Bank loan

Indian state of West Bengal secures $ 135 million loan from World Bank to improve efficiency and reliability of electricity supply

WASHINGTON, November 29, 2021—The World Bank Board of Directors has approved a $ 135 million loan to the Indian state of West Bengal to improve operational efficiency and reliability of electricity supply in parts of the state.

West Bengal is strategically located along the corridor to North East and South East Asia and plays an important role in facilitating and promoting regional electricity trade. The state is already facilitating electricity trade with Bangladesh.

The rapid economic growth of West Bengal has resulted in an increase in demand for electricity at a rate of 4.5% over the past five years. The number of consumers served by West Bengal State Electricity Distribution Company Limited (WBSEDCL) has more than doubled over the past six years to nearly 20 million consumers. The main increase has occurred in rural areas, as the state has almost achieved universal access to electricity. However, this growth has also put a strain on the finances of electricity distribution companies (Discoms). The COVID-19 crisis has added to this tension, as demand for electricity from the commercial and industrial sectors – proportionately the biggest sources of revenue for Discoms – has plummeted.

“The financial stability of power companies is essential to providing efficient and reliable electricity to people. The pandemic has damaged the financial health of power utilities in India and in turn the financial health of power generation companies ”, noted Junaid Ahmad, World Bank Country Director in India. “The West Bengal Electricity Grid Modernization and Distribution Project will strengthen distribution networks, invest in smart grid technologies and ensure the financial viability of WBSEDCL. This could serve as an example for other distribution utilities across India.

In May 2020, Super Cyclone Amphan caused significant damage to West Bengal’s power infrastructure. Support through the West Bengal Electricity Grid Modernization and Distribution Project aims to strengthen WBSEDCL’s information and communication systems and provide an immediate response to similar crises and emergencies.

The project aims to reduce the losses of the distribution system, increase the capacity of the distribution network to meet the increasing load demand, improve the overall reliability of the system, make the network resilient to climatic disasters and improve the capacity institutional structure of WBSEDCL.

“The project will support investments in the network to improve operational efficiency and reduce losses. It will also invest in smart grid technologies for better load management as well as the integration of distributed energy resources ”, noted Rohit Mittal, World Bank team leader for the project.

The Indian government, through its major programs such as Deendayal Upadhyaya Gram Jyoti Yojana and Sahaj Bijli Har Ghar Yojana, has been able to extend access to electricity to almost every household in the country. The project will support the implementation of the Indian government’s Power For All 24 × 7 program in the state and support WBSEDCL in its transition to a leading public service in India.

The project will be financed by the government of West Bengal and loans from the Asian Infrastructure Investment Bank (AIIB) and the World Bank.

The International Bank for Reconstruction and Development (IBRD) $ 135 million loan is a variable spread loan with a term of 17 years, including a grace period of seven years.