Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: India
Project: Haryana Distribution System Upgradation Project
Loan Agreement: March 31, 2014
Loan Amount: 26,800 million yen
Borrower: The President of India
2. Background and Necessity of the Project(1) Current State and Issues of the Energy Sector in India
With its recent fast-paced annual economic growth of more than 8%, energy consumption in India has been
increasing, which has made the country become the fourth largest energy consumer in the world. However,energy supply has not met the energy demand (FY2012: April 2012 - March 2013): there are serious electricity
supply shortages of 8.7% of total requirements, and 9.0% of peak demand. In addition, the high rate of powertransmission and distribution losses (FY2011: estimated at 23.7% on an average for all of India) has become
serious problems with respect to the power supply.
(2) Development Policies for the Energy Sector in India and the Priority of the Project
Under the Twelfth Five-Year Plan (April 2012 to March 2017), the Government of India plans to develop newpower sources of 88,537 MW, establish power transmission and distribution facilities, and reduce transmission
and distribution losses. In the state of Haryana, as of the end of FY2012, there is a power supply shortage ofslightly more than 7.7% of total requirements (total energy supply: 38,209 GWh) and a shortage of 9.5% of peakdemand (peak met: 6,725 MW). As such, the Government of Haryana set a goal to develop 2,002 MW of newpower sources within the Twelfth Five-Year Plan. In response to the new power sources, there is a plan todevelop and strengthen the distribution networks, which aims to reduce the distribution loss rate to 20.9%(44.0% in FY2012) in Northern Haryana and to 17.7% (24.8% in FY2012) in Southern Haryana by FY2016. The
Haryana Distribution System Upgradation Project (hereinafter referred to as “the Project”) aims to improve
Haryana’s distribution facilities as part of the plans promoted by the Government of India and Haryana State
Government to strengthen the distribution sector as well as to increase the efficiency of the sector.
(3) Japan and JICA’s Policy and Operations in the Energy Sector in India
In Japan’s Country Assistance Programs for India (May 2006), “Promotion of Economic Growth” has been
identified as one of the priority areas. Accordingly, in its Country Analysis Paper (March 2012), JICA has set“Promotion of Sustainable Growth through the Development Assistance to the Infrastructure” as a priority area.
In order to deliver a stable and efficient power supply, strengthening the power supply capacity as well as thepower transmission capacity is necessary. JICA’s primary assistance includes the establishment of highly
efficient power supply facilities (power stations and transmission/distribution systems), the improvement ofefficiency of the existing old power facilities, and the reduction of transmission/distribution losses, which are allconsistent with the objective of the Project. As for the past Japanese ODA loan projects in the energy sector,
there were 73 projects totaling 1,094.4 billion yen. With regard to the distribution system improvement projects,
JICA extended ODA loans to the “Rural Electrification Project” in FY2005, the “Bangalore Distribution
Upgradation Project” in FY2006, and the “Andhra Pradesh Rural High Voltage Distribution System Project” inFY2011. As for technical cooperation, JICA conducted the development study titled the “Andhra Pradesh
Power Distribution Improvement Planning Study” from FY2001 to FY2003 and the “Thermal Power Generation
Management Improvement Planning Study” from FY2008 to FY2010.
(4) Other Donors’ Activities
The World Bank and the Asian Development Bank (ADB) have been supporting not only the power sector
reforms in India, but also projects related to the establishment of transmission and distribution systems,
strengthening of the capacity of state electric power corporations, development of hydroelectric powergeneration, and energy efficiency improvement. The World Bank has provided assistance to states including
Odisha, Haryana, Andhra Pradesh, Uttar Pradesh, and Rajasthan, while the ADB has provided assistance toGujarat, Madhya Pradesh, Kerala, Assam, and Uttarakhand.
In the state of Haryana, in 2009, the World Bank provided loan of USD 250 million to Haryana Vidyut Prasaran
Nigam Limited (Haryana Transmission Company) and USD 70 million to Dakshin Haryana Bijli Vitran Nigam Ltd.
(southern Haryana Distribution Company) in order to develop urban distribution networks with the objective ofstrengthening the transmission network and reducing distribution losses.

(5) Necessity of the ProjectWith faster progress in reforming its energy sector than in other states, the state of Haryana has been promoting
the participation of the private sector in order to implement efficient facility management as well as market
mechanisms. However, due to the lack of sufficient power supply facilities, the state of Haryana has been facing
frequent power outages and an unstable power supply. Numerous local and overseas companies, including
Japanese companies, have offices and factories in Haryana, particularly in industrial parks (as of Januar y 2014,
the number of Japanese companies operating in Haryana was 325, the third largest number in any state after
Tamil Nadu and Maharashtra). To avoid power outages and voltage fluctuations, many of these companies haveinstalled private power generators and “separate feeders,” which are distribution lines laid directly from asubstation to an office or factory. However, such measures are costly and affect profit margins. Furthermore,power theft and meter tampering are frequently observed in Haryana, resulting in more than 50 percent in
distribution loss in many areas. Due to such serious problems in Haryana, immediate measures for the existingpower distribution system need to be taken.
Under these circumstances, by implementing and improving distribution systems, the Project aims to achieve
stabilization of the power system in Haryana, reduction of the distribution loss rate, and stable power supply.
Therefore, the aim of the Project is in line with the development policy of the Government of India as well as theforeign aid policy of the Government of Japan and of JICA. Consequently, JICA’s assistance for the Project isnecessary and relevant.
3. Project Description(1) Project Objective
The objective of the Project is to facilitate the reliability and quality of power supply to the state of Haryana andreduce distribution losses by augmenting existing electrical infrastructure, laying additional infrastructure, as wellas introducing Automatic Meter Reading, thereby contributing to securing the stable energy supply in the Stateand improving the economic development and living standards of the residents of the State.
(2) Project Site/Target Area
All 21 districts of the state of Haryana(3) Project Components
1) Procurement of materials and equipment needed for new construction and enhancement for distribution lines(11kV, total of approximately 4,359 km) and civil work
2) Procurement of materials and equipment for construction of 75 new substations and 74 augmented
substations and civil work
3) Installation of Automatic Meter Reading (total of approximately 63,000) and 2 AMR servers (only in northernHaryana)4) Installation of meter pillar boxes (total of approximately 131,000) and electronic meters (1,705,000)
5) Revamping of existing Meter Testing Labs (total of 10 labs) and setting up of 2 new testing labs for materials
6) Procurement of 33/11kV power transformers and allied equipments7) Consulting services (financed by the Executing Agencies; TOR including basic design, tender preparation,and project supervision)- Method of procurement: Local Competitive Bidding for both project components and consulting services(4) Estimated Project Cost (Loan Amount)
32,756 million yen (Loan Amount: 26,800 million yen)
(5) Project Implementation Schedule
April 2014 – June 2019 (63 months). Project completion is scheduled in June 2019, which is the expected time
for the commencement of commercial operation.
(6) Project Implementation Structure1) Borrower: The President of India
2) Executing Agencies: Uttar Haryana Bijli Vitran Nigam Ltd. and Dakshin Haryana Bijli Vitran Nigam Ltd.
3) Operation and Maintenance System: Same as 2)(7) Environmental and Social Considerations/Poverty Reduction/Social Development
1) Environmental and Social Considerations(i) Category: C(ii) Reason for Categorization: The project is likely to have minimal adverse impact on the environment
under the Guidelines for Environmental and Social Considerations (April 2010) in terms of its sectors,
characteristics and areas.
2) Promotion of Poverty Reduction: Improvement in the standard of living in rural areas (reduction in poweroutage times).
3) Promotion of Social Development (e.g. Gender Perspective, Measures for Infectious Diseases Including
HIV/AIDS, Participatory Development, Consideration for Persons with Disability, etc.): None
(8) Collaboration with Other Schemes or Donors
The World Bank is implementing a project that installs AMRs in southern Haryana. JICA plans to be in close
communication with the World Bank for the project’s progress.
(9) Other Important Issues
The Project aims to improve energy efficiency by reducing distribution losses, and therefore it will contribute incontrolling Greenhouse Gas (GHG) emissions. The estimated annual GHG emissions reduction by the Project isapproximately 329,509 ton-CO2 equivalent per annum.
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicators)
Baseline(2012)

Target (2021)(2 Years after ProjectCompletion)

North

01,161

South

0744

Indicators
Augmented Substation
Capacity (new &augmented substation
capacity) (MVA)
Total
Number of Meters
Tested in Labs
(units/year)*

1,905
North

176,973

335,000

South

241,611

381,000

418,584

716,000

North

N/A

100

North

44.00

14.60

South24.84

12.18

Total
AMR Successful
Connection Rate (%)**
Distribution Loss Rate(%)**** Present (FY2012) figures are yearly average of past 5 years.
** Rate = [number of successful connections with AMR installed under the JICA Loan]/63,000 total numberof AMR meters to be installed*** Targets are based on the Executing Agencies’ “Financial Restructuring Plan” approved by India’s
Ministry of Power.
2) Internal Rate of Return
Based on the conditions indicated below, the Economic Internal Rate of Return (EIRR) for the Project is
16.7% and the Financial Internal Rate of Return (FIRR) is 14.0%.
EIRR:
Cost: Project cost (excluding tax) and operation and maintenance expenses
Benefit: Decrease in economic cost due to reduction of distribution losses
Project Life: 15 years
FIRR:
Cost: Project cost, operation and maintenance expenses
Benefit: Increase in the income level
Project Life: 15 years(2) Qualitative Effects
Economic growth in the state of Haryana, improvement of the power demand/supply situation in the state due toincreased distribution efficiency, and mitigation of climate change

5. External Factors and Risk Control
Deterioration of political and economic situation and natural disasters in India and the areas around the Projectarea
6. Results of Evaluations and Lessons Learned from Past Projects(1) Evaluation Results of Similar Projects
From the ex-post evaluation of previous energy project named “Power System Improvement and Small HydroProject,” the project’s challenge with sustainability was pointed out partially due to the weak financial structure ofstate transmission companies and distribution companies that were in charge of operation and maintenance.
(2) Lessons for the Project
In order to reduce the amount of uncollected bills resulting from nontechnical losses such as by meter tampering,as well as to increase the income level of the Executing Agencies, AMRs and meter pillar boxes will be installedby the Project. In addition, under the initiative of the Ministry of Power, the Executing Agencies are currently
implementing the Financial Restructuring Plan, which aims to transform the financial structure of the Executing
Agencies into a profit-generating structure by FY2016 by preventing thefts and reducing their liabilities. JICA
plans to conduct monitoring on the progress towards their turn-around target on a periodical basis.
7. Plans for Future Evaluation(1) Indicators To Be Used
1) Augmented Substation Capacity (new & augmented substation capacity) (MVA)
2) Number of Meters Tested in Labs (units/year)
3) AMR Successful Connection Rate (%)4) Distribution Loss Rate (%)5) Economic Internal Rate of Return (EIRR) (%)6) Financial Internal Rate of Return (FIRR) (%)(2) Timing
Two years after project completion