dues as of 30 September 2001

o Settlement of post CPSU dues after 30 September 2001

o Agreement between GOA and MeSEB, WESEB, and GRIDCO on deferred repayment mechanism

o Transfer of REC loans from ASEB to GOA under rescheduled terms

O Transfer of defaulted bonds and LIC loans GOA

The state and ASEB shall have completed implementation of FRP including (i) through provision of budget appropriation of all dues payable up to FY2005 and (ii) all dues paid for upto FY2005 in accordance with FRP.

LIC payment of Rs 389.5 million made on 4 April 2005 and Rs 60.5 million made on 29 June 2005, with total amount of Rs450 million . ASEB paid GRIDCO Rs 452 million on 24 October 2005 and Rs 8.1 million on 7 April 2006. Loan restructured was Rs 544 million paid to REC during 2005-06. GOA paid Rs 50 Cr to WBSEB during April 2005. Rs 459.9 million was paid to GRIDCO & Rs 604 million to MESEB during May 2006. GOA paid Rs 280 million in FY2005 for municipality dues

GOA to approve ASEB’s proposal for treatment of terminal benefits

5. Tariff rationalization and Efficiency Improvements

ASEB to file a second tariff proposal

ASEB to install 790,000 energy audit meters (162,000 meters procured under APDRP and 372,185 meters under the loan).

165,928 meters under APDRP and 372,185 meters installed under the loan.

AERC=Assam Electricity Regulatory Commission. APSDP=Assam Power Sector Development Program, ASEB=Assam State Electricity Board, APDRP= Accelerated Power Development and Reforms Program, CPSU= central power sector undertakings DISCOM=distribution company, FRP=Financial Restructuring Plan, GOA=Government of Assam, GENCO=generation company, GRIDCO=grid company, HRD=Human Resource Development, MOU=Memorandum of Understanding, TRANSCO=transmission company, MeSEB=Meghalaya State Electricity Board, WBSEB=West Bengde State Electricity Board, and, REC=Rural Electrification

20 Appendix 3

PROGRAM FRAMEWORK

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Actual Achievement

Goal

To ensure that in the state of Assam, electricity will be supplied in adequate quantities, in an efficient manner, and at reasonable cost to all consumers

No load shedding by FY2007 All villages electrified by 2007 100% electrification expected by 2012 funded by GOI

System operation report MIS reports of sector entities

Commitment at political and bureaucratic levels Enough funds available to support reform and invest in power sector Sector entities ownership in reform

In 2009, 10% power shortfall occurred (shortfall was Million Units 459 and shortage dropped from 15% in 2008 to 9% in 2009) 85.87% of villages with 37.61% households electrified in 2009; 100% household electrification expected by 2012, funded by GOI

Purpose

Appropriate policy, legal, and regulatory framework to ensure balanced sector growth while protecting consumer interests

Establish and operationalize an independent statutory regulatory authority

Timing and contents of regulatory orders Transparent process for appointment and removal of regulator

Commitment at political and bureaucratic levels Capacity of regulator

GOA constituted a statutory independent regulatory authority for the power sector, AERC, under the Central Electricity Act 2003. Orders issued by GOA for AERC to have adequate staff and budgetary funds. A full-time secretary of AERC has been appointed.

Enhance sector efficiencies by establishing commercial and competitive business environment

T&D losses reduced to 25% by FY2008

MIS reports Management leadership of sector companies Employee ownership in reform

System loss reduced to 29.61% in FY 2008

Improve financial viability of the power sector

Sector companies to achieve cash breakeven by FY2007 and post net profit by FY2011

Annual financial statements of sector entities MIS reports

Government financial support

On 29 October 2003, GOA approved The FRP and signed an MOU with ASEB that focused on debt restructuring and transitional financial support to enable the new companies to start

Ap

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Appendix 3 21

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Actual Achievement

with a clean slate. Cash breakeven achieved in DISCOMs in FY2008

Improve quantity and quality of power supply

Network to be able to evacuate power for peak load by the end of 2006

System operation report

Capability of sector companies to implement new projects Sufficient generating capacity and power purchases

ASEB’s installed capacity is 399.5 MW (after decommissioning of 4x60 MW Bongaigaon TPS) Transmission lines installed covered 10,396 km, distribution lines installed covered 29,430 km

Components/ Outputs

Ensure independence of AERC

Appointment of permanent staff by March 2004 Provision of sufficient operational budget

GOA order/notification

Commitment at political and bureaucratic levels

4 full-time staff were appointed at AERC in 2003; these posts were sanctioned to continue in 2005. Sufficient budget provided for permanent staff and running costs.

Development of regulatory framework Establishment of policies for sector development

Issuance of appropriate codes, standards and rules

Policy decision on industry structure, governance structure, and principle of transfer scheme by September 2003

AERC order/notification Official gazette

GOA order/ notification

Capacity of AERC

Commitment at political and bureaucratic levels

GOA approved legislative department and issued rules, codes, and standards on 25 February 2005. GOA approved a policy paper on industry structure, reform road map, and governance structure of ASEB’s successor companies on 28 October 2003; GOA approved the statutory transfer scheme on 10 December 2004 for transfer of assets, liabilities, and personnel from ASEB to successor companies by 31

22 Appendix 3

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Actual Achievement

May 2005. GOA approved ASEB’s HRD plan.

Rural electrification policy developed by June 2004

GOA order/notification

Commitment at political and bureaucratic levels

GOA issued a rural electrification policy on 25 February 2005 for greater efficiency in managing loss control and revenue collection in rural areas and easier access to rural electricity services.

Restructuring of ASEB

Functional unbundling and corporatization of ASEB completed by March 2004

Incorporation and registration papers of the registrar of companies

ASEB was unbundled on October 2003 into 1 generation, 1 transmission, and 3 distribution companies. Independent regulator functioning.

New sector companies able to service liabilities

Financial statement Government financial support

In FY 2006, all sector companies’ liabilities were liquidated.

Change management of new sector companies

Progress report Operations manuals and work rules

Management leadership of sector companies Employee ownership of the reform process

The Articles of Association clearly state that the chairman and managing director shall be appointed to successor companies by an independent selection committee, with only a third of the directors to be nominated by GOA.

Tariff rationalization

At least 75% recovery achieved by FY2007

Financial statement MIS report

Independence and capacity of regulator

Cost recovery was 99% in 2007

Ap

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Appendix 3 23

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Actual Achievement

Improve system, capacity, and efficiencies

100% energy audit by September 2004 100% consumer metering by 2007 T&D system can handle peak demand by 2007 No load shedding due to shortage of T&D system capacity

Progress report

Project implementation capacity of sector companies Availability of funds

Meter testing

equipment

completed in April

2008.

100% consumer

metering

achieved.

359,359 meters

were installed.

All transmission

lines completed

except for a span

of 132 kV

Kahilipara-

Sarusajai line,

which is targeted

to be completed

by October 2010.

Distribution

system

improvement

completed 100%.

Power generation

increased from

768 MWh in 2005

to 1,599 MWh in

2009.

Activities GOA to sanction positions of additional permanent staff for AERC

Target date: September 2003

Permanent staff appointed end of 2003.

AERC to issue technical codes and standards and rules, and rules for independent tariff setting, including multiyear tariff principle and licensing

Target date: June 2004 Official gazette Regulation and standard required for tariff setting and licensing notified by GOA on 3 May 2005.

GOA to approve the FRP of ASEB and commit to provide transitional financial support

Target date: September 2003

GOA order/notification

On 29 October 2003, GOA approved a FRP that focused on debt restructuring and transitional financial support to clean the balance sheets of the companies.

24 Appendix 3

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Actual Achievement

The FRP indicated a total restructuring adjustment of Rs45.6 billion. GOA completed the FRP in 2008.

GOA to incorporate APGCL, AEGCL, and DISCOMs under the Companies Act 1956

Target date: October 2003

Incorporation and registration papers of the registrar of companies

GENCO (APGCL) incorporated on 25 February 2005

TRANSCO (AEGCL) incorporated on 25 February 2005

DISCOMS (LAEDCL, CAEDCL & UAEDCL incorporated on 25 February 2005

GOA to notify a first transfer scheme for APGCL, AEGCL, and DISCOMs

Target date: March 2004

GOA order/notification

Transfer scheme notified by GOA on 10 December 2004

GOA to constitute an independent selection committee for managing directors and part-time directors of APGCL, AEGCL and DISCOMs

Target date: March 2004

GOA order/notification

Managing Directors of the five companies appointed as per recommendation of selection committee on 4 February 2005.

APGCL, AEGCL, and DISCOMs to submit separate tariff proposal to AERC

Target date: June 2004 Copy of tariff proposal as filed

Tariff proposals by successor companies begun in May 2005.

APGCL, AEGCL, and DISCOMs to finalize new organizational structure and operational procedure

Target date: June 2004 Progress report Structure issued on 10 December 2004.

APGCL, AEGCL, and DISCOMs to constitute proper selection committee with independent professionals to select and appoint senior management staff of

Target date: September 2004

Progress report Selection committee was appointed on 10 December 2004.

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Appendix 3 25

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Actual Achievement

APGCL, AEGCL, and DISCOMs

GOA to complete financial restructuring plan of ASEB

Target date: September 2004

GOA order/notification

Completed on 29 October 2003.

Appointment of managing directors and part-time directors for APGCL, AEGCL and DISCOMs

Target date: December 2004

Board resolutions Officers were appointed on 4 February 2005.

Inputs Finance:

ADB loan of $250 million APDRP funds of $78 million

ADB loan $250 million APDRP funds $146.31 million

RETA-6010: South Asia Subregional Economic Cooperation TA: (i) Reorganization of ASEB, (ii) institutional development for rural electrification, and (iii) policy and legal support for sector reforms

ADB=Asian Development Bank, AEGCL= Assam Electricity Grid Corporation Limited, AERC=Assam Electricity Regulatory Commission. APGCL Assam Power Generation Corporation Limited, ASEB=Assam State Electricity Board, APDRP= Accelerated Power Development and Reforms Program, CAEDCL=Central Assam Electricity Distribution Company Limited, DISCOMs=distribution companies, FRP=Financial Restructuring Plan, GOA=Government of Assam, GENCO=generation company, GRIDCO=grid company, HRD=Human Resource Development, Kv=kilovolt, LAEDCL= Lower Assam Electricity Distribution Company Limited, MIS=management information system, MU=million units, MwH=megawatt hours, RETA=regional technical assistance, TA=technical assistance, T&D=transmission and distribution, TRANSCO=transmission company; UAEDCL- Upper Assam Electricity Distribution Company Limited

26 Appendix 5

COST BREAKDOWN BY PROJECT COMPONENT

($ million)

Project Component Appraisal Estimate Revised Estimate

FC LC Total FC LC Total

A Transmission System Improvement

1 New Transmission line 14.40 7.30 21.70 20.37 18.43 38.80 2 New 132 KV s/s 18.60 1.90 20.50 26.48 22.71 49.19 3 132 KV sub-station Augmentation 11.00 0.80 11.80 15.21 4.75 19.96 4 33 KV Bus capacitors 2.40 1.10 3.50 3.01 0.70 3.71 5 Grid Communication System 4.80 1.70 6.50 0.00 0.00 0.00 6 Communication Equipment 0.00 0.00 0.00 1.39 3.70 5.09 7 Control and Protection Equipment 2.30 0.80 3.10 2.28 0.85 3.13 8 Switch Gear replacement 1.20 0.40 1.60 0.00 0.00 0.00 9 Circuit Breaker 0.00 0.00 0.00 0.95 0.16 1.11

10 SCADA System 4.00 0.30 4.30 0.00 0.00 0.00 11 SCADA ( SLDC & Existing RTU) 0.00 0.00 0.00 0.94 0.47 1.41 12 SCADA ( New RTU) 0.00 0.00 0.00 0.49 0.84 1.33 12 CT/PT 0.00 0.00 0.00 1.00 0.07 1.07 Subtotal 58.70 14.30 73.00 72.12 52.68 124.80 B Distribution System Improvement 0.00 94.80 94.80 0.00 146.31 146.31 C Rural Electrification

1 i) 33/11 KV sub-station augmentation 1.70 0.30 2.00 1.80 1.62 3.42

2 ii) Renovation of 11/04 KV s/s and associated lines 0.00 5.60 5.60

0.00

0.00 0.00

Subtotal (C) 1.70 5.90 7.60 1.80 1.62 3.42 D Revenue Management System

1 Communication system 2.10 0.20 2.30 0.00 0.00 0.00 2 Revenue Management System 0.00 3.70 3.70 0.00 0.00 0.00 3 Meter 20.00 8.20 28.20 20.74 7.59 28.33 4 Meter Testing Equipment 1.33 1.15 2.48

Subtotal (D) 22.10 12.10 34.20 22.07 8.74 30.81 E Consulting Services

1 Project Implementation Support 0.00 0.00 0.00 1.51 0.00 1.51 2 System Study 0.00 0.00 0.00 0.62 0.00 0.62 3 Program Implementation support 0.00 0.00 0.00 1.38 0.00 1.38 4 Loss Estimation & Loss reduction 0.00 0.00 0.00 0.49 0.00 0.49

Subtotal (E) 2.70 1.80 4.50 4.00 1.49 5.49 Subtotal Base cost 85.20 128.90 214.10 99.99 210.84 310.83 F Contingencies

1. Physical 8.10 3.80 11.90 0.00 0.00 0.00 2. Price 4.90 3.80 8.70 0.00 0.00 0.00 Subtotal (F) 13.00 7.60 20.60 0.00 0.00 0.00

Front End Fee 0.50 0.00 0.50 0.50 0.00 0.50

Interest/Commitment Charge during construction 7.10 1.20 8.30 7.10 1.20 8.30

Total 105.80 137.70 243.50 107.59 212.04 319.63*

* includes $40.3 million Government counterpart to be disbursed by October 2010 CT/PT=Current Transformer (CT) and Potential Transformer (PT), FC=foreign cost, LC=local cost, SCADA=supervisory control and data acquisition SLDC= State Load Dispatch Center ,s/s=substation, RTU=remote terminal unit,

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Appendix 4 27

Indian Rupees (Rs)

Fiscal Year Per $

2003 46.49

2004 45.24

2005 44.06

2006 45.32

2007 41.21

2008 43.86

2009 48.51

Source: CTL's Period-End Rates

ANNUAL AVERAGE EXCHANGE RATE

28 Appendix 6

Category Contract

PCSS No. No. Disbursed ($)

2037-IND

0001 03 Consulting services for Program Implementation Support (Component 3) 853,734 853,734

0001 03 Consulting services for Program Implementation Support (Component 3) 502,654 502,654

0002 03 Consulting services for Program Implementation Support (Component 1) 764,663 764,663

0002 03 Consulting services for Program Implementation Support (Component 1) 5,128 5,128

0002 03 Consulting services for Program Implementation Support (Component 1) 731,605 731,605

0003 02A Supply of control and protection equipment 2,282,914 2,282,914

0004 02A Supply of circuit breakers 954,158 954,158

0005 01A Turnkey contract for addtion of 33kV bus capacitors 3,012,184 3,012,184

0006 03 Consulting services for training & support for loss estimation & reduction in distribution 462,927 462,927

0006 03 Consulting services for training & support for loss estimation & reduction in distribution 29,120 29,120

0007 03 Consulting services for system study (Component 2) 317,259 317,259

0007 03 Consulting services for system study (Component 2) 293,994 293,994

0008 02A Supply of 220kV, 132kV, 66kV and 33kV current and potential transformers 1,003,670 1,003,671

0009 02B Supply of meter testing equipment 1,328,585 1,328,585

0010 01A Construction of 132/33kV substations, Package A (Supply Contract) 4,794,756 4,794,756

0011 01A Construction of 132/33kV substations, Package A (Erection Contract) 821,946 821,946

0012 01A Construction of 132/33kV new substations, Package B (Supply Contract) 3,304,266 3,304,266

0013 01A Construction of 132/33kV new substations, Package B (Erection Contract) 276,420 276,421

0014 01A Construction of 132/33kV new substations, Package D (Supply Contract) 5,457,229 5,457,229

0015 01A Construction of 132/33kV new substations, Package D (Erection Contract) 2,057,944 2,057,944

0016 01A Construction of 132/33kV new substations, Package E (Supply Contract) 4,491,111 4,491,111

0017 01A Construction of 132/33kV new substations, Package E (Erection Contract) 1,068,075 1,068,075

0018 01A Construction of 132/33kV new substations, Package C (Supply Contract) 3,819,621 3,819,621

0019 01A Construction of 132/33kV new substations, Package C (Erection Contract) 385,629 385,629

0020 01A Augmentation and extension of existing substations, Package A (Supply Contract) 6,966,725 6,966,725

0021 01A Augmentation and extension of existing substations, Package A (Erection Contract) 436,435 436,435

0022 01A Augmentation and extension of existing substations, Package B (Supply Contract) 7,168,475 7,168,475

0023 01A Augmentation and extension of existing substations, Package B (Erection Contract) 635,621 635,621

0024 01C Turnkey contract for consumer metering, Package 1 (Supply Contract) 7,452,946 7,452,946

0025 01C Turnkey contract for consumer metering, Package 1 (Erection Contract) 1,297,247 1,297,247

0026 01C Turnkey contract for consumer metering, Package 2 (Supply Contract) 5,398,184 5,398,184

0027 01C Turnkey contract for consumer metering, Package 2 (Erection Contract) 573,491 573,491

0028 01C Turnkey contract for consumer metering, Package 3 (Supply Contract) 5,313,059 5,313,059

0029 01C Turnkey contract for consumer metering, Package 3 (Erection Contract) 706,692 706,692

0030 03 Procurement of equipment & furniture for consultants (Component 1) 12,405 12,405

0031 03 Procurement of equipment & furniture for consultants (Component 3) 23,491 23,491

0032 01A Construction of 220/132kV transmission line, Package 3 (Supply Contract) 2,328,517 2,328,517

0033 01A Construction of 220/132kV transmission line, Package 3 (Erection Contract) 1,802,014 1,802,014

0034 01A Construction of 220/132kV transmission line, Package 4A (Supply Contract) 1,640,277 1,640,277

0035 01A Construction of 220/132kV transmission line, Package 4B (Erection Contract) 2,566,394 2,566,394

0036 01A Construction of 220/132kV transmission line, Package 1A (Supply Contract) 3,128,500 3,128,500

0037 01A Construction of 220/132kV transmission line, Package 1B (Erection Contract) 4,263,760 4,263,760

0038 01A Construction of 220/132kV transmission line, Package 2A (Supply Contract) 1,909,251 1,909,251

0039 01A Construction of 220/132kV transmission line, Package 2B (Erection Contract) 2,728,739 2,728,739

0040 01B Augmentation of 33/11kV substation, Package 3A (Supply Contract) 781,372 781,372

0041 01B Augmentation of 33/11kV substation, Package 3B (Erection Contract) 99,742 99,742

0042 01B Augmentation of 33/11kV substation, Package 2 (Supply Contract) 519,613 519,613

0043 01B Augmentation of 33/11kV substation, Package 2 (Erection Contract) 80,376 80,376

0044 01B Augmentation of 33/11kV substation, Package 1(Supply Contract) 321,523 321,523

0045 01B Augmentation of 33/11kV substation, Package 1(Erection Contract) 0 0

0046 03 Procurement of equipment & furniture for consultants (Component 2) 5,471 5,471

0047 01A SCADA system expansion 338,625 338,625

0047 01A SCADA system expansion 601,672 601,672

0048 01A Turnkey contract for SCADA expansion (new RTU) 486,414 486,414

0049 02A Turnkey contract for grid communication (PLCC) 1,393,377 1,393,377

No.= number, PCSS- procurement contract summary sheet

Source: Loan Financial Information System of Asian Development Bank

SUMMARY OF CONTRACTS

Contract

Amount ($)Item Description

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Appendix 7 29

PROJECT FINANCING PLAN ($ million)

Appraisal Estimate Actual Source Foreign Local Total Foreign Local Total

ADB 98.20 1.80 100.00 100.00 0.00 100.00 GOI 7.60 108.90 116.50 0.00 159.80 159.80 GOA & ASEB 0.00 27.00 27.00 7.59 52.24 59.83 Total 105.80 137.70 243.50 107.59 212.04 319.63

ADB-Asian Development Bank; ASEB-Assam State Energy Board; GOA – Goverrnment of Assam; GOI-Government of India

30 Appendix 8

Calendar

Year For the Year Cumulative For the Year Cumulative

2004 0.38 0.38 0.00 0.00

2005 1.94 2.32 2.24 2.24

2006 15.81 18.13 15.12 17.36

2007 30.13 48.26 47.51 64.87

2008 28.00 76.26 25.21 90.07

2009 9.13 85.38 9.93 100.00

a Projections are made in Asian Development Bank's Loan Financial Information System

Source: Asian Development Bank Loan Financial Information System

PROJECTED AND ACTUAL DISBURSEMENTS OF LOAN PROCEEDS

($ million)

Projected a Actual

Disbursement Details

0

10

20

30

40

50

2004 2005 2006 2007 2008 2009

Year

$ M

illi

on

ADB Projection

Actual

Ap

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9 31

IMPLEMENTATION SCHEDULE

CT/PT=Current Transformer/Potential Transformer ,KV=kilovolt, SCADA=supervisory control and data acquisition, SLDC= State Load Dispatch Center,RTU=remote terminal unit

PROJECT IMPLEMENTATION SCHEDULE

Project Component

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

PART A: TRANSMISSION SYSTEM

IMPROVEMENT

PART C: RURAL ELECTRIFICATION

PART D: REVENUE MANAGEMENT SYSTEM

Legend : Projected 1 : Jan, Feb, Mar

2 : Apr, May, Jun

: Actual 3 : Jul, Aug, Sep

4 : Oct, Nov, Dec

: To be completed by October 2010

* Construction of one transmission line segment between Sarusajal and Kahilipara is expected to be completed by end of October 2010.

5. SCADA EXPANSION (NEW RTUs ) *

6. CIRCUIT BREAKER

2. 132 KV NEW SUB STATIONS

2003

1. 220/132 KV TRANSMISSION LINES *

3. AUGMENTATION OF EXISTING SUB STATION

4. SCADA (SLDC Upgrade & Expansion )

20102004 2005 2006 2008 20092007

PART E: CONSULTING SERVICES

7. 33 KV BUS CAPACITOR

9. COMMUNICATION EQUIPMENT *

1. METERS

1. 33/11 KV SUBSTATION AUGMENTATION

10. CONTROL AND PROTECTION EQUIPMENT

8. CT AND PT

2. METER TESTING EQUIPMENT

32

A

pp

end

ix 1

0

ORGANIZATIONAL CHART OF ASSAM STATE ELECTRICITY BOARD

CE : Chief Engineer

ACE : Additional Chief Engineer

SE : Superintentend Engineer

CM : Chief Manager

Assistant Chief

Engineer (COM)

Chairman

SE -I

SE (T&I)

SE-II

Member (P&A)

Chief Engineer (M) Chief Engineer

(P&P)COM Kolkata

Member (Finance)

RE Liaison Secretary

Member (Tech)

SE Bgsk

Dir EST

Law Officer

Manager (IR)

Manager (P)

Manager (R)

Dir(P)

DPM (LC)

SE (M)

EE (M)

EE (M)

SE

EE

EE

Dy Chief Auditor

CM (CF)

Chief Account

Officer

Mgr Audit

Dy CAO

Mgr COM

Mgr Est

Mgr Bgt

CE (RE)

CE (Rural

Electrification

CE (Generation)

SE (Tech)

SE

SE TR

SE HQ

SE PGV

ACE

SE

SE

CE (Civil)

ACE (Design)

SE (Ghv)

CE (Distribution)

SE Inv

SE (PD)

SE(SD)

ACE (E&A)SE

Manager

SE

DM A-I

DPM GEF

LAO

CSO

PRO

DM - II

Ap

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33

Appendix 11 33

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Loan 2036-IND Covenant

Reference in Loan Documents

Status of Compliance

1. The SPU set up under the Reform Steering Committee shall

be responsible for daily implementation of the Program within the institutional, financial and regulatory imperatives. In the activities, the SPU shall also coordinate with ADB and various stakeholders and for adequate consideration in the Program, solicit regular feedback from power sector experts within and outside the state and consumer groups.

Schedule 5, para 2(b) of the Loan Agreement (LA) (L2036)

Complied. The SPU was set up in September 2003.

Financial

1. The Borrower shall ensure that the Counterpart Funds are

used by the state to finance the adjustments costs associated with the Program, satisfactory to ADB for this purpose and shall, in particular, provide necessary budget appropriations in support of the Program. the counterpart funds shall support the state in the power sector reforms and the financial restructuring of ASEB and adjustment costs associated with the Program including: (i) retirement of defaulted bonds and loans, (ii)payment of dues owned under FRP, and (iii) funding of cash shortfall of the sector. 2. The Borrower shall cause the State to ensure that sufficient

budgetary allocations are made in a timely manner for the efficient and timely implementation of SDP 3.The state shall make timely appropriate budgetary

appropriations so as to ensure that:

(I) with effect from April 2004,its eligible cash deficit/subvention payments to ASEB and the successor companies are paid within not more than two months of raising of claim by ASEB or the successor companies.

(ii) with immediate effect, its payments on he account of subsidies to ASEB are made in accordance with the provisions of section 65 of the Electricity Act,2003,and

(iii) With effect from June 2004,ASEB’s (and the of each successor company’s ) balance of receivables from municipalities and other state bodies/authorities shall not exceed immediately preceeding the month’s equivalent sales at any time.

4.The state shall continue to make timely and appropriate

budgetary appropriations to ensure a fully functional AERC

Schedule 5 para 4 of LA (L2036) Schedule 5 para 5 of LA (L2036) Schedule 5 para 9 of LA (L2036) Schedule 5 para 10 of LA (L2036)

Complied. Complied. Compiled. Complied. Complied. Complied.

Sector 1.The State shall ensure that within three months from the

effective date the AERC shall have appointed the staff as per approval given by the AERC

Schedule 5 para 11 of LA (L2036)

Complied.

2.Not later than 15 Months from the effective date , the state

shall develop for implementation , necessary rules under the Electricity Act,2003

Schedule 5 para 15 of LA (L2036)

Complied.

3. Not Later than three months from the effective date , the

state shall constitute an independent selection Committee (as per respective Articles of Associations ) for selections and appointment of Managing Directors and part time directors of

Schedule 5 para 14(a) of LA (L2036)

Complied.

34 Appendix 11

Loan 2036-IND Covenant

Reference in Loan Documents

Status of Compliance

APGCL ,AEGCL and DISCOMS through pen competitive selection progress.

Others

1.GOA shall furnish quarterly progress report on the execution

of the program, the operation and management of the Program facilities and the state budgetary position in the each current financial year and its medium term project .Such reports shall be submitted in such a form and in such detail and in March, June, September and December 2004 and shall indicate ,among other things ,progress made and problems encountered during the quarter under review, steps taken and proposed to be taken to remedy these problems ,status and progress of expenditures to be financed out of the counterpart funds and proposed program of activities and expected progress ding the following quarter 2.Promptly after closing date for withdrawal from loan account,

but in any event not later than 3 months thereafter, GOA shall furnish ADB a Program Completion Report promptly after physical completion of the Program, but in any event not alter than three(3) months thereafter. 3. The state as applicable ,and ASEB shall (i) maintain

separate accounts for Program and for is overall operations;(ii) have such accounts(statement of income and expenses) audited annually by independent auditors and (iii) furnish to ADB promptly but no later than 9 months after the close of the fiscal year to which they relate ,certified copies of such audited account and financial statements and the report of the auditors relating thereto (including auditors opinion on the use of loan proceeds and compliance with covenants of Loan Agreements), all in the English language.

Section 2.06 (b) of Project Agreement (PA) (L2036) Section 2.06 (c) of PA (L2036) Section 2.07 (a) of PA (L2036)

Complied. Complied. Complied.

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35

Appendix 11 35

Loan 2037-IND Covenant

Reference in Loan Documents

Status of Compliance

Project Implementation L2037

1. The PMU as set up by ASEB shall be responsible for day to

day implementation of the Project and the coordination. Except for exceptional organizational requirements, the staff assigned to the PMU shall be retained for the entire duration of Project Implementation in PMU and any vacancy in the PMU shall be filled immediately. 2. Within three months of the effective date, ASEB shall set up

a Benefit Monitoring unit (BMU)

Schedule 6 para 2 of LA (L2037) Schedule 6 para 25(b) of LA (2037)

Complied. PMU was established on 18 October 2003, with a director, two full-time staff, and 9 part-time officers. Complied. BMU was established on 11 March 2004.

Social

1. Within one month of the effective date, ASEB shall establish

a full functional social and environment management cell to manage and monitor land acquition, resettlement, social benefits and environment, social benefits and poverty impact.The cell shall be assisted by Consultants recruited for Project implementation support. 2. ASEB (including AEGCL and DISCOMs) shall ensure that

turnkey contracts under Project incorporate provisions to be effect that contractors(i) shall carry out HIV/ids awareness and prevention programs for labour ; (ii) shall not use children labour ;(iii) shall disseminate information at worksites on the risks of sexually transmitted diseases and HIV/AIDS as pat of the health and safety measures for those employed during construction ;(v) shall follow legally – mandated provisions of labour (including equal pay to equal work ), health .safety, sanitation and working conditions. The tunkey contracts shall also provide for termination of the contracts by ASEB (including AEGCL and DISCOMS) in case of breach of any stated provisions by the Contractors. 3. The state and the ASEB(including AEGCL and DISCOM

s)shall ensure that all land and rights –of way required by the Project shall be made available in a timely manner and that the provisions of the RP as agreed with ADB including compensation and entitlement for effective households and persons shall be implemented in accordance with the RP and in conformity with all applicable laws and regulations of he borrower ,and ADB s policy on Involuntary Resettllement,1998 as amended from time to time. 4. ASEB shall ensure that prior to award of any turnkey contract

under the Project ,the RP including its update based on 100 % census of affected people , is disclosed with all necessary information made available to persons affected by the project and confirm that it be posted on ADB website. 5. Within three months of the effective date, ASEB shall engage

independent locally –based NGO or representative of local community for monitoring and verification of the RP implementation.

Schedule 6 para 12 of LA (2037) Schedule 6 para 13 of LA (2037) Schedule 6 para 14(a) of LA (L2037) Schedule 6 para 14(b) of LA (2037) Schedule 6 para 17 of LA (L2037)

Complied. Social and environmental cell was established on 15 February 2004. Complied. Complied. Some land resettlement and right-of-way issues will be settled by November 2010. Complied. Complied.

36 Appendix 11

Loan 2036-IND Covenant

Reference in Loan Documents

Status of Compliance

Environment

1. ASEB (including AEGCL and DISCOMs ), shall undertake

the project in accordance with ADBs Environment Assessment Guidelines 2003,as amended from time to time and implement all mitigation measures recommended in IEE to minimize any related adverse impacts under the project. 2. ASEB (including AEGCL) shall not undertake any civil works

in any search of transmission lines passing through reserve forests or other forestland unless the required forests and environmental clearances are obtained from borrower’s Ministry of Forest and Environment

Schedule 6 para 18 of LA (L2037) Schedule 6 para 19 of LA (L2037)

Complied. .Complied.

Financial

1. GOA shall make available to ASEB and the successor

companies, promptly as needed the funds, land ,facilities ,services and other resources that are required in addition to the Borrower under the program loan) for carrying out the project ad operations and maintenance of the project facilities. 2. ASEB (including successor companies as applicable) shall

remain net receivables of not more than the immediately preceding two month’s equivalent of sales at a time.

Schedule 6 para 6 of LA (L2037) Schedule 6 para 4 of LA (L2037)

Complied. Complied.

Sector

1. By not later than 28 Feb’05,ASEB shall complete the route

survey for transmission lines under the project. 2. Within six months from the effective date, ASEB shall

complete installation and operation of energy meters at all 11 KV feeders in the state.

Schedule 6 para 11 of LA (L2037) Schedule 6 para 10 of LA (L2037)

Complied. Complied. Route survey completed on 28 February 2005.

Others

1. ASEB shall furnish quarterly progress reports on the

execution of the project an on operation and management of the project facilities in such a form and in such form and such details within thirty (30) days of the end of each quarter. 2. ASEB shall furnish ADB a Project Completion Report

promptly after physical completion of the Project, but in any event not late than (3) months thereafter. 3. The State as applicable, and ASEB shall (i) maintain

separate accounts for the projects and for its overall operations ;(i) have such accounts and ASEB financial statements (balance sheet, financial statements (balance sheet ,statement of income and expenses and related statements ,sources and application of funds) audited annually by independent auditors and (iii) furnish to ADB to ADB promptly but not later than 9 months after the close of the fiscal year to which they relate, certified courses of such audited related thereto (including the auditors relating thereto (including the auditor’s opinion on the use of loan proceeds and compliance with covenants of loan agreements)all in English Language. 4. In addition to annual financial statements to annual audited

financial statements, ASEB shall furnish to ADB promptly after the end of each financial year, un-audited financial statements (including Project accounts) on its operations for such fiscal year.

Section 2.08(b) of PA (L2037) Section 2.08(c) of PA (L2037) Section 2.09(a) of PA (L2037) Section 2.09 (a) of PA (L2037)

Complied. Complied late. Complied. Complied.

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Appendix 12 37

Financial and Economic Evaluation 1. The major assumptions used in the financial and economic evaluation of the investment project are discussed in this appendix. A. Financial Evaluation

2. The financial evaluation of the investment project was carried out based on cost and benefit streams realized on a component basis. All costs and revenues are expressed at constant 2010 prices. The capital costs include goods and services, and interest charges during construction. 3. The cost of capital is calculated for the project as a whole. The project is financed by foreign debt (Asian Development Bank [ADB] loan). The cost of debt of the Government of Assam (GOA) to the Government of India for the ADB loan is 10.5%. The weighted average cost of capital (WACC) was calculated for the project and was compared with the project’s financial internal rates of return (FIRRs) to ascertain the financial viability. Financial viability was examined by comparing the incremental costs and benefits of the with-investment and without-investment scenarios. The WACC was calculated based on the financing sources of the projects, as follows: (i) GOA’s equity contributions and foreign loans; (ii) cost of equity is calculated based on GOA’s long-term bond rate and a margin; (iii) the ADB loan is passed on to GOA, the Assam State Electricity Board (ASEB), and Assam Electricity Grid Corporation Limited (AEGCL) in Indian rupees, with the interest rate including allowance for the national government’s foreign exchange premium; (iv) the foreign inflation rate is taken as 0%, with the domestic inflation rate at 7.7%. Table 1 shows that average WACC is 2.04%.

Table A12.1: Weighted Average Cost of Capital

($ million)

Nominal Weighted Source Amount Cost (%)

ADB Loan 100.00 4.3 31.3 Government Equity 219.63 9.0 68.7 Weighted Average Cost of Capital 2.04 ADB = Asian Development Bank.

Source: PCR mission estimates.

1. Capital Cost

4. All components have been completed and have begun to yield benefits. No salvage value has been assumed at the end of the useful life of components. A total cost of $319.63 million is used.

2. Sales Revenue

5. Components A and B, Transmission and Distribution. There has been a noticeable increase in revenue collection by the distribution companies. The increase in revenue is attributable to additional savings on account of investments, greater availability of input energy, higher retail tariffs, and other efficiency improvements in the system. It is assumed that at least 80% of the incremental benefits in the system can be attributed to ADB funding. For the distribution component, the incremental savings are based on actual benefits accrued in supplying power to about 2.2 million consumers in 2010.

38 Appendix 12

Component D: Revenue Management System. Benefits that accrue to this component are assumed to be 10% of total revenues of transmission and distribution (T&D).

3. Tariff

6. Revenues corresponding to incremental power sales are computed assuming the actual overall average retail tariff from 2008–2010. For the projection years, the tariffs are based on tariff projections for 2010–2013 by the Assam Electricity Regulatory Commission (AERC). The same set of tariffs is assumed for estimating the benefits under component D. The tariff principles set by AERC in March 2006 allow AEGCL to pass on full cost recovery of depreciation, return on equity, operation and maintenance expenses, and interest on loans and working capital. AERC tariff methodology for transmission follows the Central Electricity Regulatory Commission tariff methodology for interstate transmission licensees such as the Power Grid Corporation of India.

4. Operating Cost

7. The annual operating cost has been assumed to be 2.5% of total capital costs for component A. No additional operating cost has been assumed for calculation of the FIRR in the case of component B. The annual operating cost has been assumed to be 1% of total capital costs for component D: Revenue Management System.

5. Financial Internal Rate of Return

8. For Components A and B (Transmission and Distribution), the FIRR at the time of appraisal was estimated as 12.0% (which was higher than the WACC of 2.1% in real terms). The FIRR at project completion is estimated to be 18.01%, which is still higher than the revised WACC of 2.04% at project completion in real terms. For Component D: Revenue Management System, the FIRR is estimated at 34.4% at completion, as against the 30.9% at appraisal. A summary of the comparison of FIRR at appraisal and project completion is given in table 2.

Table A12.2: Financial Internal Rate of Return of Project Components

Project Component

FIRR at Appraisal (%)

EIRR at Project Completion (%)

Transmission and Distribution Rural Electrification Revenue Management System

12.0 0

30.0

18.01 0

34.4

Source: PCR Mission estimates.

6. Economic Evaluation

9. The economic analysis was carried out on the basis of economic benefits of power consumption to the final consumers represented by their willingness to pay as applicable. The economic analysis used the world price numeraire. The economic costs were derived from the financial costs by deducting taxes and duties. The costs were separated into foreign exchange, indirect foreign exchange, and local currency costs. Local costs were further separated and a specific conversion factor of 0.95 was used for unskilled labor. Labor costs were assumed to be 10% of the local currency costs, and unskilled labor costs were assumed to be 35% of the labor costs. 10. The economic evaluation of components A and B is based on the economic benefits arising from increased incremental consumption, valued by using consumers’ estimated willingness to pay. The net incremental savings are estimated after accounting for transmission and distribution losses

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Appendix 12 39

for the corresponding years. The economic benefits of these components are valued at the differential between willingness to pay and the average tariff. The EIRR is estimated at 19.7% against 15.7% at appraisal. For Component C: rural electrification, the EIRR is estimated at 47% against 57.2% at appraisal. A summary of the comparison of EIRR at appraisal and project completion is given in table 3.

Table A12.3: Economic Internal Rate of Return of Project Components Project Component

EIRR at Appraisal (%)

EIRR at Project Completion (%)

Transmission and Distribution Rural Electrification Revenue Management System

15.7 57.2

0

19.7 47.0

0

Source: PCR Mission estimates.

40

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Table A12.4: Financial Highlights, ASEB, 1997/98-2008/09

ASEB=Assam State Electricity Board, EBITDA=earnings before interest, taxes, depreciation, amortization and non-cash items. kWh=kilowatt hours, MWh=megawatt hours, Rs=rupees, T&D=transmission and distribution

Items 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Power Genaration (Mwh) 936.00 855.00 801.00 869.00 787.00 707.00 677.00 721.00 751.00 790.00 1,474.00 1,599.00

Power purchase (Mwh) 1,747.00 1,978.00 2,072.00 2,306.00 2,460.00 2,512.00 2,617.00 2,581.00 2,996.00 2,869.00 3,250.00 3,207.00

Power Sales (Mwh) 1,876.00 1,753.00 1,672.00 1,911.00 1,818.00 1,961.00 2,099.00 1,984.00 3,258.00 2,483.00 3,402.00 3,383.00

T&D Loss (%) 30.05 38.12 41.82 39.80 44.02 39.07 36.28 35.47 34.99 32.51 29.83 29.09

Operation Cash Surplus/ Deficits

(EBITDA) (Rs. Million) (1,814.00) (2,182.00) (3,115.00) (3,375.00) (3,445.00) (1,114.00) (1,387.00) (9,702.00) (1,286.00) (948.48) (271.70) (1,213.90)

Profit/Loss after Tax (Rs. Million) (3,509.00) (4,912.00) (5,780.00) (6,075.00) (6,321.00) (3,940.00) (5,227.00) (10,880.00) (1,299.25) (2,616.98) (2,681.70) (4,280.90)

Operating Ratio 144% 132% 144% 142% 142% 102% 116% 121% 101% 108% 107% 115%

Average Tariff (Rs/Kwh) 2.41 2.42 2.91 3.00 3.26 3.59 3.88 3.96 4.36 4.42 4.42 4.41

Average Cost of Supply (Rs/Kwh) 5.22 5.77 6.98 6.76 7.35 6.28 6.29 5.49 4.35 4.54 4.45 4.86

Cost Recovery (%) 46% 42% 42% 44% 44% 57% 62% 72% 100% 97% 99% 91%

Average Tariff (Rs/ Kwh)- Annual Changes

(%) - 0.41% 20.25% 3.09% 8.67% 10.12% 8.08% 2.06% 10.10% 1.38% 0.04% -0.27%

Average Cost of Supply (Rs/Kwh)- Annual

Changes (%) - 10.54% 20.97% -3.22% 8.75% -14.51% 0.12% -12.62% -20.79% 4.32% -1.88% 9.15%

Appendix 12 41

Table A12.5: FIRR Calculation for Transmission and Distribution Component A

T&D Cost of Net

Cash

Year Investment O&M Loss Sales Tariff Cost/KwH Benefit Sales Revenue Flow

M. Rs M. Rs MWH MWH Rs/kwh Rs M. Rs M. Rs M. Rs M. Rs

2005 751 1,256 3,258 4.36 2.24 (776)

2006 1,237 1,492 2,483 4.42 2.80 (1,279)

2007 2,738 1,021 3,402 4.42 3.41 (2,830)

2008 2,413 1,594 3,383 4.44 3.60 (2,494)

2009 2,208 1,610 3,475 4.67 4.23 (1,629)

2010 1,794 1,626 3,694 4.67 4.97 1,854)

2011 398 1,642 4,358 6.07 5.12 21,166 17,863 3,303 2,905

2012 417 1,659 4,896 6.07 5.28 23,779 20,671 3,108 2,691

2013 438 1,675 5,288 6.07 5.44 25,681 22,994 2,687 2,249

2014 460 1,692 5,711 6.37 5.60 29,122 25,578 3,544 3,084

2015 483 1,709 6,168 6.37 5.77 31,452 28,453 2,999 2,516

2016 507 1,726 6,661 6.37 5.94 33,968 31,652 2,317 1,809

2017 533 1,743 7,194 6.69 6.12 38,520 35,209 3,311 2,778

2018 559 1,761 7,769 6.69 6.30 41,602 39,167 2,435 1,876

2019 587 1,778 8,391 6.69 6.49 44,930 43,569 1,361 773

2020 617 1,796 9,062 7.36 6.69 53,377 48,466 4,910 4,294

2021 648 1,814 9,787 7.36 6.89 57,647 53,914 3,733 3,085

2022 680 1,832 10,570 7.36 7.09 62,259 59,974 2,285 1,605

2023 714 1,851 11,416 8.10 7.31 73,963 66,715 7,248 6,534

2024 750 1,869 12,329 8.10 7.52 79,880 74,214 5,667 4,917

2025 787 1,888 13,315 8.10 7.75 86,271 82,555 3,716 2,928

2026 827 1,907 14,380 8.91 7.98 102,490 91,835 10,655 9,829

2027 868 1,926 15,531 8.91 8.22 110,689 102,157 8,532 7,664

2028 911 1,945 16,773 8.91 8.47 119,544 113,639 5,905 4,994

2029 957 1,964 18,115 9.80 8.72 142,018 126,412 15,606 14,649

2030 1,005 1,984 19,565 9.80 8.98 153,380 140,621 12,759 11,754

Total 11,141 13,146 1,331,740 1,225,659 106,081 82,074

NPV

FIRR 18.01%

Tariff Increase - 30% in 2011 and 10% every three years thereafter

Cost per Kwh - 3% per annum

Sales volume assumes BPL accommodation of additional 8.5 million consumers FIRR=financial internal rate of return, kWh=kilowatt hours, M. Rs=million rupees, MWh=megawatt hours, NPV=net present value, Rs=rupees, T&D=transmission and distribution

42 Appendix 12

Table A12.6: EIRR Calculation for Transmission and Distribution Component

Incremental Benefit

Incremental Net

Year Capital O&M Sales Consumption WTP Consumption Flow

M. Rs M. Rs MWH MWH M. Rs M. Rs M. Rs

2005 776.1

3,258 1,274

(751)

2006 1,278.8

2,483 (775)

(1,237)

2007 2,829.7 3,402 919

(2,738)

2008 2,494.0

3,383 19

(2,413)

2009 1,628.9

3,475 92

(2,208)

2010 1,853.8

3,694 219

-

(1,794)

2011 387.6

4,358 664

5.11

3,393

3,393

2012 407.0

4,896 538

5.37

2,887

2,887

2013 427.3

5,288 392

5.37

2,102

2,102

2014 448.7

5,711 423

5.37

2,270

2,270

2015 471.1

6,168 457

5.63

2,574

2,574

2016 494.7

6,661 493

5.63

2,780

2,780

2017 519.4

7,194 533

5.63

3,002

3,002

2018 545.4

7,769 576

5.92

3,404

3,404

2019 572.7

8,391 622

5.92

3,677

3,677

2020 601.3

9,062 671

6.20

4,160

4,160

2021 631.4

9,787 725

6.51

4,717

4,717

2022 662.9

10,570 783

6.51

5,095

5,095

2023 696.1

11,416 846

6.82

5,764

5,764

2024 730.9

12,329 913

7.16

6,537

6,537

2025 767.4

13,315 986

7.16

7,060

7,060

2026 805.8

14,380 1,065

7.50

7,988

7,988

2027 846.1

15,531 1,150

7.87

9,058

9,058

2028 888.4

16,773 1,242

7.87

9,783

9,783

2029 932.8

18,115 1,342

8.25

11,068

11,068

2030 979.4

19,565 1,449

8.66

12,551

12,551

Appendix 12 43

Total 10861.3

EIRR 19.7%

() = negative, EIRR=economic internal rate of return, kWh=kilowatt hours, M. Rs=million rupees, MWh=megawatt hours, NPV=net present value, O&M=operating and maintenance, Rs=rupees, WTP=willingness to pay

Note: Willingness to pay is assumed at Rs5.1 /kWh for domestic consumers, Rs6/kWh for industrial consumers

and Rs2,5 for commercial consumers in the northeast region. Source: 39630 IND RRP: for Power Grid

Corporation. For the project EIRR, the composition of consumers is assumed to be: domestic (80%),

industrial (10%), and commercial (10%). An annual increase of 5% in WTP is assumed; consumption is based on the projected demand in the FIRR

Sources: PCR mission estimates

44 Appendix 12

Table A12.7: EIRR Calculation for RE Component

Cost Incr Benefit Incr

Year Capital O&M Incr Consumptn Consumptn Project

Investment 4% Capital Consumptn Rs/kWh Rs/kWh Cash Flow

M. Rs M. Rs GWh M. Rs M. Rs M. Rs

2004 32.14 (32.14)

2005 60.09 592 (60)

2006 17.46 (12) (17)

2007 2.19 59 213 263

47

2008 2.30 141 597 659

59

2009 2.42 428 2,127 1,997

(133)

2010 2.54 346 1,775 2,103

326

2011 2.67 252 1,331 1,531

198

2012 2.80 272 1,481 1,654

170

2013 2.94 294 1,647 1,875

225

2014 3.09 318 1,832 2,026

190

2015 3.24 343 2,038 2,188

146

2016 3.40 371 2,267 2,481

210

2017 3.57 400 2,522 2,679

153

2018 3.75 432 2,806 2,893

84

2019 3.94 467 3,121 3,437

312

2020 4.14 504 3,472 3,712

236

2021 4.34 545 3,862 4,009

143

2022 4.56 588 4,296 4,763

462

2023 4.79 635 4,779 5,144

360

2024 5.03 686 5,317 5,556

234

2025 5.28 741 5,914 6,600

681

2026 5.54 800 6,579 7,128

544

2027 5.82 864 7,318 7,699

374

2028 6.11 933 8,141 9,146

999

Appendix 12 45

2029 6.42 980 8,804 9,603

792

2030 6.74 1,029 9,522 10,083

555

Total 109.70 97.63 13,009 91,765 99,232 7,260

EIRR 47%

__________________________________________________________________________________________________ EIRR=economic internal rate of return, GWh=gigawatt hours, kWh=kilowatt hours, M. Rs=million rupees, O&M=operating and maintenance, RE=rural electrification, Rs=rupees

46 Appendix 12

Table A12.8: FIRR Calculation for the Revenue Management System

Project Comm Loss Net Cash

Year Investment O&M Reduction/ Benefit Benefit Rs Flow

M. Rs M. Rs GWh M. Rs M. Rs

2004 5.7

(5.7)

2005 200.4 (200.4)

2006 616.1 (616.1)

2007 194.3 (194.3)

2008 7.3

(7.3)

2009 102.4 161.0 4.4 711.6 609.2

2010 107.5 162.6 4.4 722.0 614.5

2011 112.9 164.2 4.7 767.0 654.1

2012 118.5 165.9 4.7 774.6 656.1

2013 124.4 167.5 6.1 1,017.1 892.6

2014 130.7 169.2 6.1 1,027.3 896.6

2015 137.2 170.9 6.1 1,037.5 900.3

2016 144.1 172.6 6.4 1,100.3 956.2

2017 151.3 174.3 6.4 1,111.3 960.0

Total 1,023.8 1,128.9 1,508.3 5.5 8,268.6 6,115.9

FIRR 34.4%

Benefi Benefits accrue to commercial loss reduction, which is assumed to be 10% of T&D losses. FIRR=financial internal rate of return, GWh=gigawatt hours, M.Rs=million rupees, O&M=operating and maintenance, Rs=rupees

Appendix 13 47

QUANTITATIVE ASSESSMENT OF OVERALL PROGRAM PERFORMANCE

Table A13.1: Overall Rating

Criteria Assessment Rating Weights Weighted (0–3) (%) Rating

Relevancea 3 20 0.60 Efficacyb 2 25 0.50 Efficiencyc 2 20 0.40 Sustainabilityd 2 20 0.40 Institutional Developmente 1 15 0.15 Overall Rating 2.05

Successful

a Relevance: The program objectives and outputs were relevant to the strategic objectives of the Asian Development Bank and the Government of India. b Efficacy: The program achieved its targets and objectives. c Efficiency: The program achieved objectives in an efficient manner. d Sustainability: The program benefits and development impacts are sustainable. e Institutional Development: The program had beneficial impacts on government policy and institutional

capacity, and other positive social impacts. Source: Asian Development Bank estimates.

Table A13.2: Rating System

Rating Relevance Efficacy Efficiency Sustainability Institutional Value Development

3 Highly Highly Highly Most Likely Substantial Relevant Efficacious Efficient

2 Relevant Efficacious Efficient Likely Significant 1 Partly Less Less Less Likely Moderate

Relevant Efficacious Efficient 0 Irrelevant Inefficacious Inefficient Unlikely Negligible

Rating: 2.5, and no rating less than 2 = Highly Successful 1.6–2.5, and no rating of 0 = Successful 0.6–1.6 m and no more than two ratings of 0 = Partly Successful < 0.6, or three or more ratings of 0 = Unsuccessful

Source: Asian Development Bank estimates.