NEW DELHI, Dec 10 ? End of power woes in Assam seems to be in sight with the Asian Development Bank (ADB) clearing a USD 250 million loan package to Assam Government to restructure its power sector. The ADB from Manila said that the Assam Power Sector Development Plan (SDP) comprises a policy loan, an investment loan, and three technical assistance (TA) grants to support a comprehensive programme of reform. The State Power Department and Assam State Electricity Board (ASEB) are the executing agencies for the investment loan, which has a 20-year term, including a five-year grace period. The project is due for completion in December 2006.
In Delhi, Chief Minister, Tarun Gogoi welcomed the clearance of the loan by ADB at its board meeting last evening. It may be recalled here a team of officials of Assam Government had in October visited Manila to negotiate the terms of the loans and signed on minutes. Though the loan was approved at the meeting the board of directors formally cleared it yesterday.
The ADB said that 150 USD million policy loan will help restructure ASEB, a vertically-integrated utility, into independent companies and strengthen its policy and regulatory framework to implement reforms. The 100 USD million investment loan will improve the transmission and distribution system, introduce a revenue management system, and increase the reach of electricity in rural areas. Assam is blessed with abundant natural resources and is a strategic corridor for the region, but unreliable power supply from the state-owned ASEB has hampered industrial growth, the ADB said.
"The lack of sufficient and reliable power is eroding the state's competitiveness and preventing it from attracting industrial investments from outside," the ADB quoted Tomoyuki Kimura, a Senior Energy Sector Specialist. as commenting on sanctioning the loan. "Improved power supply at a reasonable cost is essential to revive the state's industry and economy. Equally important is improving the financial sustainability of the power sector so that it is no longer a drain on state finances," he said, adding that because of technical and financial constraints, ASEB operates below capacity and is unable to meet the total power demand.
ASEB tries to fill the supply shortage by purchasing power from neighboring states and other government enterprises, but financial problems caused by its high cost structure and poor billing and collection system are a major constraint, the ADB said. Only 21 per cent of the 4.5 million households in Assam receive electricity and per capita power consumption is only 104 kilowatt-hours, less than one third of the national average. The Board is heavily dependent on State Government support, resulting in more use of public funds at the expense of education and health, the ADB observed.
The state government began its restructuring programme with the establishment of the Assam Electricity Regulatory Commission (AERC) in 2001 to remove from it the task of regulating the power sector. It also "unbundled" ASEB into generation, transmission and distribution companies, but needs assistance to further implement the reform programme. The SDP was included in the India Country Strategy and Program for 2003, which provides extended coverage to the northeastern region where the poverty incidence is much higher than the national average and where there is significant potential for regional cooperation.
The ADB had for preparation of the SDP, approved a Technical Assistance (TA) grant in 2002 to help the State Government plan the restructuring of ASEB, and another TA grant in October 2003, financed by the Japan Special Fund, to boost the capacity of AERC to promote power sector reforms. Power is one of the major sectors in infrastructure development where ADB's intervention will be directed to policy reforms and capacity building, combined with physical investment support. Since 1986, ADB has provided over USD2.5 billion worth of loans and grants to India's power sector, the oraganisation claimed.