Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry:India
Project:
Andhra Pradesh Rural High Voltage Distribution System Project
Loan Agreement: June 16, 2011
Loan Amount:
18,590 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 fifth largest energy consumer in theworld. However, energy supply has not caught up with energy demand (FY2010: April 2010 March 2011): serious shortage of electricity supply, 10.6% in the total requirement, 12.1% in thepeak demand). In addition, a high rate of power transmission loss (FY2010: 25.5% on average for
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 ondeveloping new power sources of 78,600 MW, establishing power transmission facilities, andreducing transmission loss (reducing to 15%). In addition, during the Tenth Five-Year Plan, in orderto improve the High Voltage Distribution System, the Government of India also launched the“Accelerated Power Development and Reform Programme” (APDRP) and continued to improve theHigh Voltage Distribution System (HVDS) in the rural area under the “Restructured Accelerated
Power Development and Reform Programme” (R-APDRP). As the “Andhra Pradesh Rural High
Voltage Distribution System Project” (hereinafter referred to as “the Project”) aims to improve
distribution systems, the Project therefore supports the aforementioned reform programs.
(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 aspower transmission capacity is necessary. JICA’s primary assistance includes establishing highly
efficient power supply facilities (power stations and transmission/distribution systems), improving
efficiency of the existing old power facilities, and reducing power transmission losses, which are allconsistent with the Project’s objective. As for the past Japanese ODA loan projects to India in theenergy sector, there were 69 projects totaling 966.6 billion yen (31% of the total loan amount). With
regard to the State of Andhra Pradesh (AP State), the “Transmission System Modernization andStrengthening Project in the Hyderabad Metropolitan Area” assists in establishing transmission
lines and substations. As for technical cooperation, JICA conducted development study titled the“AP State 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 reform 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.

1(5) Necessity of the Project
In recent years, AP State, primarily the state capital Hyderabad, has become the center for IT andbio-medical industries. This trend led to an increase in the number of office buildings, factories andpopulation, causing a sharp rise in the demand for electric power in urban areas. As AP State is
located in the Deccan Plateau, agriculture has traditionally been prospering, and an increase in thedemand for electric power in rural areas is prominent due to the development of electric irrigation
pumps throughout the State. In order to narrow the huge gap between electric power supply anddemand, it is necessary not only to increase the electric-generating capacity, but also to establish
efficient distribution systems.
As AP State is one of the most agricultural states in India, power supply to agriculture accounts forapproximately one-third of the total power supply, which is mainly used for approximately 2.7
million irrigation pumps. Since electric power is supplied to the irrigation pumps using low-voltage
lines through large-capacity transformers, electricity is likely to be stolen and the lines are more
likely to cause distribution losses compared to high-voltage distribution lines. In addition,
considerable voltage fluctuations cause damages to the irrigation pumps, which hinders farm workand puts burden on farmers to spend money on pump repair fees. As a result, in order to stabilize
power supply and agricultural production for the entire state of AP, it is necessary to urgently
promote an efficient way of supplying electric power for agriculture.
In this environment, JICA’s assistance for the Project is considered necessary and appropriate as theProject aims to reduce distribution losses in electric power supply to agriculture and to provide
stable electric power supply in AP State by establishing high-voltage distribution systems in ruralareas.
3. Project Description(1) Project Objective
The objective of the Project is to facilitate the reliability and quality of power supply to agricultural
services and the reduction of distribution losses by converting Low Voltage Distribution System(LVDS) to HVDS in rural areas of AP State, thereby contributing to securing the stable energy
supply in the State and improving the efficiency of agricultural production as well as living standardof the rural population.
(2) Project Site/Target Area
16 districts in the rural areas, State of Andhra Pradesh(3) Project Components
Out of all the rural areas in AP State subject to the High Voltage Distribution Systems Improvement
Plan (including installation of approximately 69,000 km High Voltage Distribution Lines andapproximately 195,000 units transformers), the Project focuses on the areas that will highly benefit
from the Project and primarily focuses on works that improve HVDS by converting LVDS toHVDS.
1) Procurement of equipment (high voltage distribution lines, small-capacity transformers,supporters, low voltage lines)
2) Civil works that accompany the installation
3) Consulting services (assistance for monitoring of implementation)(4) Estimated Project Cost (Loan Amount)
27,480 million yen (Loan Amount: 18,590 million yen)(5) ScheduleJune 2011 – December 2016 (67 months); Project completion is scheduled in January 2016, whichis the expected time for commencement of commercial operation.

2(6) Project Implementation Structure1) Borrower: The President of India
2) Executing Agencies: Central Power Distribution Company of Andhra Pradesh Limited;
Northern Power Distribution Company of Andhra Pradesh Limited; Southern PowerDistribution Company of Andhra Pradesh Limited3) Operation and Maintenance System: same as 2) above(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Consideration(1) Category: C(2) Reason for the Categorization: The Project has a potential minimal negative impact onthe environment as per the JBIC Guidelines for Confirmation of Environmental andSocial Consideration (issued April 2002).
2) Promotion of Poverty Reduction
Reduction in the cost of irrigation pump maintenance fees
3) 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 distribution loss, and therefore it willcontribute in controlling Greenhouse Gas (GHG) emissions and further in mitigating climate change.
The Executing Agency is proactively considering registering the Project for the Clean Development
Mechanism (CDM).
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Indicator

Distribution Loss (%)
Reduction in Failure ofDistribution Transformers(%)
Unauthorized Number ofpump-sets (%)
Improvement in Voltage
Profile (% reduction intail-end voltage drop)
Improvement in Efficiency
of End Use Equipment(rated efficiency)

Distribution
CompanyBaseline(2010)

CentralNorth
South
CentralNorth
South
CentralNorth
South
CentralNorth
South
Central
North
South

13.5
13.0
13.0
9.00
9.11
7.12
20.0
15.0
15.0
12.0
14.0
10.0
8080802) Internal Rates of Return3

Target (2017)(2 Years after ProjectCompletion)
8.3
8.0
7.5
1.0
1.0
1.0
0.0
0.0
0.0
6.0
7.0
6.0
95
9595

Based on the conditions indicated below, the Economic Internal Rate of Return (EIRR) for the
Project is 18.73%.
EIRR
Costs:
Benefit:
Project life:

Project cost (excluding taxes), operation and maintenance costs
Effect of reduction of distribution losses
30 years(2) Qualitative Effects
Improvement of living conditions in the rural areas; local economic growth; improvement of power
supply and demand in AP State through the improvement of distribution efficiency in the ruralareas; mitigation of climate change
5. External Factors and Risk Control
Deterioration of political and economic climate and natural disasters in India and the areas near theProject
6. Lessons Learned from Past Projects
From the ex-post evaluation of previous transmission and distribution projects, for projects to be
fully effective, continuous augmentation of facilities as well as optimization of the equipment isnecessary after the project completion. Along with the HVDS improvement, the Project also
requires optimization of the entire distribution system by resolving overloaded lines and equalizing
the load, and therefore monitoring the investment climate related to the improvement of power
distribution facilities has been planned.
7. Plan for Future Evaluation(1) Indicators to Be Used
1) Distribution loss rate (%)2) Reduction in Failure of Distribution Transformers (%)3) Unauthorized Number of Pump-Sets (%)4) Improvement in Voltage Profile (% reduction in tail-end voltage drop)5) Improvement in Efficiency of End Use Equipment (rated efficiency)
6) Economic Internal Rate of Return (EIRR) (%)(2) Timing
Two years after project completion4