Bihar gets $132M electricity upgrade loan

The Indian state of Bihar will receive $132 million from ADB for electricity system upgrades.

The ADB Board of Directors approved the loan for the Bihar Power System Improvement Project to spur growth in one of the country's poorest and most populous states.

"The project will alleviate system bottlenecks and reduce technical and commercial losses, resulting in a more sustainable power sector providing better services to the people of Bihar," said Andrew Jeffries, Senior Energy Specialist in ADB's South Asia Department.

The funds will be used to install new transmission lines and to renovate and modernize transmission and distribution facilities to improve the quality and reliability of the state's electricity supply network. The distribution work will cover seven towns, while the transmission activities will span a broader area where agriculture is the primary economic activity.

While India is one of the fast growing economies in the world, Bihar is one of its poorest states with around 40 per cent of its population of 90 million people living below the poverty line. Power consumption is low with electrification rates less than half the national average, while the transmission and distribution system is unreliable and unstable, with system losses exceeding 40 per cent. Upgrading power supply is a priority for the Government of India as it seeks to boost growth and cut poverty in the state.

"Currently only about 60 per cent of Indian households have access to electricity and adequate supply is essential for sustained economic growth and poverty reduction," said Mr. Jeffries.

ADB will also a provide a technical assistance grant of $300,000 for training and other capacity development support to improve project and financial management in the Bihar State Electricity Board, which will execute the project.

The loan of $132.2 million from ordinary capital resources makes up 86 per cent of the total project cost of almost $154 million, with the Government of Bihar providing counterpart finance of $21.7 million. The loan has a 25-year term, including a 5-year grace period with an annual interest rate determined in accordance with ADB's LIBOR-based lending facility. The grant comes from ADB's concessional Technical Assistance Special Fund.
The project is due for completion in December 2015.