Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: India
Project: Tamil Nadu Transmission System Improvement Project
Loan Agreement: September 28, 2012
Loan amount: 60,740 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 the world.
However, energy supply has not met the energy demand (FY2010: April 2010 - March 2011): serious
shortage of electricity supply of 10.6% in the total requirement, 12.1% in the peak demand. In addition, ahigh rate of power transmission losses (FY2010: estimated at 25.5% on an average for entire India) andfrequent 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 to develop
new power sources of 78,700 MW, establish power transmission facilities, and reduce transmission anddistribution losses. As such, the Government of Tamil Nadu (TN) set a goal to develop 16,000 MW in
new power sources by 2017, formulate transmission and distribution development plan accordingly, andreduce transmission and distribution loss by 0.4% every year starting Fiscal Year 2012. The Tamil Nadu
Transmission System Improvement Project (hereinafter referred to as “the Project”) contributes to TN’sefforts and plans.
(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 theDevelopment Assistance to the Infrastructure” as a prioritized area. In order to deliver stable and efficient
supply of electric power, strengthening power supply capacity as well as power transmission capacity isnecessary. JICA’s primary assistance includes establishment of highly 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 theProject. As for the past Japanese ODA loan projects in the energy sector, there were 71 projects totaling
1,003.7 billion yen (or 31% of the total loan amount extended to India). With regard to the transmission
system improvement projects, JICA extended ODA loans to the “Maharashtra Transmission SystemProject” in FY2007, the “Haryana Transmission System Project” in FY2008, and the “Madhya Pradesh
Transmission System Modernisation Project” in FY2011. As for technical cooperation, JICA conducteddevelopment study titled the “Andhra Pradesh Power Distribution Improvement Planning Study” fromFY2002 to FY2004 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
power generation, and energy efficiency improvement. The World Bank’s assistance includes in thestates of Odisha, Haryana, Andhra Pradesh, Uttar Pradesh, and Rajasthan, and ADB in Gujarat, Madhya
Pradesh, Kerala, Assam, Uttarakhand. To date, no other donors have provided assistance to TN State.
(5) Necessity of the Project
In TN State, particularly in the state capital of Chennai, the fifth-largest city in India with a population of4.6 million, an increasing number of domestic and international corporations have been establishing theirbusiness operations, which is expected to contribute to robust economic growth. As TN State is locatedalong the Sea Lines of Communication to Southeast Asia and encourages foreign capital investments,
there is stable labor-management relationship and an abundant labor force, which has led todevelopment of auto industry accumulation. In this environment, an increase in power demand isexpected in the future, but power demand surpasses supply (annual power deficit of more than 8%),which results in planned power cuts even in urban areas. To resolve this situation, TN State plans todevelop 16,000 MW in new power sources by 2017.
Under these circumstances, by improving power transmission and substation facilities in TN State, theProject aims to achieve stabilization of the power system in TN and other states in the southern India,
reduction of transmission loss rate, and stable power supply. Therefore, the aim of the Project is in linewith the development policy of the Government of India as well as the foreign aid policy of theGovernment of Japan and JICA. Consequently, JICA's assistance for the Project is necessary andrelevant.
3. Project Description(1) Project Objective
The objective of the Project is to ensure reliable power transmission system by constructing transmission
lines and substations throughout the State of Tamil Nadu in Southern India, including Chennai area, stabilize
the power system and reduction in transmission losses, thereby contributing to stable power supply in orderto promote economic growth in TN State.
(2) Project Site/Target Area
The entire state of Tamil Nadu
(3) Project Components
1) Procurement of materials and equipment needed for new construction and enhancement fortransmission lines (400kV, 230kV, 110kV, total of approximately 1,151 km), including low-loss
conductors (311 km circuit length) and High Temperature Low Sag Conductor (HTLS) (382 km
circuit length), and civil work.
2) Procurement of materials and equipment for construction of 19 new substations and civil work3) Consulting services (e.g. project supervision)・Method of procurement: International Competitive Bidding; Consultants: shortlist(4) Estimated Project Cost (Loan Amount)
85,243 million yen (Loan Amount: 60,740 million yen)
(5) Project Implementation Schedule
September 2012 - October 2017 (62 months). Project completion is scheduled in October 2016, whichis the expected time for commencement of commercial operation.
(6) Project Implementation Structure1) Borrower: The President of India
2) Executing Agency: Tamil Nadu Transmission Corporation Limited3) Operation and Maintenance System: same as 2)(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Considerationsi.
Category: Bii.

Reason for Categorization: The Project does not include sensitive sectors, characteristics orareas described in the Guidelines for Environmental and Social Considerations (issued inApril 2010), and therefore the adverse impact of the Project is considered to be moderate.

iii.

Environmental Permit: The Environmental Impact Assessment (EIA) report is not required for
the Project under the country’s domestic laws.

iv.

Anti-Pollution Measures: During construction, appropriate mitigation measures will be taken
to reduce the dust by spraying water and covering freight carriers and for vehicles and heavymachinery while performing the works.

v.

NaturalEnvironment:

The

project

areas

are

not

locatedinoraroundanyenvironment-sensitive areas, such as national parks, and thus adverse impact on the naturalenvironment caused by the Project is expected to be minimal. None of the sites for theinstallation of transmission lines or construction of substations are located in reserved forests,
thus there is no problem in this regard.
vi.

Social Environment: Out of 82.6 hectares (ha) of land that the Project requires, 35.2 ha (3substations out of 19 still needs land acquisition) owned by TN State Government is in theprocess of being acquired with the reacquisition price under the domestic procedures of India
as well as compensation policy enacted by the Executing Agency. The land acquisition isscheduled to be completed by the time construction begins. The Project involves no resident
resettlement.

vii.

Other/Monitoring: During construction, the Executing Agency will monitor air quality, waterquality, noise, and vibration. After the completion of the Project, the Executing Agency will
monitor the waste, discharged water, solid waste, air quality, noise, and other parameters, ifany.
2) Promotion of Poverty Reduction: None
3) Promotion of Social Development (e.g. Gender Perspective, Measure for Infectious Diseases
Including HIV/AIDS, Participatory Development, Consideration for the Person with Disability, etc.): None
(8) Collaboration with Other Schemes or Donors: None
(9) Other Important Issues: None

4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Baseline

Target (2019)(2010)(2 Years after ProjectIndicatorsCompletion)
InstalledTransformer
Capacity (MVA)

400kV/230kV or

1,890

5,955

15,29017,966400kV Transformer

88

60

230kV Transformer

7865

400kV Transmission

4434423447344.26

Below 4400kV/110kV
230kV/110kV or
230kV/33kV

Loading Factor (%)

Line
230kV Transmission
Line
110kV Transmission
Line

Transmission System Losses (%)2) Internal Rates of Return
Based on the conditions indicated below, the Economic Internal Rate of Return (EIRR) for the
Project is 15.34%, while the Financial Internal Rate of Return (FIRR) is 10.44%.
EIRR:
Cost: Project cost (excluding tax), operation and maintenance expenses
Benefit: Effect of increase in transmission revenue, effect of reduction in power transmission losses
Project Life: 30 years
FIRR:
Cost: Project cost, operation and maintenance expenses
Benefit: Effect of increase in transmission revenue
Project Life: 30 years(2) Qualitative Effects
Promotion of investments through stable and reliable provision of electricity supply in TN State,
improvement in the living environment with less power cuts, economic growth in TN State withimprovement in industrial production, 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 theProject area
6. Lessons Learned from Past Projects(1) Evaluation Results of Similar Projects
From the ex-post evaluation of previous energy project named “Anpara Power Transmission SystemProject (1) (2),” there was a lesson learned 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.
(2) Lessons To Be Applied to the Project
Based on the lessons described above, as part of Project Supervision, JICA will have updated statusof the financial situation of Executing Agency, from the view point of the financial sustainability of theProject.

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