Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry:India
Project:
Madhya Pradesh Transmission System Modernisation Project
Loan Agreement: June 16, 2011
Loan Amount:
18,475 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 becoming the fifth largest energy consumer in theworld. However, energy supply has not met the energy demand (FY2010: April 2010 - March 2011:serious shortage of electricity supply, 10.6% in the total requirement, 12.1% in the peak demand). Inaddition, a high rate of power transmission losses (FY2010: 25.5% on an average for the entire
India) and frequent power cuts have become serious problems with respect to power supply.
(2) Development Policies for the Energy Sector in India and the Priority of the Project
Under the Eleventh Five-Year Plan (April 2007 to March 2012), the Government of India plans odevelop new power sources of 62,374 MW and establish power transmission facilities. As such,, theGovernment of Madhya Pradesh has established an “Eleventh Five-Year Transmission Plan ofMadhya Pradesh,” whose initiative includes the Madhya Pradesh Transmission SystemModernization Project (hereinafter referred to as “the Project”) that contributes to establish powertransmission networks in Madhya Pradesh (hereinafter referred to as “MP State”).
(3) Japan and JICA’s Policy and Operations in the Energy Sector in India
In Japan's Country Assistance Programs for India, “Promotion of Economic Growth” has been
identified as one of the priority areas. Accordingly, JICA has set the “Promotion of Sustainable
Growth through the Development Assistance to the Infrastructure” as a prioritized area. In order todeliver stable and efficient supply of electric power, strengthening power supply capacity as well as
power transmission capacity is necessary. JICA’s primary assistance includes establishment ofhighly efficient power supply facilities (power stations and transmission/distribution systems),
improving efficiency of the existing old power facilities, and reduction of power transmission
losses, which are all consistent with the objective of the Project. . As for the past Japanese ODA
loan projects in the energy sector, there were 69 projects totaling 966.6 billion yen (or 31% of thetotal loan amount extended to India). With regard to the transmission system improvement projects,
JICA extended ODA loans to the “Transmission System Modernization and Strengthening Projectin Hyderabad Metropolitan Area” in FY2006, the “Maharashtra Transmission System Project” inFY2007, and the “Haryana Transmission System Project” in FY2008. As for technical cooperation,
JICA conducted development study titled the “Andhra Pradesh Power Distribution Improvement
Planning Study” and the “Thermal Power Generation Management Improvement Planning Study.”(4) Other Donors’ Activities
The World Bank and the Asian Development Bank (ADB) have been supporting not only the power
sector reforms in each state, but also projects related to the establishment of transmission anddistribution systems, strengthening of the capacity of state electric power corporations, developmentof hydroelectric power generation, and energy efficiency improvement.
(5) Necessity of the Project
MP State is one of the states located in the Delhi-Mumbai Industrial Corridor (DMIC), which is an
initiative developed between the Governments of Japan and India. As MP State plans on1

contributing to the DMIC-area development, such as the special economic zone near the Indore
Airport, distribution center near Dewas City, and an industrial zone in Pithampur, stable economic
growth is expected to continue, which should lead to an increase in electric power demand in urban
areas. In order to meet the increasing demand for electric power, two new thermal power plants(with a total capacity of 1,700 MW) are planned to begin operations by 2013. With the increase inelectricity generation capacity, strengthening of the transmission systems is required. Out of the fiveregions in India’s power transmission systems, MP State belongs to the western region, which has
the highest demand for electric power in India. As MP State is located at the center of the westernregion, the State has nine out of 19 trunk substations, and therefore, reliability and stability intransmission system of the State will further contribute to reliability not only in the western region
but also in the DMIC area and ultimately entire India. As such,, by improving transmission systemin the State, the Project aims to contribute in stabilizing the transmission system in the State as wellas the western region, reducing transmission losses, and stabilizing management of the power
supply systems, which makes JICA’s assistance for the Project necessary and relevant.
3. Project Description(1) Project Objective
The objective of the Project is to ensure reliable transmission of expanded volume of electricity andto avoid overloading of transmission system in the state of Madhya Pradesh and ultimately in thewestern region after the prospected expansion of power generation, by modernising transmission
system throughout MP state, thereby promoting economic growth in the served area.
(2) Project Site/Target AreaThe entire state of Madhya Pradesh(3) Project Components
Laying of transmission lines (220 kV, 132 kV), construction of new substations, and augmentation
work at existing substations throughout the State
1) Procurement of Equipment
 Laying and reinforcement of transmission lines (220 kV, 132 kV): approximately 2,100 km
in total Construction and augmentation of the following substations:
Construction
Augmentation
400 kV/220 kV
None
3 substations
220 kV/132 kV
8 substations
15 substations
132 kV/33 kV
26 substations
66 substations
2) Civil works related to installation(4) Estimated Project Cost (Loan Amount)
22,213 million yen (Loan Amount: 18,475 million yen)(5) Schedule
June 2011 – May 2015 (48 months); Project completion is scheduled in May 2014, which is theexpected time for commencement of commercial operation.
(6)
1)
2)
3)

Project Implementation Structure
Borrower: The President of India
Executing Agency: Madhya Pradesh Power Transmission Company Limited
Operation and Maintenance System: same as 2) above(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Considerations2(1) Category: B(2) Reason for Categorization: The Project does not include sensitive sectors, characteristics
or areas described in the Guidelines for Environmental and Social Considerations (issuedin April 2010), and therefore the adverse impact of the Project is considered to bemoderate.
(3) Environmental Permit: The Environmental Impact Assessment (EIA) report is not
required for the Project under the country’s domestic laws.
(4) Anti-Pollution Measures: During construction, appropriate mitigation measures will betaken to reduce the dust by spraying water and covering freight carriers and for vehicles
and heavy machinery while performing the works..
(5) Natural Environment: The project areas are not located in or around any
environment-sensitive areas, such as national parks, and thus adverse impact on thenatural environment caused by the Project is expected to be minimal. None of the sites
for the installation of transmission lines or construction of substations are located inreserved forests, thus there is no problem in this regard.
(6) Social Environment: The Project requires land acquisition of 97.16 ha, out of which
91.71 ha is owned by the Government, while 5.45 ha is privately owned which is in theprocess of being acquired with the reacquisition price under the domestic procedures ofIndia as well as compensation policy enacted by the Executing Agency. 4.57 ha has been
already acquired and the acquisition of the remaining 0.88 ha is also scheduled to becompleted by August 2011. The Project involves no residents resettlement.
(7) Other(Monitoring): During construction, the Executing Agency will monitor air quality,water quality, noise, and vibration. After the completion of the Project, the Executing
Agency will monitor the waste, discharged water, solid waste, air quality, and noise. The
Executing Agency has agreed to report to JICA the monitoring results every six months
during construction, and once a year over a three-years period after the completion of theProject.
2) Promotion of Poverty Reduction
None3) Promotion of Social Development (e.g. Gender Perspective, Measure for Infectious Diseases
Including HIV/AIDS, Participatory Development, Consideration for the Person withDisability, etc.)
None(8) Collaboration with Other Donors
None(9) Other Important Issues
The Project aims to improve energy efficiency by reducing transmission losss, and therefore it willcontribute in controlling Greenhouse Gas (GHG) emissions.
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)

400 kV
220 kV

4,200
14,030Target (2016)(2 Years after ProjectCompletion)
8,610
18,450132 kV

15,07018,032

Indicators
InstalledTransformer
Capacity (MVA)

Baseline(2010)

3

Average
400 kV
Availability Factor substation(%)
220 kV
substation
220 kVtransmissionline
132 kVtransformer
132 kVtransmission
line
Transmission System Losses (%) 1

99.05

98

99.58

98

98.22

98

99.84

98

98.70

98

3.88

Below 4%

2) Internal Rates of Return
Based on the conditions indicated below, the Economic Internal Rate of Return (EIRR) for the
Project is 18.50% while the Financial Internal Rate of Return (FIRR) for the Project is 14.23%.
EIRR
Cost:
Benefit:
Project Life:

Project cost (excluding tax), operation and maintenance expenses
Effect of increase in transmission revenue, effect of reduction in powertransmission losses
30 years

FIRR
Cost:
Benefit:
Project life:

Project cost, operation and maintenance expenses
Effect of increase in transmission revenue
30 years(2) Qualitative Effects
Promotion of investments, improvement in the living environment condition, and economic growthin MP State
5. External Factors and Risk Control
Deterioration of political and economic situation and natural disasters in India and the areas aroundthe Project area
6. Lessons Learned from Past Projects
From the ex-post evaluation of previous energy project named “Anpara Power Transmission System
Project (1) (2),” there was a lesson learnt for structural reforms of the energy sector, which requires
continuous efforts for effective measures, such as implementation of an appropriate tariff structure(correction of excessive cross subsidies) and unbundling of the sector. .
With the tariff policy ordered by the guidelines of the Madhya Pradesh Regulatory Authority, theExecuting Agency is able to maintain a certain level of profitability by collecting sufficienttransmission charges tariff from the distribution corporation. However, in case of any revisions tothe method for setting transmission charges , discussions will be held with the MP State
Government to ensure appropriate profitability.

1

As for Average Availability Factor and Transmission System Loss, the performance level is very high even at the current level. The
Project aims to maintain the current level of Average Availability Factor which is one of the performance indicators.

4

7. Plan for Future Evaluation(1) Indicators to Be Used
1) Substation’s Transformer Capacity (MVA)
2) Substation’s Average Availability Factor (%)3) Transmission Loss (%)4) Economic Internal Rate of Return (EIRR) (%)5) Financial Internal Rate of Return (FIRR) (%)(2) Timing
Two years after project completion5