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India may get $ 1.3 billion ADB loan for power projects

The Asian Development Bank has plans to sanction a $ 1.3 billion loan for India's oncoming five energy projects, Frank J Polman, resident representative of the ADB, said today in New Delhi.

The energy ventures are Power Transmission Project ($ 250 million), Gujarat Power ($ 300 million), Madhya Pradesh Power Development ($ 300 million), Energy Efficiency Support Project ($ 200 million) and Power Finance Corporation ($ 250 million).

The loan is, however, still at a negotiating stage and the disbursement will take anything between six to seven years. ''We are in the process of preparing these loans for the ADB board approvals,'' Polman said.

The loans which are in the pipeline are classified for non-human needs, according to the post-Pokhran sanction format. ''Most of the loans from the ADB or the World Bank for energy projects do not come under the clause for 'human needs','' Polman said.

The ADB which started giving loans since 1986, has given loans of $ 2.8 billion to India. Five loans have been given in the last three years and these do not come under the sanctions, Polman said.

''Our strategy is to leverage commercialisation of state electricity boards and improve their financial efficiency. The duration of repayment will be 15 to 20 years," he said.

N G Pai, deputy general manager, ICICI Limited, said that the ADB funds will give exposure to Indian financial institutions of the experiences outside India. ICICI, Pai said, could be one of the Indian financial institutions where the loans could be finally disbursed.

S G Rangan, chairman, technical committee, Energy Management Cell of the CII, said the ADB is extending support in sugar, paper, textiles, glass and ceramics. He said there should be cost reduction in the power sector which can be achieved through energy conservation and change in technology. The energy conservation aspects must be incorporated at the design stage itself. This is where the $ 200 million loan will help, he said.

Polman said the financiers are at present not interested in financing projects that attempt to put in place energy efficiency processes and methods. For the volume of such projects today fails to attain an attractive return.

On the other hand, the development of these projects, he said, is constrained due to lack of confidence regarding the availability of funds and poor knowledge in identifying and structuring, financing and developing the market for energy efficiency efforts.

The local financial institutions in India also have a very useful role to play as financial intermediaries with international institutions ''but it seems they are largely unaware of the potential market for such projects''.

The ADB official said economic growth leads to an increase in the consumption of energy. So, the Asia-Pacific region, especially India and China, will be demonstrating marked increase in energy usage in the future.

However, inefficient use of energy results in a situation where returns are lower than investment. So, energy efficiency has more relevance today than before.

He said that energy conservation efforts in India are not a new concept, but the impact has been slow, and the industrial sector, the major user of efficiency, suffers from a lack of awareness.

He said that it was necessary to identify industrial sub-sectors which could do with more efficient energy usage, promote the concept of energy conservation, strengthen the capability of consultants and research institutes to carry out work on energy conservation, and design and implement energy efficiency efforts in the private sector.

Anil Razdan, joint secretary, ministry of power, spoke on the need to see energy conservation as a way of life. Today conservation of energy is more important than energy provision or generation, he said.

UNI

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