A-V -s (i//- VADocument of

The World Bank

FOR OFFICIAL USE ONLY

I.'iLI-''.5F Ih ' YI I 1 V DN 7 II ! i. (K HReport No. 11574-TN

STAFF APPRAISAL REPORT

INDIA

POWERGRID SYSTEK DEVELOPMENT PROJECT

MARCH 2, 1993

Energy Operations DivisionCountry Department IISouth Asia itegion

This document has a restricted distribution and may be used by eipients only in the perfornance oftheir official duties. Its contents may not otherwise be disclosed without Wodd Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS(as of March 2, 1993)

Currency Unit = Rupee (Rs)Re 1.U0 Paise 100Rs 33.0 US$1.00Rs 1.00 US$0.03

MEASURES AND EQUIVALENTS

1 Kilometer (km) = 1,000 meters (t a 0.6214 miles (mi)1 Meter (m) = 39.37 inches in)1 Cubic Meter (m ) - 1.31 cubic yard (cu yd) = 35.35 cu. ft.1 Ton (t) = 1,000 kilograms (kg) - 2,200 lbs1 Kilovolt (kV) = 1,000 volts (V)1 Kilovolt-ampere (kVA) = 1,000 volts-amperes (VA)1 Megawatt (MW) = 1,000 kilowatts (kW) 1 million watts1 Kilowatt-hour (kWh) 1,000 watt-hours1 Megawatt-hour (MWh) = 1,000 kilowatts-hours1 Gigawatt-hour (GWh) = 1,000,000 kilowatt-hours

ABBREVIATIONS AND ACRONYMS

ADS Asian Development BankCEA Central Electricity Authority00I Government of IndiaHVDC High Voltage Direct CurrenmlCD International Competitive BiddingLCB Local Competitive BiddingLICB Limited International Competitive BiddingLRMC Long-run Marginal CostLTIPS Long Term Issues in the Power Sector studyMOP Ministry of PowerNHPC National Hydroelectric Power CorporationNTPC National Thermal Power CorporationODA Overseas Development AdministrationPFC Power Finance CorporationPOWERGRID Power Grid Corporation of IndiaREB Regional Electricity BoardSEB State Electricity BoardSCF Standard Conversion FactorThe Act Electricity (Supply) Act of 1948USAID United States Agency for International Development

FISCAL YEAR

April 1 - March 31

FOR OMCAL UE ONLY

INDIA

POWERGRID SYSTEM DEVE.,4PMENT PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No*.

Loan and Project Summary . . . . . . . . . . . . . . . . . . . . . . . . . iv

I. SECTORAL CONTEXT . . . . . . . .. .... .* * * * *. * . * * * * * * 1

Overview . . . . . . . . . . . *. * * * * . . . . . . . . . . . . 1Organization of the Power Sector * ... 2Electricity Supply, Demand and Tariffs . . . . . . . . . . . . . . 3GOI Strategy in the Power Sector ......... . .... 4Past Bank Group Operations and Strategy in the Power Sector . . . . . 5New Approach in the Power Sector . . . . . . ........ . . . 8

II. THE BORROWER POWER GRID CORPORATION OF IDDIA LIMITED . . . . .. . . 9

Present Operational Environment. . . . . . . . . . . . . . . . . . . 9POWERGRID's Objectives and Scope of Operations . . . . . . . . . . . 10POWERID's Institutional Development . ....................... . . . 11Organization, Mmg t and Staff . . .................. 14POVERGRID's Investmet Program . . . . . . . . . . . . . . . . . . . 14Transmissior Regulation and Tariffs .9.9.9.9.9.9.9.9.9.9.9.9.9.9.9. 15Bulk Power -4riffs . . . . . . . . . .. .*. * * 16

III. THE PROJECT . * . . * o . * * * . . . . * . 17

Project Objectives . . . . . . . . . . .. . . . . . . .. . . . . 17Project Description . . . . . . . . . . . .9. . . . . . . . . . . . 18Cost Estimates .. .9. . 9 * 9 .9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 . 19

This report was prepared by Messrs. Rari Nyman (Energy Economist), John Irving(Senior Power Engineer), Akbar Thawaja (Information Technology Specialist), andTjaarda Stonm van Leeuwen (Senior Financial Analyst). The report was reviewedby Messrs. John Besant-Jones (Principal Economist, IENEP) and Olivier Koenig(Senior Economist, ASTEG). The report was endorsed by Mr. Heinz Vergin,Director, India Country Department, and Mr. Jean-Francois Bauer, Division Chief,Energy Operations Division, India Country Department.

This document has a rtrctd distbution and may be used by mcipi:nts only in th perfomancoof their oMcia duties. Its contents may not otherwise be disclosed without Wodd Bank authori2ation.

Pase No.

Project Financng . . . . . . . . . . . . . . . . . . . . . . . . .. 20Project Management . . . . . . . . . . . . . . . . 21Status of Project Preparation . . . . . . . . . . . . . . . . . . . 22Project Schedule . . . . . . . . .*. . . . . . , *. . .* *. . .a2sProcuremt . . . . . . . . . . . . * . * . . * . . # . . .* a .* 23Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Environmental Aspects . . . . . . * * . .. . . . .* # * * o . . .. . 25Project Monitoring and Supervision . . . . . . .#. . . . . . . . . .26

IV. FINWCE * *99 9 9 9 9 9 9 9* 9 9 9 * 9 9 *9* 9 * 9 9 * 9 26

P0 6 IID - Past Financial Perfosn ce .e*,...*..* * 26Accounting. Management Infornation and Auditing . . . . . . . . . . . 27De-jure Transfer of Assets and Liabilities . . . . . . . . . . . . . 27PO0MORID's Financial Position (March 31, 1992) . ... ... 28Billing and Collection ..... *.... .*......... .. 25Financing of POVERGRID's Investment Program . . . . . . . . . . . . . 30Future linances . . . . . . . . . . . . . . . . . . . . . . . . . . 31

V. PROJECT JUSTIFICATION 9. o . . . . . . . . . . .. . .. . 32

Economic Analysis . . . . . . . . . .. . . . ..9.. . . . . . . .. 32Improved Coordiuation of System Operations . . . . . . . . . . . . . 33Project Risks . . . . . . . . . . . . . . .*. . . . . .9. . . . . . . 34

VI* AGREDINTS AND RECOEETION 35

Beco.w.ndation . . . . . . . . . . . 36

ANNEXES

1.1 PREVIOUS LOANS AND CREDITS TO IIAN POWER SECTOR

2.1 POWRGRID IN INTERNATIOIAL PERSPECTIVE2.2 POWERGRID'. TRANSMSSION PROJECTS2.3 POWREID's ORGANATION CHART2.4 POWERGRID's INVESTSMET PROGRAM

3.1 DETAILED PROJECT DESSCRIPTION3.2 TRANSFER OF TRANSMSSION ASSETS FROM NTPC AND

NMPO TO POWIRID3.3 INSTITUTIONAL DEVELOPMENT OF POWZRGRID - TERMS OF RZEMNCE3.4 BULK POWER AND TRANSMISSION TARIFF AND TRANSMISSION

REGULATION STUDIES - TERMS OF REEENCE OF ADD TECUNICiLASSISTANCE

3.5 COORDINATION AND CONTROL SYSTEM PROJECTS - TERMS OF RZJRS3.6 TRANSMISSION PLANNXNG - TEIMS OF REFERENCE3.7 CENTRAL POWER AND RIEMAND TRANSMISSION PROJECTS3.8 SYSTEM COORDINATION AND CONTROL - DETAILED COSTS

VINDHYACHAL-DHULE TRANSMISSION LINESRAMAGUNDAN- YDERANAD TRANSMISSION LINES

3.9 PROJECT MANAGEMENT ORGANIZATION3. 10 PROJECT IMPLEMENTATION SCHEDULS3.11 PROCUREMENT ARRANGEMENTS AND PACKAGES3.12 SCHEDULE OF DISBURSEMENTS3.13 BANK SUPERVISION PLAN

4.1 POWERGRIDs BALANCE SHEET AND REGIONAL DISTRIMUTION OF ASSETS:4.2 POWERGRIDs INVESTMENT PROGRAM AND FINANCING S4.3 POWERGRIDs PROJECTED FINANCIAL STATEMENTS4.4 ASSUMPTIONS FOR THE FINANCIAL PROJECTIONS

5.1 ECONOMIC ANALYSIS

6.1 RELATED DOCUMENTS IN THE PROJECT FILE

MAPS

IBRD 24518 - FUNCTION MAP OF SOUTHERN REGION SYSTEK COORDINATION ANDCONTROL FACILITIES

IBRD 24519 - TRANSMISSION SYSTEM REINFORCEMENT

- iv -

INDIA

POWERGRID SYSTEM DEVELOPMENT PROJECT

Loan and Project Summary

Borrower: Power Grid Corporation of India (POWERGRID)

Guarantors India, acting by its President

Amounts US$350 million

Terms: Repayable over 20 years, Including five years of grace, at theBank's standard variable interest rate. POVERGRID would bearthe foreign exchange and interest rate risks.

Guarantee Feet The Government of India (0OI) would charge a guarantee fee of12 p.a. on the outstanding amount of the Bank loan.

ProjectDescription: Part A of the project, Srstem Coordination and Control,

provides fors (a) the implementation of a coordination andcontrol system for the Southern region; and (b) the preparationof similar systems for the Eastern, Western and North-Easternregions. Part B, Transmission System Reinforcement, providesfor: (a) the strengthening of POWERGRID's transmission systemin the Southern and Western regions; (b) the completion oftransmission lines and substations under the Central PowerTransmission Project (Ln. 2283-IN) and the Rihand PowerTransmission Project (Ln. 2555-IN); (c) transmission planningsupport and preparation of POWERGRIDIs future transmissionprojects; and (d) the installation of tariff meters. Part CsTechnical Assistance helps implement India's reform program forpower transmission and system operations and supportsPOVERGRIDa's institutional development.

Benefits: The proposed project: (a) helps establish and develop POWERGRIDas a transmission service company and grid operator; and (b)supports the implementation of modern system coordination andcontrol facilities and reinforcement of India's transmissionsystem. This will improve the efficiency of power systemoperations, reduce transmission system losses, encourageprivate investment in power generation and facilitatecompetition in power generation. POWERGRID's tariff andcommercial policies ensure financial viability and adequateinternal resource contribution to investment; its operationswill help attract private investment in power development byproviding transmission service to independent generators andtheir customers. As a result, India's power sector will beable to supply more power, at a lower cost and higher quality,to help meet the energy needs of the Indian economy, which isundertaking a far-reaching macroeconomic and structuraladjustment program.

- v -

lUikss The project does not face any particular technical risks inimplementation or operation. It utilizes well proventechnologies and, where needed, provides for consultant supportand training to POlZRORID in their utilization. The economicviability of POVIRGUD' s investment program is insensitive tochanges In key assumptions. This applies similarly to itsfinancial viability; tariff allows POWERGRID to charge itscustomers in addition to investment costs also the cost ofworking capital, actual interest charges and a 001-prescribedreturn on equity. POWERGRID's main financial risk thereforerelates to its ability to recover its charges from its clients.As long as it recovers, the level and structure of 4ie tariffwill safeguard its financial position. Special attention hasbeen paid during project processing to ensuring that POVURG IDdevelops adequate commercial arrangements to ensuresatisfactory revenue recovery.

While the foundation for POWERGRID tecoming a transmissionutility and operator of power pools has been laid duringproject processing, the risk that the state electricity boards(SEns) will not participate in the power pools to coordinatetheir operations remains. To the extent they do not takeadvantage of the opportunities provided by POWVRGEID to reducetheir operating and investment costs, the full potentialbenefits of POW =GRID's operations will not be realized. GOI'sand POWERGID's success in pursuing the implementation of therecommendations of the bulk power tariff studies will beessential, as further tariff improvements beyond the two-parttariffs implemented during project processing will be requiredto provide the SEEs commercial incentives to coordinate theiroperations.

- vi -

Estimated Cost: 8ILocal Foreign Totsl-_----- (USS millon)------

A. System Coordination and Control 55 98 153B. Transmission Reinforcement 146 189 335C. Technical Assistance 2 5 7

TOTAL BASE COST 203 292 495

Physical Contingenciss 20 27 47Price Contingencies 45 Sea s

TOTAL CONTINGENCIES 65 65 130

TOTAL PROJECT COST 268 3S57 625

Interest During Construction (IDC)World Bank 68 68Others 49 22 71

TOTAL IDC 49 90 13I

TOTAL FINANCING REQUIRRD 317 447 764

Financing Plant

Source

Proposed Bank loan 55 295 350 46Other borrowings 85 148 233 31ADB grant - 1 1 naODA grant - 3 3 aSEBs 24 - 24 3POVERGRID 153 - 153 20

Total 317 447 764 100

Estlmated Bank Disbursements(US$ million)

Bank Fiscal Year PY94 FY95 FY96 FY97 FY8 FY99 FY2000

Annual 51.5 50.0 127.3 72.0 27.9 16.7 4.6Cumlative 51.5 101.5 228.8 300.8 328.7 345.3 350.0

Rate of Return: 222

a/ Including taxes and duties of about USS76.1 million equivalent.

INDIA

POWERGRID SYSTEH DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

I. SECTORAL CONTEXT

Overview

1.1 Power Situation and Challenge. Over the past decade, electricityconsumption in India increased at an average annual rate of about 92, but witha per capita level of about 270 kVh per annum, electricity consumption remainsamong the lowest in the world. Despite progress In system expansion, powershortages persist and, in FY92, were equivalent to about 9Z of total energyand 18Z of peak capacity requirements. Demand is expected to continue toexpand at an average growth rate of 8SZ per annum and massive investments inpower supply continue to be required. As pointed out in a recent Bank studyof the power sector&/, increased emphasis needs to placed on improving theefficiency of supply, consumption and pricing of electricity. Supply capacityexpansion alone will not substantially improve the critical power demandlsupply situation and is likely to be financially unsustainable. A maj3orchallenge for the Government of India (GOI) in the power sector in the 1990swill thus be to strike a better balance between supply expansion andefficiency improvement. In the face of the current and medium-term budgetaryconstraints, GO funding of the sector's investment program is likely to beInsufficient; the state and central government-owned utilities will thus haveto rely increasingly on their own internal resources as well as privateinvestment.

1.2 Power Sector Reform. GO1 has recognized that the growth targets ofits economic stabilization and liberalization program will be threatened aslong as power supply continues to severely constrain industrial developmentand financial burden of the power sector on public sector finances is notcontained. Major reforms are underway to help address the issues,complementing the long-standing programs to increase energy self-reliance,reduce oil dependence and meet rural energy needs. GOI's power sector reformprogram includes:

(a) faced wiclh a growing power gap and diminishing public resourcesavailable for the sector, GOI has opened the power sector to privatesector participation in generation; transmission and distribution,beyond the few successful licensee operations (in Bombay, Calcutta,Abmedabad and Surat). This is fully in line and consistent with GOI1'seconomic liberalization objectives, to tap the financial, technical andmanagerial capabilities of the private sector into areas previouslyreserved to the public sector;

11 Long Term Issues in the Power Sector (LTIPS), December 1991. The studywas prepared in 1990-91, with financing from the Overseas DevelopmentAdministration (ODA) of the United Kingdom and the United States Agency forInternational Development (USAID). It was formally discussed with Gol inFebruary 1992.

- 2 -

(b) GOI has started to promote reforms at the state l1,el in the stateelectricity boards (SEBs)* The Power Finance Corporation (PFC) wasestablished to raise resources and lend only to utilities, which haveundertaken to implement an Operational and Financial Action Plan (OFAP),endorsed by their state governments and aimed at improving theutilities" resource mobilization and operational efficiency;

(c) 001 has adopted uew investment and commercial policies and electricitytariffs for Its main generating utility, the National Thermal PowerCorporation (NTPC). They are designed to improve NTPC's operational andfin&>oial performance and help NTPC improve its revenue recovery whilealec promoting reforms by SEBs; and

(d) 001 established the Power Grid Corporation of India (POWIGRID) to: (a)improve the efficiency in power transmission and system operatW is,through an extensive restructuring of the transmission sector; and (b)complement its policy initiatives to encourage private generation andcompetition in power generation.

1.3 Bank Support. The Bank supports GOI's reform initiatives through aseries of ongoing and proposed lending/technical assistance operations: (a)the Bank and IFC are working closely with GO0 to assist in the refinement andimplementation of GOI's private power policy. Under the Second MaharashtraPower Project (Ln. 3498-IN, approved in June 1992) the Bank is also helpingMaharashtra develop its private power policy and regulatory framework and tocontract with private developers for major power generation projects. Theseactivities are partly financed by two grants from the Japan Grant Facility;(the Bank is also preparing a technical assistance project for private powerdevelopment, para 1.12); (b) the Power Utilities Efficiency ImprovementProject (Ln. 3436-IN, approved in January 1992) supports GOI's efforts todevelop PFC into a viable and effective instrument for promoting improvementsIn the stattt power sector; (c) the first of a planned series of NTPC leadingoperations is in advanced stage of preparation, to support the implementationof NTPC's new investment and commercial policies; and (d) the proposedproject supports the implementation of ¢OI's transmission sector reform andthe institutional development of POWERGRID.

Organization of the Power Sector

1.4 Central Sector. Responsibility for electricity supply is sharedconstitutionally between COX and the states. Through the Ministry of Power(MOP). GOI controlst (a) several generating companies selling bulk power tothe SEBs, including NTPC, the National Hydroelectric Power Corporation (NHPC),the Nuclear Power Corporation (NPC), the Neyreli Lignite Corporation (NLC) andthe North-Eastern Electric Power Corporation (NEEPCO); (b) POVERORID; and (c)two power sector financial intermediaries, PFC and the Rural ElectrificationCorporation. The Central Electricity Authority (CEA) is charged withdeveloping a national power policy and planning and regulating sectordevelopment. In addition, CZA operates the Regional Load Dispatch Centers(RLDCs). The Ministry of Non-Conventional Energy Sources administers G01'srenewable energy program, which seeks to supplement conventional power supplywith alternative energy systems, e.g., mini-hydro, biomass, wind and solarenergy, as well as meet the decentralized energy needs of the rural sector.The program is supported by the Renewable Resources Development Project (Cr.2449-IN and Ln. 3544-IN, approved in December 1992).

-3-

1.5 State Sector. The states control the SEBs and the State GenerationCompanies (SGCs), which together generate about 75? of electricity supply andprovide most of the distribution to final consumers. The Electricity (Supply)Act of 1948 (the Act) created the SIns and entrusted them with primaryresponsibilit'- for public power supply as well as for regulating privateutilities. The Industrial Policy Resolution of 1956 subsequently definedaspects of generation and distribution which were to be the exclusiveresponsibility of the states. SEBs and SOCs are grouped into five regionalinterconnected power systems in the Eastern, Northern, North-Eastern, Southernand Western regions of India. GOI created the regional Electricity Boards(REBs) in 1964 to bring together the concerned SEBs and central and jointsector utilities to coordinate system operations in their rispective regionalgrids and also entrusted CEA with the development and operation of RLDCs tosupport the REBs. More recently, GOI strengthened the authority of the REBsand RLDCs by an amendment of the Electricity Act requiring generatingcompanies and licensees to follow their instructions. The proposed projectsupports POWERGRID in its efforts to address the main issues constraining moreefficient operations of these regional power generation and transmissionsystems.

1.6 Private U.tlitties. At independence, private utilities and licensedlocal authorities tobether provided about 80? of public electricity supply.Most licensees have since been taken over by the SEBs when their licensesexpired, and no new licenses have been granted since 1956. Only five privateutilities remains Bombay Suburban Electric Supply Limited (BSES), TataElectric Companies (TEC), Ahmedabad Electricity Coppany (AEC), Surat ElectricCompany (SEC), and CESC Ltd. (formerly Calcutta Electric Supply CQrporation).All but BSES generate at least some of the power they distributeZi; theirgeneration capacity totals about 2,800 MV. In addition, an estimated 6,250 MWof captive generating facilities are operated by industries.

Electricity Sunply. Demand and Tariffs

1.7 India's power system has an installed capacity of over 69,000 MV.This makes its size comparable with that of the United Xingdom, or all of sub-Saharan Africa excluding the Republic of South Africa. In FY92, this systemgenerated about 283,500 GWh, about 70? from coal-fired power stations, 25?from hydro stations, and 5Z from gas, oil and nuclear stations. Supply hasexpanded quickly: in FY82 installed capacity was only 32,350 MW, andgeneration 114,000 MWh. In parallel with the g:.rth of supply, operationalefficiency has improved. For example, the plant load factor has i4creasedfrom 442 to about 552 over the last ten years and the rate of coal consumptionby power stations has been cut by about 10X. These improvements reflect astrengthening of plant maintenance and operations and are commendable in viewof the deteriorating quality of coal supply. movever, auxiliary consumptionexceeds 10?, technical and commercial losses in transmission and distributionare estimated at 22? of net generation and interruptions and reductions insupply and voltage are common. The poor quality and unreliability of publicsupplies cause consumers to purchase costly back-up generating capacity.

21 8SES is now in the process of constructing Its first generating plant, a2x250-MV coal-fired unit at Dahanu.

1.8 Industry consumes almost half (472) of all electric power;agriculture uses 272X residences 16.; commerce 52; and public services thebalance. The growth in electricity demand has been accelerated by relativelylow po'ier tariffs which have fostered wasteful end-use of energy. Averageretail tariff rates have increased only slightly since FY82 in real terms andremain at about 50S of the long-run marginal cost (LRMC). Increases in realcosts (particularly for fuel and wages) have offset the increases inefficiency and real tariffa. In the meantime, tariff differentials amongconsumer groups have widened. Industrial consumers have taken the brunt ofthe increases over the last ten years and the rates to large industrialconsumers are in most states now close to. and in some cases even above, LRMC.Agricu,.tural tariffs, on the other hand, have fallen in absolute terms to anaverage of about paise 16/kWh in FY92 and cover less than 102 of LRMC. Partlyas a result of this subsidization, agriculture's share in total consumptionhas grown from about 172 in FY82 to about 27Z in FY92. Compounding theproblem is the poor collection from farmers, and high transmission anddistribution losses. They contribute to an increasing financial burdenimposed by agriculture on the power sector. A similar situation applies tothe residential uses of electricity.

OI Strategy in the Power Sector

1.9 The Eighth Plan Priorities. The objectives of GOIs energy policyare tos (a) achieve energy self-reliance; (b) reduce oil import dependence;(c) meet rural energy needs; and (d) improve the efficiency of energyproduction and use. Specific favestment priorities under the Eighth Plan(FY93-97) include: (a) accelerating the completion of ongoing projects; (b)encouraging the construction of energy efficient and environmentally benigngas-based combined cycle plants; (c) rehabilitating existing plavts; and (d)increasin3 investments in transmission and distribution relative toinvestments in generation. The main vehicle for transmission investments willbe POWERGRID, established by 001 to address the weaknesses in powertransmission and system operations through an extensive restructuring of thetransmission sector.

1.10 Reform at the State Level. Although the Act grants the stateutilities considerable autonomy, in practice they must obtain state governmentapproval (often at the highest political level) for most major decisionsincluding those or- investments, tariffs, borrowings, salary and personnelpolicies. In view of their dominant position in power supply (para. 1.5) andto achieve the Plan objectives, it is essential that GOI and the stategovernments tackle the sector's financial and institutional problems at thestate level. Improving their efficiency will require the commercialization ofSEBs, involving the establishment of a transparent regulatory framework toprovide them with operational and financial autonomy while maintainingaccountability for performance. In India's federal structure it is difficultto condition central assistance to the states as budgetary allocations are setby an automatic allocation formula. Within this framework, GOI is using moreintensively the investment selection and project implementation monitoringprocess to accelerate improvements in the sector, by emphasizing investmentsin operational improvements, earmarking funds to specific projects andmonitoring the use of funds and SEB performance more closely on a project-by-proJect basis.

1.11 GOI also promotes reforms in the state power sector by exercisingits leverage in the use of discretionary funds not subject to the automaticallocation formula, essentially PFC financing and external assistance. NTPC'snew investment and commercial policies (para. 1.16) promote improvements andcommercial discipline in SEBs. POWERGRID's task is to improve the efficiencyin system operations in close cooperation with the SEBs. Increased relianceon the private sector will also improve financial discipline among the SEBssince private investment would only go to states with an attractive policyenvironment and a financially souad SE8. GOIXs intensified pressure on thestates to raise agricultural tariffs has yielded encouraging results. TheState Power Ministers agreed in their April 1992 and January 1993 meetings toimplement to implement a minimum Rs. 0.50/kWh agricultural tariff (this wouldbring agricultural tariffs to about 20S of LRMC). At the mJment, seven SEBs(Assam, Haryana, Madhya Pradesh, Maharashtra. Orissa, Rajasthan and WestBengal) comply with the new minimum rate. The tariff reform process has atbest only just started and the challenges ahead are formidable: regular tariffadjustments and better collection practices, starting with but going wellbeyond the implementation of the agreed minimum tariff, are needed to restorethe financial viability of SEBs.

1.12 Private Power. In the July 1991 modification to the IndustrialPolicy Resolution, power was removed from the list of activities reserved forthe public sector. In September 1991, the Act was amended to lift many of theregulatory disincentives to private investment in the power sector. Inparticular, it allows full ownership of power companies by the private sector(local and foreign), an extended period of license of 30 years with 20-yearrenewals and increased financial returns. Provision is made for privategenerating companies and captive plants to sell power to the SEBs. POWERGRIDwill provide transmission service to private generators, in case they do notconnect directly to SEB systems. A High Powered Board chaired by the CabinetSecretary was established in October 1991 to promote private investment andaccelerate the cl arance of projects. The policy changes and high-levelpromotional efforts have been successful in encouraging in power projects andvarious SEBs have signed Memoranda of Understanding (MOU) with about thirtysponsors. In spite of substantial interest, exploratory activity and MOUs, noagreements have yet been finalized. Further progress in the implementation ofthe proposed projects has been slow due to: (a) unresolved policy andregulatory issues( such as collection and exchange rate safeguard mechanismsand import tax and duty concessions); (b) unclear administrative processes(project clearances, CEA's involvement) and insufficient preparatory work tomake these project proposals bankable projects; and (c) the poor financialposition of most of th- SEBs. The Bank is preparing a Technical AssistanceProject for Private Power Development to provide GOI and the concernedentities the required specialized expert services to help resolve theremaining policy, regulatory and administrative issues and assist in projectpreparation.

Past Bank Group Operations and Strategy in the Power Sector

1.13 Lending. The Bank group has made 35 loans (US$6.4 billion) and 19credits (US$2.4 billion) for power projects in India (Annex 1.1)!'. IFC hasmade five investments totalling US$203 million to AEC and TEC in FY89, TEC and

3/ Loan and credit amounts are net of cancellations.

-'6 -

CESC in FY90, an' BSES in FY91. The physical implementation of most Bankpower projects iu India has proceeded slowly, but eventually, aftersignificant initial delays, has broadly met expectations. While thedisbursement profile of the portfolio is well in line with the Bank averagepower disbursement profile, loan and credit disbursements of the Indianportfolio continue to show large outstanding balances (US$3.3 billion as ofDecember 31, 1992). These are due primarily to the long construction periodsfor generation projects compounded by frequent delays in procurement, inforeign exchange and import license clearances by the various ministries andin counterpart fund releases from state governments. Undisbursed balanceshave been pushed up further by frequent cost underruns on major equipmentcontracts. The latter are due, in some instances, to the softening ofinternational markets in the mid-1980s and, in others, to the depreciation ofthe Rupee. The Bank has reviewed its power loan portfolio for India and hassince December 1991 canceled US$864.2 million.

1.14 Past Strategy. Over the last decade, IBRD followed a three-prongedstrategy in its lending to the power sector in India. Firstly, it supportedagencies owned by GOI, NTPC in particular, as a means of effecting sector-wideImprovements. Secondly, it financed a selected number of SEBs whosemanagement and state government appeared to be comnitted to reforms. Finally,and in close cooperation with IFC, it financed existing private powerutilities to improve their financial and economic efficiency and to encourageGO! to lower entry barriers for new investors. The success of this strategyhas been uneven.

1.15 Experience with NTPC. IBRD has helped NTPC become India's modelutility and, in the process, improve operational efficiency nationwide. InFY92 NTPC provided about 21Z of India's total power supplies and theoperational efficiency of its plants has consistently surpassed that of thestate utilities. After some delays in the pre-construction stages, NTPCgenerally completed its projects on schedule and within budget, reflecting thestrong project management capability it has developed. The proceduresintroduced by NTPC in quality control helped improve the quality standards ofpower equipment supplied by Indian manufacturers. The financial health ofNTPC has been threatened by the accumulation of receivables from the SEBs.Intensified collection efforts and central appropriations have reduced NTPC'saccounts receivable from about six months of sales in 1990 to 3.8 months as ofDecember 31, 1992. Excluding past arrears agreed to be paid by GOI throughcentral appropriations the remaining net account receivables are reduced to1.4 months. NTPC's collection performance has improved significantly, from67Z (ratio of collections to billings) in August-December 1991 to 922 in thesame period in 1992. NTPC's new investment and commercial policies, approvedby the Cabinet in October 1992 after a prolonged dialogue with the Bank, areexpected to help NTPC achieve and maintain full revenue recovery and promotecommercial discipline and financial improvements in the SEBs.

1.16 Under NTPC's new commercial and investment policiess (a) NTPC hasbeen permitted to shut-off or restrict power supply from its concerned powerstations, whenever physically and technically feasible, in case of non-compliance with the agreed terms, including appropriate payment coverage byletters of credit (LCs), of the bulk power supply agreements (BPSA) vith theSEBs; (b) if the above is not possible, the defaulting state(s) would becharged penal rates for drawals (power imports) exceeding LC coverage; (c) fornew power stations, NTPC and POVRMGRID have been instructed to design the

system in such a way that it would allow the shut-off or diversion of suppliesin case of non-compliance with the BPSA; (d) NTPC would delay new investmentsin a state if that state is not in compliance with the BPSAs and (e) NTPC ispermitted to undertake projects in one region with a substantial part of theoutput to be allocated to other regions. In addition, NTPC was authorized inJanuary 1993 to enter into joint ventures with foreign and local privatepartners and to develop with those partners power projects either from its owninvestment program or those offered by others. The first of a planned seriesof NTPC lending operations Is in advanced stage of preparation, to supportNTPC in the implementation of the new policies.

1.17 Experience with SEBs. Beginning in the mid-1980s, IBRD attemptedto improve the performance of SEBs by direct involvement at the state level.This approach, involving close lending relationship with the SEBs, has beensuccessful in a few cases, such as Maharashtra. Projects with institutionallyand financially weaker SEBs have not met expectations, forcing the Bank toapply increasingly strong remedies, up to suspension of disbursement andsubsequent cancellations of loans to the Delhi Electric Supply Undertaking(DESU) and the Uttar Pradesh State Electricity Board, and formal threat ofsuspensions of loans to the SEBs in the States of Karnataka, Himachal Pradeshand Kerala. The Bank's stance has yielded positive responses from theconcerned state governments, including substantial tariff adjustments inHimachal Pradesh, Kerala and Uttar Pradesh. Tariffs in Uttar Pradesh were,however, rolled back in June 1992. This event, combined with the failure teimplement agreements to settle current power bills of NTPC and fundamentalweaknesses in the operations of UPSEB forced the Bank to cancel the US$350million Ln. 2957-IN for the Uttar Pradesh Power Project in August 1992.Continued close and frequent supervision of the remaining SEB loans isnecessary to help ensure continued compliance with loan agreements, settingeffectively a limit to the number of the Bank's direct SEB operations.

1.18 Experience with Private Utilities. The Bank and IFC's experiencewith the private utilities has been generally satisfactory. Unlike the SEBs,private utilities have been allowed by their respective state governments tooperate autonomously and in a technically and financially viable manner. Theyhave not suffered from the institutional and financial problems of the GOI-owned entities either, because the power they generate is largely fed intotheir own distribution networks which supply financially lucrative urbanresidential and industrial consumers.

1.19 Lessons from Previous Operations for the Proposed Project. This isthe Bank's first POWERGRID operation. Transmission components included inBank operations with NTPC have, after some delays in the pre-constructionstage, generally been completed on schedule and within budget. Preparatorywork during project processing on tender documents and consultant invitationdocuments is expected to help avoid pre-construction delays duringimplementation. Experience with past NTPC and SEB operations - discussed inparas. 1.15 and 1.17, respectively - highlight similar difficulties: despitesome progress, in general, SEBs did not respond to GOI's initiatives and therewas no mechanism to enforce compiiance ur elicit cooperation. These lessonsfrom past operations have strongly influenced the Bank's current lendingstrategy and are reflected in NTPC's new commercial and investment policies(para. 1.16). They had an important bearing on the design of the proposedproject, in particular on POVEIGRUD's commercial arrangements (to ensurerevenue recovery) and on POWEIGRID's operations, which emphasize the creation

of adequate facilities and effective commercial incentives to elicit SEBparticipation, on a voluntary basis, in regional power pools, to improvecoordination and operational efficiency in power system operations.

New A&proach in the Power Sector

1.20 The Country Assistance Strategy supports GOI1's recent major policyreforms for improved operational efficiency and financial performance andresource mobilization in the power sector. As noted earlier the sectorsuffers from growing financial problems. Except for a few states, t-ariffs arestill well below LRMC. However, progress has been made in designing aregulatory framework making private investment more attractive. Thus themajor need is to increase the role of the private sector in power generationand distribution, bring tariffs to realistic levels, increase collectionrates, commercialize central and state utilities and strengthen theirmanagement, and reduce inefficiencies in power generation and distribution.This is being addressed through: (a) the creation of PFC and POWERGRID; (b)NTPC's new investment and commercial policies; (c) the channelling ofdiscretionary funds by the center only to the performing SEBs; and (d)addressing the remaining policy, regulatory and administrative issues inprivate sector participation. The key constraintu to be addressed are thelack of financial autonomy and the poor financial discipline and operationalefficiency of most publicly-owned utilities, combined with the absence ofcommercial incentives and subsidized power prices in most states. Physically,these constraints cause India's power system to provide less power and of apoorer quality, at higher cost, than it otherwise would be able to provide.The economic costs of shortages and-poor quality of supply are exacerbated byinefficient use of power which is encouraged by inefficient pricing and non-collection of dues. All these issues are being emphasized in the Bank'scontinuing dialogue at both the central and state levels.

1.21 The evolving lending strategy supports capacity additions throughthe private sector and efficient public utilities while at the sa-e timegiving increased attention to improvements in the utilization and efficiencyof existing operating assets. It would seek and support actions by GOI toaddress fundamental issues in the power sector such as imbalances betweencapacity expansion and efficiency improvements in the investment planning andfund allocation process, problems in the current central sector power (andalso coal and natural gas) allocation process, the operational efficiency ofthe power system, the institutional structure of the state utilities and poorresource mobilization in the power sector. In addition, issues relating toenergy conservation, environmental and sociological aspects of powerdevelopment will be taken up. Bank lending for power is focused on:

(a) promoting domestic and foreign private investments, includingsupport to joint ventures between the private sector and well-managed public utilities and assistance to the states fordeveloping policy framework and contracting private power;

(b) proje-ta implemented by either center or state utilities benefitingstates whose SEBs either perform in a satisfactory manner or havestarted implementing credible plans underwritten by their states toimprove their performance and finances, with emphasis onsignificant up-front tariff adjustments. Loans to such agenciesvould in particular support investments designed to improve the

- 9 -

utilization, operations and efficiency of existing powergeneration, transmission and distribution facilities;

(c) investments that promote energy conservation and demand-sidemanagement; and

(d) innovative, small-scale developments such as mini-hydro, co-generation and non-conventional energy schemes which areenvironmentally sound and cost-effective.

1.22 The reform process in the power sector hai only just begun and muchremains to be done at both the central and state levels. For example NTPC hasonly just been given the authority which allows it to limit supply to matchthe level of payments from each client and to direct its future investments toregions and states meeting their obligations to it. At the state level theprecarious financial position of most state governments together withpolitical obstacles to raising power tariffs will continue to hinder thefinancial strengthening of the SEBs including their ability to pay the centralentities. The Bank's lending program will be used to continue the dialogueand provide some of the incentives needed to make tough decisions at both thecentral and state levels. In addition the Bank will ccitinue to use themanagement of the existing portfolio to support the needed reforms.

II. THE BOUROWER - POWER GRID CORPORATION OF INDIA LIMITED

Present Operational Environment

2.1 Frequent power interruptions, uneconomic out of merit order plantdispatch, high system losses in transmission and distribution, and widevariations in system frequency are major problems in power system operationsIn India. Long-standing emphasis on expanding generating capacity hasaggravated the situation. SEBs have invested only the minimum necessary intransmission and distribution capacity while transmission systems associatedwith central sector projects have been planned primarily with the view toevacuating the output from power stations to the SEBs without dueconsideration of system needs. Although the existing facilities areinsufficient, they could be utilized more efficiently, to supply more power ata lower cost and higher quality (in terms of reliability and frequency), asconfirmed by recent Bank estimates (paras. 5.4). More efficient systemoperations are constrained by technical shortcomings, inadequate tariffstructures and commercial arrangements, and institutional and organizationalweaknesses:

(a) the technical constraints on system operations includes (i) chronicshortage of available generating capacity during system peak demandperiods; (ii) relative under-investment in transmission anddistribution, resulting in high eystem losses and preventing meritorder utilization of available generating capacity; and (iii)inadequacies in power system coordination and control facilities;

(b) prevailing tariffs for central sector power supply do not providecommercial inceutives to the SEBs to coordinate their powerpurchases and own generation in line with merit order operations.

- 10 -

The lack of appr"priate tariff and commercial arrangements limitpower trading among SEBs well below technical possibilities; and

(c) the multiplicity of central, joint sector and state generation andtransmission organizations have compounded the technicalconstraints and tariff and comuercial problems, further restrictingmerit order operation and exchange of capacity and energy anddefeating efforts to optimize losses, reliability and security.

2.2 The potential benefits of improved operations and need forcoordination and cooperation in system operations have long been recognized inIndia (para. 1.5). The impact of the REBs and the C=A-operated RLDCs insystem operations, however, remains limited as CIA has been unable to developmodern coordination and control systems. The existing facilities do not allowreal-time coordination and limit RLDC operations to system monitoring andproviding the SEBs indicative generation schedules, prepared on the basis ofprojected electricity demands and expected availability of power stations andtransmission. The SEBs have not developed their part of the control andcommunication systems either, reflecting their lack of appreciation of thevalue of such systems and the benefits of more active participation in thecoordination of power system operations.

POVERORID's ObJectives and Scope of Operations

2.3 Reform Program. POWERGRID was established to address the mainweaknesses in power transmission and system operations, through an extensiverestructuring of the transmission sector. The main objectives of the reformare to: (a) consolidate the transmission activities of various central sectorand joint centralistate sa,tor power utilities and provide transmissionservice to public and private generators; (b) develop and operate modernsystem coordination and control facilities and restructure bulk power andtransmission pricing and regulation to bring about efficiency improvements insystem operations; (c) accelerate the development of a national power gridsand (d) strengthen CEA as a regulatory authority while transferring its systemoperation activities to POWERORID. The creation of a separate grid company isan essential element of GOI's policy initiatives to promote reforms at SEBsand encourage private generation and will facilitate competition in powergeneration: POWEN RID's transmission system connects suppliers competing forviable clients to clients competing for available supplies (para. 2.10).These objectives are consistent with those of power sector reform andrestructuring programs in developed and developing countries world-wide.Annex 2.1 presents the rationale and role grid companies have in such programsand highlights lessons from alternative approaches and experiences in Europeand the United States.

2.4 Scope of Operations. Initial concepts for POWEZGRID's developmentenvisaged roles ranging froms (a) a transmission line construction andmaintenance company, where POWERGRID's contribution to the objectives of thereform (para. 2.3) would have been limited; to (b) a super grid companymanaging the operations of the regional grids by dispatching central sectorplants and trading power to its own account. Such a dominating "command andcontrolV position for POWERGRID was not readily endorsed either by the SEBs orthe affected central sector utilities, which would have had to relinquish thedispatch of their stations to POVERGRID. POVEZRRID would have taken a directcommercial interest in the operation of the system, which it is expected to

- 11 -

coordinate impartially. During project processing, POWERGRID's scope ofoperations has been defined into that of a transmission service company andoperator of loose power pools. This is in line with the findings of theBank's sector study, which: (a) demonstrated the potential for improvedutilization of existing generation and transmission capacity and foroperational efficiency gains through inter-regional and inter-state powertrading: and (b) concluded that coordination in power system operations InIndia is most likely to improve through SEB participation on a voluntary basisin loose power pools. The review of international experience (Annex 2.1)similarly supports the creation of POWERGRID and its scope of operations.

2.5 POWERGRID as an Operator of Loose Power Pools. In a loose powerpool, each SEB would be responsible for supplying the load on its system.Each SEB would do this by using either its own generated power or powerpurchased from central sector utilities, other SEB$ or private generators,trading power in accordance with agreements made with these other parties andthe grid code (operating rules of the pool). Emerging industry and marketstructures are outlined in para. 2.10. POVERGRID as the operator of the poolwill monitor and record power transfers, ensure the security of thetransmission system, and help the SEBs coordinate the dispatch of theirsystems, to achieve a more reliable and economic operation of the regionalgrids. POWERGID will help reduce overall cost of supply by helping the SEBstrade power and dispatch the regional power systems in accordance with meritorder dispatch, without actually participating in the transactions for its ownaccount. Instead of the SEBs trying to communicate with each other in seekingto reduce their generation costs, POWERGRID will provide this service to the8EBs through its coordination and control system. POWERGRID would alsoinstall necessary metering facilities to be able to monitor and record actualpower flows and operate the settlement system, i.e. determine (on the basis ofsystem information and contracts) power flows from each generator to eachcustomer and applicable charges in accordance with the contractual and tradingarrangements. POWERGRID would not have a commercial interest or assumerelated risks in the settlement systems the bills would be paid directly tothe generators and supplying SEEs and, in case of payment defaults, it wouldbe up to the suppliers, not POVERGRD, to enforce collection.

POWERGI' s Institutional Development

2.6 Three-phase Development Plan. POWERGRID's development into anational grid operator and transmission service company is structured in threeoverlapping phases, in line with GOI's reform program and objectives forPOVERGRID (para. 2.3):

(a) phase 1 involves POWERGRID: (1) taking over the management andownership of the existing transmission facilities and projects ofvarious central sector and joint central/state sector agencies; (2)operating its transmission system; and (3) reinforcing andexpanding the system to meet the bulk power transmission needs ofpublic and private sector generators and SEEs;

(b) the obJective of phase 2 is to improve the operation of regionalgrids and facilitate power trading, by (1) helping implementreforms in bulk power and transmLssion pricing and installingtariff metering facilities; (2) taking over from CIA the operationof the existing RLDCs; (3) developing (in cooperation with the

. 12 -

SEBs) modern regional system coordination and control facilities;and (4) improving system coordination as an operator of loose powerpools, in cooperation with the SEBs, through the existing andimproved RLDCs; and

(c) in phase 3 POWERGRID would complete the development of a nationalgrid and facilities for intensified inter-regional cooperation andcoordination, and operate as a national grid company.

The three phases are being implemented concurrently, as explAtnedbelow. In terms of emphasis and effort, the focus since POWERGRID'sestablishment has been primarily on phase 1. Once the asset transfers arecompleted and phase 1 shifts to standard transmission line construction andmaintenance activities, POWERGRID's development focus will move to phase 2, toimproving the operations of the regional systems and developing improvedcoordination and control systems. While the long-term activities fallingunder Phase 3 are already being pursued, this phase of POWERGRID's developmentwill be implemented gradually and the completion of a national grid withstrong inter-regional connections is expected only well after the year 2000.

2.7 Phase 1. POWERGRID assumed the management of the transmissionassets and projects of NTPC and NPC in August 1991, NEEPCO's and NHPC's inNovember 1991 and those of NLC in November 1992. An Ordinance for thetransfer of the transmission assets, retroactively from April 1, 1992, waspromulgated by the President of India on January 8, 1993. POWERGRID now ownsand operates a transmission system consisting of about 16,600 km oftransmission-lines and ongoing projects will add another 15,800 km (Annex2.2). The modalities and the financial aspects of the traasfer of assets andliabilities as they affect POWERGRID and previous Bank loans and credits arepresented in Chapter 4.

2.8 Phase 2. At the moment CEA continues to operate the RLDCs, butprovides POWERGRID access to, and use of, the existing facilities at the RLDCsas required by POWERGRID for its transmission system operations and projectimplementation. Agreement was reached at loan negotiations that GOI will: (a)continue to provide POVERGRID full access to, and use of all facilities at theexistin£ RLDCs: and, not later than December 31, 1995, under terms andconditions satisfactory to the Bank, Cb) transfer the RLDCs to POWERGRID; and(c) transfer the related system operation functions from CEA to POWERGRID.The first RLDC (expected to be either the Western or Southern region facility)and its operation will be transferred not later than December 31, 1993. Twomore RLDCs are expected to be transferred during 1994 and the remaining two bythe end of 1995. One of POWERGRID's major challenges under phase 2. after thetakeover of RLDCs, is to help improve the operations of the regional gridsduring the next 5-7 years while its proposed regional coordination and controlsystems are being constructed. A prerequisite is further reform of bulk powerand transmission pricing and regulation, to create incentives for SEBs toimprove their system operation practices, as discussed in paras. 2.16-21.Complementing tariff development, POWERGRID will establish tariff meteringfacilities, which are urgently required nationwide. These are to be financedunder the proposed project.

2.9 Phase 3. POWERGRID's task in phase 3 is to interconnect India'sregional power systems and operate them as an integrated national power grid.While the implementation of the first major new interconnection projects is

- 13 -

expected to commence in the 1990s, the completion of the nkational grid isexpected only vell after the year 2000. At the moment, POWERGRID operates a500 MW asynchronous interconnection between the Northern and Western regionsthrough an HVDC back-to-back terminal located at Vindhyachal and also has asynchronous interconnection between the Western and Southern regions through a1,000 MW 400kV line connecting Chandrapur and Ramagundam. POWERGRID's firstpriority under phase 3 is to put them into more productive use. Due totransmission capacity and operational constraints and commercial issues, thesefacilities are used well below their full capacity. Investments under theproject will help POWERtIRID reinforce the transmission systems in the Westernand Southern regions and the tariff study under the technical assistanceprogram will help POWERGRID address the commercial issues. POWERGRID alsointends to add an HVDC back-to-back terminal at Chandrapur in order to be ableto control the inter-regional power flows. Longer term strategy fortransmission system development, including proposed inter-regionalconnections, will be refined under Part B (iv) of the project (para. 3.2). Itwill help POWERGRID define nd prioritize its proposed major inter-regionaltransmission projects, which include high-capacity lines *.rom the Easternregion to the South and North, followed by a connection of the North-Easternregion. It will also examine the merits of additional IVDC back-to-backstations, to initiate interconnections -while the major inter-regional powergeneration and transmission projects are being planned and constructed.

2.10 Emerging Industry and Market Structures. After the Implementationof bulk power and transmission tariff reforms and completion of thecoordination and control system projects under phave 2, and establishment cfinter-regional connections under phase 3, India will have a functioningnational power grid with an increasingly competitive and coordinatedgeneration and transmission system. The emerging industry structure consistsof: (a) central, state and private generating companies: (b) POWERGRID as thenational grid company; and (c) state and privately-owned distribution. Powertrading is expected to be dominated by capacity contract trading (long-termcontracts between generators and SEBs), supplemented by spot trading in ashort-term market with prices reflecting supply and demand on a short-termbasis. Spot trading is likely to gradually increase its share andsophistication, as the participants gain experience in the operations of thepower pools and realize the benefits and uncertainties of spot trading insupplementing contracted supply. SEBs are likely for the time being to remainintegrated state-level utilities, but are expected to focus more ondistribution and, with POWERGRID's assistance, on trading and improvedcoordination of their system operations. Contract trading (in the case ofSEBs mainly power purchases from central sector utilities and competitiveprocurement of private generation) would account for a steadily increasingshare in their overall supply. Such reliance would increase commercialpressures on the SEBs as generators (both private and public, as demonstratedin NTPC's new commercial and investment policies, para. 1.16) focus theirinvestments and operations to serve financially viable and commerciallydisciplined clients and divert supplies from non-performers; at the same timegenerating companies would have to increasingly cc-apete to sell their outputto the viable SEBs. Long-term prospects also inc;ade power imports fromNepal, most likely with transmission service by POVERGEID. Privateinvestments vould focus mainly on generation (mostly new facilities, butpossibly also on takeover, rehabilitation and operation of existing SEBplants). They would be complemented by distribution (licensee) operations andpossibly a few joint-ventures with POWERGRID for major transmission

- 14 -

investments. These industry and market structures and significant involvementof the private sector will only develop over time and require that India meetsthe challenges to commercialize the SUBe and increase transparency, establishcommercial pricing principles and generally de-politize decision-making insector regulation.

Organization, Management and Staff

2.11 POWERGRID was incorporated on October 23, 1989, under the CompaniesAct, 1956, as the National Power Transmission Corporation and changed its nameto the Power Grid Corporation of India on its third anniversary on October 23,1992. POWERGUID is managed by a Board of Directors consisting of a full-timeChairman & Managing Director (CMD) and -ot less than four, but not more than12 members. Currently, POWERGRID has two full-time Directors (for Finance andProjects) and three part-time directors, two representing the Ministry ofPower (MOP) and one from the Central Electricity Authority (CEA). The Board'spower is largely confined to the daily operations and administration of thecorporation. GoI approval is required for POWERGRID's annual budget, itscapital investment program and borrowing, tariffs, salary structure and theappointment of key personnel. Similar to other Government-owned enterprises,POVERGRID has signed with the Ministry of Power a Memorandum of Understanding,which sets operational and financial performance targets, delegates some moreauthority to POWERGRID with respect to capital and expenditures and sets outthe Government's other obligations towards POWEIGRID, in terms of financingand various clearances and permite.

2.12 POWERGRID's organizational structure (Annex 2.3) hass (a) aCorporate Center (located at New Delhi) responsible for overall corporateplanning, system planning and engineering, management of transmission systemoperations and projects, finance, commercial matters and personnel; and (b)six Regional Headquarters, which in turn manage several Group Headquarters.POVERGRID's staff consists of experienced professionals transferred with theassets. Out of the total staff of 5,463 as of October 1992, about 422originate from NTPC, 372 from NHPC, about 182 from NEEPCO. The integration ofpersonnel has gone surprisingly smoothly, given the large number of affectedpersons and relatively short implementation period. POWERGRID's staffing andorganizational structure and related inmediate and medium-term plans have beenex2mined by the Bank and found generally satisfactory for its immediate needs.POVEIGRID, however, readily acknowledges the need for institutionalstrengthening, in order to be able to take on the added responsibilitiesinvolved in phases 2-3 of its development. A comprehensive technicalassistance program has been designed to support POWERGRID's institutionaldevelopment. It will be implemented as Part C of the project (para. 3.2).

POWERGRID's Investment Program

2.13 The priorities in POVEIGRID's investment program (Annex 2.4) aretransmission for ongoing generation projects in phase 1 (para. 2.7) and systemreinforcement, interconnections and coordination and control systems in phases213 (paras. 2.8-2.9). The program has been reviewed during projectpreparation and adjusted to match these priorities. It has also beensubstantially scaled down, from over Rs 170,000 million to Rs 97,000 for theZighth Plan period, to take into account the availability of funds to financePOWERGRID's, NTPC's and NHPC's overall programs. Over 5OZ of the totalinvestment is for POVERGRID's ongoing and committed projects. Most of them

-1S -

are transmission lines associated with ongoing generation projects and neededto evacuate the power from these new stations once they have beencommissioned.

2.14 POWERGRID's program directs about 201 into system improvementprojects (transmission line and substation reinforcements and installation ofcapacitors), as a beginning to address the under-investment issue (para. 2.1).A major program to strengthen the Northern region power system is supportedunder the Northern Region Transmission Project (Ln. 3237-IN), implemented byPOVERGRID. The proposed project includes other high priority investments inthis category and will also help POVERGRID prepare further investments.Another 101 of POVERGRID's investment is for the development of regionalcoordination and control systems. The implementation of the Northern regionsystem is financed under Ln. 3237-IN. The proposed project helps implement asimilar system for the Southern region and prepare such systems for the otherpower regions as Part A of the project (para. 3.2).

2.-'?.! The balance of POVERGRID's proposed investments, about 201 of thetotal, is for transmission associated with proposed new investments of NTPC(over 5O0 of this category) and other generating companies. This category vassubstantially reduced during project preparation - and further reductions maystill be necessary, after further review of the financial projections (para.4.12). POVERGRID will continue to periodically review and update theinvestment program. Further changes are in fact inevitable as POVERORIDresponds to changes in the investment plans of various central sectorgenerating companies and transmission requirements of private generators.Agreement was reached at loan negotiations that POWERGRID will annuallyfurnish its investment program for Bank review and covments, as a part of theenvisaged close and continuing relationship between POWERGRID and the Bank tosupport POWERGRID's institutional development and the implementation of itsinvestment program.

Transmission Regulation and Tariffs

2.16 Transmission Regulation: The Electricity (Supply) Act, 1948, givesCIA the responsibility to: (a) develop a sound, adequate and uniform nationalpower policy; (b) advise the central government, state governments andagencies involved in the generation or supply of electricity; (c) act as anarbitrator in various power sector issues; and (d) issue regulations. The Actalso requires licensees and generating companies to conduct their operationsin accordance with the instructions of RLDCs so as to ensure integrated gridoperations. Resulting disputes, if any, are to be referred to CEA, whosedecisions are final. The current anomaly of CEA being both the operator ofULDCs and regulator settling related disputes will be removed with thetakeover of RLDCs by POWERGRID (para. 2.8). CEA will limit its involvement tothat of a regulatory authority and will continue to regulate power sectoragencies, including POVEIGRID, as envisaged under the Act.

2.17 POVERGRID is setting out to provide transmission service as acommon carrier, i.e. as an entity that is required to transmit electricity ona nondiscriminatory basis and, if necessary, to construct additionaltransmission capacity if the existing system is inadequate to meet allrequests. Due to financial constraints, it may not, however, always be in aposition to assume the obligation to expand its system. It can better becharacterized as a contract carrier, i.e. an entity that is required to

- 16 -

transmit on a non-discriminatory basis as long as there is capacity available,but has no formal obligation to transmit or construct additional facilitieswhen capacity is not available. The international perspective is summarizedin Annex 2.1. In addition to pricing, one of the most difficult regulatoryissues to resolve when prospective sellers (generators) and buyers (SEBs andlicensees) depend upon the use of the same transmission system is the settingof access conditions and priorities when the transmission system is notcapable of safely transmitting each generator's power to its preferredcustomer. Transmission studies under Part C (iii) of the technical assistanceprogram (paras. 3.2 and 3.4) will examine this issue, along with tariff andother regulatory requirements, and outline and recommend key regulations forPOWERGRID's operations. The role of CPA as the regulator (including thesettlement of disputes between POWERGRID and prospective sellers and buyers)and the functions of other bodies directly or indirectly involved intransmission and power trading will also be examined.

2.18 Transmission Tariffs: Central sector utilities used to incorporatetransmission charges in their bills to SEBs, combining them with thegeneration charges in one rate (only NTPC's bills used to show transmissioncharges separately). As part of the asset transfer process, detailedInventories were developed, and then reviewed with the concerned SEBs so as todefine POWERGRID's own separate transmission charges. They are determined onthe basis of the value of each asset, using agreed GOI-approved parameters forreturn on equity, depreciation, operation and maintenance charges, and debtservice (para. 4.9). Using these parameters, including the recently approvedincrease to 161 in return on equity on POWERGRID's new investments,POWERGRID 's tariff for its incremental service to the SEBs (for the use of newtransmission facilities) will be well in line with its long-run marginal cost.The revenue from current service (using existing transmission facilities takenover from the generators) will remain below LREC, as assets are not revalued.With the approval of the Ordinance, POVERGRTD started billing in Februaryl993. POWERGRID plans to revise its pricing strategy and introduce, in linewith international practice, entry charges for the generators and use ofsystem charges for the clients (SEBs and licensees). Alternative tariffsetting mechanisms for such future improvements will be examined under atariff study under Part C (iii) of the project (para. 3.2). POWERGRID willthen enter into commercial contracts (connection and use of system agreements,incorporating the new tariffs), which the technical assistance will also helpprepare, with the SEBs. These will be implemented not later than December 31,1994 (para. 3.4).

Bulk Power Tariffs

2.19 All central sector utilities (with the exception of NTPC fromNovember 1992, for some of its power stations) charge for their electricitysupply using a simple one-part tariff structure, without separating fixed andvariable costs. This has resulted in the reluctance of SEBs to back downtheir units in off-peak periods, in spite of their higher variable cost, andsystem frequencies well above 50 Hz are not uncoumon. There is no mechanismfor penalizing SEBs which take more than their shares of electricity fromcentral sector plants; this in turn has resulted in some SEBs getting lessthan their share, and system frequencies falling well below 50 Hz during peakperiods. Various attempts at dealing with these issues have been made by saeREBs, with relatively modest results largely limited to a few straightforwardarrangements for inter-utility exchanges.

17

2.20 An important internal review of bulk power tariffs w_e undertakenin late 1980s by a committee headed by Mr. R.P. Rao, former Member (Economic &Commercial) of CEA. The K.P. Rao Committee finalized its report, but limitedits recommendations mainly to NTPC tariffs, proposing the separation of NTPC9sfixed and variable costs in a conventional two-part tariff and making ratesdependent on NTPC's operational performance. These were, in the Indiancontext, ground-breaking recommendations. They involve NTPC recovering itscosts and earning a satisfactory return on its investments, subject to meetingperformance targets on plant availability and efficiency and auxiliary fueland power consumption. Two-part tariffs were implemented from November 1992for NTPC's coal-fired stations in the Northern, Southern and Western regions,meeting one of the original conditions of loan negotiations. Discussionsstill continue in the Eastern region and for NTPC's gas-fired stations. Withthe R.P. Rao tariff parameters, including the recently approved increase to162 in return on equity on NTPC's new investments, NTPC's tariff forincremental supply to the SEBs (sales from new power stations) will be well inline with its long-run marginal cost. The revenue from current supply (salesfrom existing stations) will remain below LRMC, as assets are not revalued.

2.21 The implementation of new bulk power tariffs on the principles ofthe K.P. Rao Committee is an important first step in bulk power tariff reform.They facilitate capacity contract trading and are essential in the developmentof the emerging market structure in the power sector (para. 2.10). Furthertariff reform (relating to the application of the two-part tariffs in theregions as well as to the pricing of capacity and electrical energy exchangesamong the SEBs) will be required the realize the full potential benefits ofspot trading and POWERGRID's investments in coordination and control systems.POVERGRID is not, however, commercially affected by the remaining inadequaciesin bulk power tariffs. During the construction period of such facilities,POVERGRID has proposed the application of a three-part tariff, which would usevariations in system frequency as the basis of spot price (para. 2.10) signalsto system operators. Taking advantage of variations in system frequency, thethree-part tariff system would establish a spot price for transfers. over andabove those covered by contracts, during peak periods (characterized in Indiaby frequencies well below the 50 Hz norm) at relatively high rates whiletransfers during off-peak periods (characterized in India by frequencies wellabove 50 Hz) would be priced at the variable cost of mine-mouth coal stations(i.e. stations with the lowest variable cost). This is an attempt to createan incentive mechanism to encourage utilities to make power available toothers at the time of shortage and, in order to improve grid discipline, topenalize those drawing more than their entitlement from the grid. Bulk powerreforms and alternative bulk power tariffs, including POWERGRID's proposedthree-part tariff, will be examined in the tariff study under Part C (iii) ofthe project (paras. 3.2 and 3.4).

III. THE PROJECT

Project Objectives

3.1 The project has been designed to support India's reform programfor power transmission and system operations (para. 2.3). The objectives ofthe project are to:

- 18 -

(a) aseist G02 In restructuring the power transmission sub-sector,Improve coordination in system operations and promote Inter-regional and inter-state power trading through regulatory, tariffand institutional reforms;

(b) support POVEIRRID's institutional development and help introducesatisfactory financial performance targets and commercialarrangements; and

(c) assist POUZIGRID in the development of modern system coordinationand control facilities and reinforcement of its transmissionsystem by financing selected components of POVERGRID's investmentprogram.

Pr^.ect Description

3.2 The proposed project, described in Annex 3.1, consists of:

(a) Part As System Coordination and Control provides for: (i) theImplementation of a coordination and control system for theSouthern region, consisting of a regional load dispatch center(RLDC) in Bangalore, four SEB load dispatch centers (SLDCs), aboutfourteen area control centers (ACCs) and about 300 associatedremote terminal units (RTUs) in Andhra Pradesh, Karnataka, Keralaand Tamil Nadu; together with related commnication facilities;and (ii) the preparation of coordination and control systemprojects for each of the Eastern, Western and North-Easternregions, consisting of RLDCs, SLDCs, ACCe and associated RTUs;

(b) Part Bs Transmission System Reinforcement provides for: (i) theconstruction of Vindhyachal-Dhule transmission lines to evacuatethe full output of the Vindhyachal power stations and tostrengthen the Western region grid; (ii) the construction of

qamaundam-flyderabad transmission line to help utilize thelnterconnection between the Western and Southern regions and tostrengthen the Southern region grid; (iii) the completion oftransmission lines and substations under the Central PowerTransmission Project (Ln. 2283-IN) and the Rihand PowerTransmission Project (Ln. 2555-IN); (iv) the provision of moderninteractive transmission system planning software and relatedhardware; training in the use of these facilities; preparation ofa long-term transmission plan; pre-feasibility studies; andpreparation for implementation of selected emerging majortransmission system improvement projects; and (v) the installationof tariff meters; and

(c) Part C: Techuical Assistance for the provision of consultingservices to assist in the implementation of India's reform programfor power transmission and system operations, Includings (i)POMERGRID's institutional development and refinement of itsdevelopment plans; (ii) utility cooperation arrangement with agrid company; and (iii) studies on bulk power tariffs,transmission tariffs and transmission regulation.

- 19 -

3.3 Transfers of Loans and Credits. The proposed project isaccompanied by a proposal to formalize the transfer of the concerned Bankloans and credits (Annex 3.2) from NTPC and NHPC to POWERGRID, by amending thecredit and loan agreements. Details are given in paras 4.5-4.7.

3.4 A8reement was reached at loan negotiations that POWERGRID will,not later than December 31, 1994, and June 30, 1994s (a) review with 001 andthe Bank the findings and recommendations of the Technical Assistance underPart C (i) and C (iii), respectively, of the proposed proiects and (b)thereafter implement the agreed recommendations in accordance with time-boundaction plans satisfactory to the Bank. It was also agreed that POVERGRID willenter into commercial contracts on transmission services (including a newtransmission tariff), with the SEBs not later than December 31, 1994. Thedetailed terms of reference of Part C (i) and C (iii) are given in Annex 3.3and Annex 3.4, respectively. The proceeds of the proposed Bank loan would beused to finance the installation of tariff meters throughout POWERGRID'ssystem under Part B (v) of the project, to facilitate the implementation ofimproved tariffs. It is expected that the grid company cooperationarrangement under Part C (ii) of the proposed project will be with theNational Grid Company (NGC) from the United Kingdom, under an assignmentinitially for a three-year period financed by the Overseas DevelopmentAdministration (ODA). NGC (described briefly in Annex 2.1) will helpPOVERGRID implement the recommendations of Part C (i) and C (iii) of theproject and will particularly focus on the coordination of system operations,operation of a power pool settlement system, and transmission systemoperations including the development and application of transmission contracts(connection and use of system agreements), tariffs and a grid code.

3.5 The coordination and control system for the Southern region isshown schematically on the project map; details are giver. in Annex 3.1. TheRLDCs will be operated by POWERG XD, state level facilities by the respectiveSEBs. The terms of reference of project consultants for Part A are in Annex3.5. The terms of reference of transmission planning consultants for Part B(iv) are attached as Annex 3.6. The Central Power Transmission Project (CPT,supported under Bank Loan 2283-IN, closed on March 31, 1992) and the RihandPower Transmission Project (Ln. 2555, closed on December 31, 1992) wereoriginally implemented by NTPC, but will be completed by POWERGRID. Insteadof extending the closing dates of these two Bank loans, it was agreed with 001to close the loans, cancel undisbursed balances and provide the funds for thecompletion of the two projects be provided under the proposed new project.Details are given in Annex 3.7.

Cost Estimates

3.6 The cost estimate of the project is given in Table 3.1; details aregiven in Annex 3.8. Estimates for the Transmission Reinforcement componentare based on data from other projects currently being engineered andimplemented by POWERGRID. Estimates for the Southern region coordination andcontrol facilities are based on system design and cost estimates prepared in1990 under the Karnataka Power project (Ln. 2938-IN), as updated in 1992(para. 3.12). Estimates for technical assistance and engineering services arebased on POWERGRID and Bank estimates. Physical contingencies amount to 1OZof base costs, on the basis of past POWERGRIDINTPC experience withtransmission lines and substations. Price contingencies, which amount toabout 302 and 1OX of base costs, in terms of local and foreign costs

- 20 -

respectiv* , are based on projected domestic and international exchangeretes. The domestic inflation rates used for the cost estimates are asfollowss 10.02 for 1992, 8.02 for 1993, 7.02 for 1994, 6.O0 for 1995, 5.52 for1996, and 5.0? thereafter. The international inflation rate is 3.12 for 1992and thereafter.

Table 3.1: Estimated Proiect Cost

Component Local Foreign Total L...l Foreign Total- --- 4A. M-l ion- --------- -S Silion-

System Coordination and Control (SCC)Southern R.,ion SCC (a) Facilities 1680.90 2769.07 4896.57 52.80 89.02 141.02tb) En91neering Service. (6/5) 55.80 211.98 287.7. 1.00 6.64 8.64E/S tor SCC. for other Region. 18.82 62.00 78.82 0.68 2.00 2.68

Transmission System Reinforc oentVI dhyahalI-hule 400 Kv Lines 8272.11 4171.86 7448.47 106.55 184.5 240.11Ramagundam-Nderabad 400 K Line 1198.86 478.68 1667.06 80.60 16.26 68.70CPT and Rihand (a) Contracts to 62.08 144.80 206.86 2.00 4.67 6.67complete (b) Payment. Outstanding 00.00 976.60 976.60 0.00 31.60 81.60E/S tor Planning/Project Preparation 6.20 81.00 87.20 0.20 1.00 1.20Tariff Meter. 9.80 62.00 71.30 0.80 2.00 2.80

Technical Assisotne 56.00 165.00 210.80 1.60 5.00 6.80

Total ea" Cot e 807.87 9047.94 16855.81 208.40 291.67 495.85

- Physical Contingencies 686.4 628.26 1464.67 20.68 26.72 47.26Price Contingencies 1878.29 1179.14 2567.48 44.46 88.04 62.50

Total Contingencies 2014.69 2007.41 4022.10 64.99 64.76 129.75

Total Project Cost 8822.56 11055.85 19877.91 208.47 856.62 626.09

Interest durlig Construction- Bank Loan 21221.01 21221.01 66.45 66.45- Other 111.60 674.25 2185.85 48.76 21.76 70.51

Total - Interest during Constructlon 1511.60 2796.26 4307.86 48.76 90.20 188.96

Total Financing Required 9864.16 18851.61 2885.77 817.28 446.68 764.06_ ~

Proiect Financing

3.7 Financing Plan. The proposed Bank loan will cover about 47Z ofthe total financing requirements of the project. It would finance a part ofthe foreign exchange and local currency requirements of Parts A and B of theproject and a part of the foreign exchange requirements of Part C (i) of thetechnical assistance program. The utility cooperation arrangement under C(ii) is expected to be financed by ODA (in case the ODA grant does notmaterialize, the proceeds of the Bank loan would be utilized). The studies ontariffs and transmission regulation under C (iii) will be financed under agrant approved by ADB in October 1992. POWERGRID would finance the major partof the local costs (including all taxes and duties) from internal cashgeneration and the balance of project costs (about US$233 million equivalentor 31Z) using the proceeds of other borrowings. These include localborrowings and bonds and export credits (for specialized comunicationequipment for Part A of the project). Additional external cofinancing mayalso be raised as a part of POVERGRID's overall financing strategy and the useof the Bank's ECO program to help mobilize private financing and supplement

- 21 -

the Bank loan is being explored (para. 4.14). The Southern region SEBs(Andhra Pradesh, Karnataka, Kerala and Tamil Nadu) would finance the localcurrency costs (mainly civil works) of their SLDCs and ACCs. The financingplan is summarized in Table 3.2.

Table 3.2 Financing Plan

Local Foreign TotalCurrency Currency----------------USS million----------------

Proposed Bank loan 55 295 350 461Other borrowings 85 148 233 31SADB grant 1 1 naODA grant 3 3 naSEBs 24 24 32POWERGRID 153 153 201

Total 317 447 764 1001

3.8 Bank Loan. The proposed Bank loan would be made directly toPOWERGRID, with a GOI guarantee, at the Bank's standard variable interestrate, five years of grace period and a final maturity of 20 years. POVERGRIDwould bear the foreign exchange and interest rate risks. It was agreed thatGOI will charge a guarantee fee of 12 p.a. on the outstanding amount of theBank loan, under an agreement with POWERGRID, satisfactory to the Bank.

3.9 Security Arrangements. Some of the transmission assets beingtransferred to POWERGRID have liens on them. Accordingly, it was also agreedthat: (a) the Bank will also have liens on POWERGRID's assets, which will rankpari passu with other lien holders; and (b) for this purpose POWERGRID willcreate, not later than September 30, 1993, an equitable mortgage in favor ofthe Bank in such form as the Bank may reasonably require to secure the loan.

Proiect Management

3.10 POWERGRID's Project Management Structure (Annex 3.9) involvesconsiderable inputs from POWERGRID's staff in the regional offices. Day-to-day implementation is largely undertaken at the regions; with headquartersupport for design, procurement, contracting and financial operations.POWERGRID designs and manages its projects with little use of outsideconsultants, and while contractors are used for erection work, POWERGRIDusually retains the responsibility for implementation coordination. POWERGRIDhas strengthened its original 1991 project management procedures and fieldorganization, and a separate project coordination office has been establishedin the Project Department at corporate headquarters. Site supervisors at eachproject location report thrnugh the field organization to the General Managersof their respective regions. The regional General Managers chair monthlyreview meetings attended by concerned project staff and senior executives ofconcerned headquarter departments to review progress, address implementationissues and authorize payments to suppliers and erection contractors.POWERGRID management receives monthly progress reports and reviews eachproject in detail in quarterly Management Committee meetings. Additionalmanagement-level meetings are also convened at short notice when needed to

- 22 -

resolve urgent issues in project implementation. POVERORID is currentlyintroducing computerized project management systems to help plan and monitorproject implementation and facilitate comprehensive and timely progressreporting, critical in POWERGRID's centralized project management philosophy.

3.11 Project consultants will be recruited under the proposed Bank loanfor the implementation of the System Coordination and Control coment; theirterms of reference are given in Annex 3.5. As their first task, theconsultants will review POWERGRID's design and tender documents for theSouthern region (para. 3.13) to ensure that: (a) the recommended communicationprotocols and design standards are fully consistent with open systemarchitecture and compatible with equipment provided by a variety of suppliers;and (b) the tender documents are thus technically and commercia!.ly suitablefor international competitive bidding. The project consultants will thenmanage and supervise the procurement and installation of the Southern regionsystem coordination and control project, including training of POWERGRID andSEB staff, using contractors to undertake the manufacture, installation andcommissioning of the facilities. Consultants will also be engaged under theloan to prepare similar projects for the Eastern, Western and North-Easternregions. POWERGRID has established a dispatch and communications office inthe Project Department to work closely with the consultants with the intent oftaking over operations of the facilities after commissioning. POVEIGRID willalso form a core support group, which will provide additional training forPOWERGRID and SEB operating staff as required.

3.12 The Transmission Reinforcement cgponent will be executedsubstantially In line with POWERGIIs standard project management philosophyand transmission construction approach inherited from NTPC, with POWERGRIDassuming the role and responsibilities of a project manager. Contractors willdesign, supply and erect transmission line sections, while POVERGRID willoversee the line construction and be responsible for procuring selectedmaterials in bulk. Modifications of the six existing substations will be doneby contractors. POVERGRID will be responsible for the approval of finalmanufacturing and construction drawings and will assist with commissioning. ADispute Review Panel will be introduced as an innovative feature under theproposed project under the transmission line design, supply and erectioncontracts. The Panel will consist of three members, one nominated byPOWERGRID, one by the contractor, and one will be a joint appointee. It willreview and is expected to settle most disputes without having to proceed totime-consuming and costly arbitration or alternative legal settlementmechanisms. The Panel is being introduced to attract wider internationalparticipation in competitive bidding, in view of POVERGRID's desire not theengage independent consultants to manage its conventional transmission lineprojects.

Status of Project Preparation

3.13 A design report and draft tender documents for Part A (i) of theproject as well as terms of reference for the project consultants for Part Ahave been prepared and required GoI clearances have been obtained. Invitationdocuments for the recruitment of the project consultants are to be released inApril 1993. Detailed terms of reference for parts C (i) and C (iii) of thetechnical assistance program and transmission planning and project preparationunder Part B (iv) were also finalized during project preparation. Invitationdocuments for Part C (iii), the ADB-financed bulk power and transmission

- 23 -

tariff and transmission regulation studies, were issued by ADB in October1992. Contact negotiations were completed in February and the field workstarted in March 1993 and is expected to be completed by the end of 19933.Invitation documents for the Bank-financed Parts B (iv) and C (i) have beenprepared and are being finalized.

3.14 POWERGRID has obtained required environmental (para. 3.21) andother clearances for Part B of the project. Transmission line walkover andpreliminary surveys have been completed and material quantities have beenspecified as required for international tendering on a rate priced basis.Technical specifications and tender documents for the TransmissionReinforcement component have been prepared by POVERGMRD and approved by theBank. This will shorten implementation period and streamline projectimplementation, as well as minimize Bank involvement in procurement duringimplementation (as the time-consuming review and finalization of documentswill be part of preparation). Prequalification of contractors is underway andthe tenders are expected to be released to prequalified contractors inSeptember 1993.

Prolect Schedule

3.15 The project will be implemented over a period of seven years andis expected to be completed by December 31, 1999, with a closing date of theloan set at June 30, 2000 (Annex 3.10). The implementation schedule for theTransmission Reinforcement component is based on previous experience forconstruction of transmission lines in India. Because the different sectionsof the lines will be done simultaneously under four different contracts, andbecause the route is adjacent to existing lines, a construction period of fouryears is regarded realistic. Likewise installation of the substations isexpected to proceed without difficulties, since the work primarily involvesmodifications at existing sites. The implementation of the Southern regionsystem under the System Coordination and Control component is likely to takelonger, because ow the complexity of the implementation, In particularinterface requirements requiring active involvement and cooperation by anumber of different SEBs and generation authorities.

Procurement

3.16 Procurement arrangements and packaging are summarized in Table 3.3and detailed in Annex 3.11. Major milestones of the procurement process aregiven in Annex 3.12. The major part of the equipment and erection (totallingabout US$523 million and including all Bank-financed items) will be procuredthrough international competitive bidding (ICB) in accordance with the Bank'sprocurement guidelines. A domestic preference of 15, or the correspondingimport duty, whichever is less, would be applied in the comparison of bidssubmitted by local manufacturers for equipment contracts. Contracts worthUS$3.5 million or more would be subject to prior review by the Bank; thiscategory is expected to cover about 15 contracts and over 90? of all ICBprocurement (Annex 3.11). Smaller contracts would be subject to selectivepost-award review as agreed with the Bank. Contract packages expected to befinanced under export credits, for specialized cammunication equipment, wouldbe procured through LICB seeking supply with financing.

- 24 -

Table 8.8: Sumr of Prono P oeur_nt Arran3emn(USIF Million oqu , t

Proloct Element Ice Other NBF Total Cost

I Goods

System Coordination and Control 69.6 68.2 127.7(54.8) (64.6)

Transmission Lnes and Subet. 290.2 290.2(252.9) (26.9)

2 Installation and Erection

System Cordinatlon and Control 20.2 89.4 e5.0(26.2) (26.2)

Tralnsislon Lines and Subst. 119.1 119.1

S. Coneulting Services 16.4 4.0 22.C(16.3) (1.8$)

Total 523.4 10.4 101.6 025.1(38.7) (10.a) (860.0)

Notes: (Figures In perenthesis are the mounts financne under the Bank lo n)Contract Values include contingnci.s. taxse and duties

ICls International Competitive Bidd ngOther: Selection of consultants acording to Sank uidelinesNBF: Not Bank Financed (mainly comunication equipment for Part A and SB**

infrastructur, for $SUD and ACC).

3.17 Contract packages have been designed with due consideration forslmplifying project management by minimizing the number of packages involved,vhile keeping the total value low enough to encourage competent localmanufacturers and contractors to bid on the work. A schedule of contractpackages, including details of price and procurement arrangements is given inAnnex 3.11. Transmission line design, supply and erection (DS&E) financedunder ICB is divided into four lots: (a) Lot 1 - the 366 km Vindhyachal-Jabalpur line; (b) Lot 2 - the 240 km Jabalpur-Itarsi line; (c) Lot 3 - the400 km Itarsi-Dhule line; and (d) Lot 4 - the 188 km EAmagundam- Hyderabadline. Substation packages have been divided into: (a) supply and erectioncontracts (for transformers, reactors, protection and control panels, andpowerline carrier facilities); (b) supply and supervision of erection (circuitbreakers, isolators, instrument transformers and ancillary equipment); (c)erection contracts (substation installation, control panels andcommissioning); and (d) building and siteworks contracts.

3.18 Contract packages for system coordination and control facilitieswill be reviewed by the project consultants for approval by the Bank. Thesewill be structured into packages, taking into account the integrated nature ofthe overall system control and coordination system, recognizing the need todelineate boundaries of responsibility for operations, accounting andmaintenance purposes. Packages will be structured to allow sub-systems to beindividually commissioned and put into service during the course of theproject. Standard protocols will be used to enable interfacing of variousitems of equipment and systems. based on an open architecture design.Communications equipment will be grouped according to technology involved i.e.fibre-optics, microwave, VHF systems, power line carrier, and terminalexchange equipment.

- 25 -

Disbursements

3.19 Disbursements from the proposed Bank loan would be made against:(a) 100l of foreign currency expenditures (CIF), 100? of the local ex-factorycost and 80? of other local expenditures for equipment; (b) 70? ofexpenditures for civil works and erection services; and (c) 100l of servicesrendered by consultants. Disbursements for: (a) equipment contracts valuedless than US$300,000 equivalent; and (b) civil works and erection contractsvalued less than US$500,000 would be made against statement of expenditures(SOB), the documentation of which would not be sent to the Bank, but would beretained by POWERGRID for inspection by supervision missions. All otherdisbursements would be fully documented. To facilitate disbursements, aspecial account will be established for the Bank loan with an authorizedallocation of US$25.0 million. Annex 3.13 shows the estimated disbursementschedule as derived from the construction programs of the project components,assuming normal terms for commercial payments, including retention payments.About US$31.5 million would be reimbursed for the Central Power TransmissionProject and the Rihand Power Transmission Project once the loan becomeseffective (para. 3.5). Expenditures for project equipment and materialsincurred by POWERGRID within 12 months prior to the signing of the loanagreement, under contracts resulting from advance actions and awarded withprior Bank approval, would also be eligible for retroactive financing underthe proposed loan up to a US$35.0 million maximum total retroactive financing.

Environmental Aspects

3.20 POWERGRID recognizes the importance of integrating environmentalconsiderations into its operations and it has established an EnvironmentalManagement Cell for that purpose. The Cell is responsible for: (a)formulating TOVERGRID's environmental policies and regulations; (b)incorporating environmental and safety procedures into POWER¢RID'stransmission system planning, construction and operations; (c) monitoringcompliance with POWERGRID's own internal established requirements andstandards as well as conditions imposed under GOI and state environmentalclearances; and (d) conducting staff training programs. During projectpreparatio- the Bank reviewed the Cell's initial staffing arrangements andwork program and found them satisfactory. The Cell's performance will bereviewed during project implementation supervision. The technical assistanceprovision under the project provides for the foreign exchange expenditures oftraining programs.

3.21 The Proiect. The investment components to be financed under theproposed project would have no significant adverse impacts on the environmentand the project has been rated B'3 by the Bank. POWERGRID has selected theline routings so as to minimize infringement on forest land and to avoidpopulated and ecologically sensitive areas. This involved a walkover surveyfor environmental screening of each section of the lines by POWERGRID staff;in association with state forest departments whenever routing through forestareas is proposed. POWERGRID's environmental assessment report of the projectdemonstrates that the main environmental impact of the project is limited toclearing about 7.8 ha of forest along transmission line corridors; noresettlement and rehabilitation is required for the lines or substation sites.POVEIGRID will bear the cost of compensatory afforestation, for which therequired land (53.2 ha) has already been identified. POnERGRID has obtainedthe required GOI and state environmental clearances for the project.

- 26 -

Clearance documentation includes: (a) field inspection findings; (b) large-scale route mapss (c) forest surveys for species and abundance; and (d)details of mitigation measures. These documents and POVERGRID's environmentalassessment report have been reviewed by the Bank and were found acceptable.

Pro1ect Monitoring and Supervision

3.22 Under ongoing Bank financed projects POWE3GRID is required toprepare quarterly reports covering the work of consultants, procurement,physical progress, project costs, disbursements and administrative aspects ofthe project. Progress reports under the proposed project will be preparedalong the same lines, but their scope will be expanded to: (a) coverPOVWRGRID's corporate performance, progress in institutional development andthe results of environmental monitoring; and (b) present key quantitativemeasures of project performance. Progress reports will be sent to the Bankwithin four weeks of the conclusion of the reporting period; the first reportis to be submitted at the end of the quarter following loan effectiveness.POWER6RID will also furnish annual financial and audit reports (para. 4.4).The Bank's project supervision plan is outlined in Annex 3.14. It was agreedthat a mid-term review will be carried-out by POVBGUD not later thanDecember 31. 1996, In consultation with GOI and the Bank, including anassessment of POVERGRID's overall performance, to assess POWERGRID"sinstitutional performance and progress in the physical execution of theproiect.

IV. FIN, Cz

POWERGRID - Past Financial Performance

4.1 POVERGRID was incorporated on October 23, 1989 with an authorizedcapital of Rs. 50,000 million of which Rs. 611 million was paid-in as of March31, 1992. It commenced transmission operations in August 1991, vhen POVERGRDwould took over the management of tranomLssion assets along with associatedmanpower of two central sector generating companies pending the completion ofthe necessary legal formalities for the de-jure transfer Cpara 2.7). Underthe management contracts POWERGRID received a management fee of about 1? ofthe capital costs of the assets managed to cover its operating expenditures.

4.2 Establisbment expenditures were funded from the initial paid-inshare capital, supplemented with a modest interest income. Under themanagement contracts, billlng and collection remained the responsibility ofthe generating companies as the owners of the transmission assets andPOWEIGMRD had to defray expenditures out of the management fees. In its firsttwo years of operations, POWERGRID had a small operating profit, but in FY92it had an operating loss of Rs. 18 million, because the management fees whereinsufficient to cover all expenditures. Internal cash generation wasnegligible. In March 1992, POWERGRID raised bonds for a total value of Rs.2,000 million in the domestic capital market, secured by NTPC-ownedtransmission assets, to help finance its own investment projects.

- 27 -

Accounting. Management Information and Auditing

4.3 POWERGRID keeps its accounts in accordance with the commercialaccounting systems defined in the Companies Act, taking into account therelevant provisions of the Electricity (Supply) Act of 1948 (as amended). Thecompilation, consolidation of accounts and budgeting is fully computerized.Accounting data are being used by POWERGRID management for budgetary control,financial planning and other decision making. A full fledged computerizedmanagement information system is being developed, and this will be furtherdeveloped as part of the institutional development technical assistance.POWERGRID has an internal audit unit reporting to the Director (Finance); atpeak work periods its staff is complemented by external chartered accountants.

4.4 The Comptroller & Auditor General of India (CAG) is responsible forPOWERGRID's annual external audit. In practice a commercial audit is performedby a private firm of chartered accountants appointed (generally for a threeyear period) with approval of CAG. The latter reviews the work of the privateauditors. The audit arrangements are satisfactory. Agreement was reached atnegotiations that POWERGRID will submit annually to the Bank, not later thanseven months after the close of the fiscal year. its audited fiwnacialstatements, together with the audit report from the private auditors and thecomments of the CAG, as well as the audit reports of the special account andwithdrawals made against statement of expenditures for the project. Being anew organization, it was also agreed that the scope of the audit and auditreport would include a detailed review and auditor's opinion on the adequacyof the accounting system and internal control procedures of POWERGRID at leastfor the first five years of proJect implementation.

De-iure Transfer of Assets and Liabilities

4.5 On January 8, 1993, the NTPC, NHPC and SEZPCO (Acquisition andTransfer of Power Transmission Systems) Ordinance, 1993 was promulgated by thePresident of India. This Ordinance provides for the transmission systems.Including all the rights, titles and other interests related to thetransmission systems of each of the corporations be transferred to POCERGRIDwith effect from April 1, 1992. 1 The transfer is effected through areduction of the net value of the transmission assets and the correspondingliabilities (loans, bonds, equity etc.) associated with those assets in eachof the three companies. Book values of assets and liabilities are determdnedon the basis of the audited accounts as of March 31, 1992. Assets underconstruction and current assets are transferred along the same principles.Unutilized long and short term loans and bonds and other right instrumentshave also been transferred to POWEIGRID on April 1, 1992. Transmissionrevenues collected since April 1, 1992 by the generating companies areimmediately payable to POWERGRID, but these revenues will be adjusted forpayments already made by the original owners in respect of interest charges,repayment of debt etc. related to the transmission assets they owned.

4.6 Prior to the completion of the legal procedures in India, CO0,NTPC, NHPC, NEEPCO and POWERORID had obtained approval in principle from thevarious international lenders (including from the Bank on April 2, 1992)

4/ For legal reasons the assets had to be transferred first to 001 andlumediately thereafter to POWERORID.

- 28 -

involved with the financing of transmission assets. All assets to betransferred to POWERGRID have been identified and details of the correspondingliabilities and equity to be transferred are currently being worked out withthe individual lenders. The formal amendments of the legal agreements islikely to take several months to complete, but under the ordinance POWERGRIDwill be responsible for servicing all debts associated with the transmissionassets starting from April 1, 1992. For the Bank a total of 16 loat.s andcredits are involved (Ann,x 3.2). All were granted to GOI and onlent to NTPC(6 Credits and 9 Loans) 2b and NHPC (one Loan). Total net Bank commitmentsto NTPC will be reduced from US$3,694.2 million equivalent to US$3,002.8million. It is proposed that the Bank loan of US$485 million for the NorthernRegion Transmission Project (Ln. 3237-IN) would also be utilized by POVERGRID,except for an amount of US$10.0 million which woull remain to be committed toand be utilized by NHPC (US$9.0 million for Bank financing of engineeringservices for future hydro-electric power stations) and CEA (US$1.0 million forenhancing CEA's planning capabilities, computer models and hardware).

4.7 After the transfer, POWERGRID will become one of the largerexecuting agencies of Bank projects and total Bank commitments, excluding theproposed loan, would amount to US$1,166.4 million equivalent. While the termsand conditions of the Bank loans and credits to GOI involved would not change,POWERGRID requested that part of the Bank loans and credits onlent by GOI toNTPC for the financing of transmission assets (Rs. 1.3 billion equivalent orUS$47 million) be converted into POVERGRID equity under a financialrestructuring program approved by GOI in March 1993 involving the conversionof about Rs. 5.7 billion equivalent (US$157 million) of various GOI loanstransferred to POVERGRID. It would require a revision of the onlending termsfor part of the Bank loans and credits to NTPC and improve POVERGRID's initialdebt to equity ratio from 61139 to 49151. This would be in line with thecurrent NTPC debt to equity ratio, substantially reduce debt servicerequirements and help POVERGRID to increase its internal resourcemobilization. Under the prevailing 001 budgetary constraints the scope fornew GOI equity contributions is limited and a conservative initial financialstructure would help to establish POVERGRID in the capital markets andincrease its ability to maximize borrowing (para 4.11). It is thereforeproposed that the Bank formalize the transfer of the Bank loans and creditsfrom NTPC and NHPC to POWERGRID retroactively with effect from April 1, 1992as explained in the preceding paragraphs, by amending the credit and loanagreements. The Bank will also require that GOI amend the concernedsubsidiary loan agreements with NTPC and NHPC. The financial covenantspertaining to POWERGRID under the proposed loan would also apply to the loansand credits transferred to POVERGRID.

POWERGRID's Financial Position (March 3', 1992)

4.8 Following the de-jure transfer of transmission assets from NTPC,NHPC, NEEPCO, NLC and NPC, POVERGRID's total assets as of March 31, 1992 areestimated at Rs. 49.7 billion (about US$1.8 billion). About 70S ofPOWERGRID's initial assets was transferred from NTPC and about 10? came fromNHPC. The balance came from NLC, NEEPCO, NPC and POWERGRID's own assetsbefore the de-jure transfer. POWERGRID's total assets of Rs. 49.7 billion are

S/ Only under one loan for NTPC (Lu. 2674-IN), the Bank did not financetransmission assets.

- 29 -

financed (before debt equity conversion), by about 37Z GOI equity and 581 invarious long term debt instruments of which Rs. 9.9 billion in domestic bondsand Rs. 18.7 billion in long term loans including about Rs. 9.8 billion ofloans in foreign currencies (Annex 4.1). In March 1993, GOI formally approvedPOVERGRID's request to convert Re. 5.7 billion of Government loans intoequity (para 4.7) with effect from April 1, 1992.

Billing and Collection

4.9 Under the prevailing transmission tariffs, POWERGRID revenues arenot related to the volume of power transmitted, but are determined on thebasis of the costs of assets in commercial operation. These include a returnon equity (12 to 162), depreciation (currently averaging about 4Z on assetvalue), refund of normative operating and Lmintenance (O&M) expenditure andinterest paid on related liabilities. POWERGRID is partially protectedagainst inflation and foreign exchange fluctuations as the charges for O&M canbe increased by 102 per annum and actual interest cost charged to its clients.Depreciation rates are calculated on the actual cost of construction at thecommissioning date of the asset. POWERGRID'Is tariff ensures that it wouldremain financially viable provided it is able to collect its bills. The rightto collect transmission charges was transferred under the Ordinance from theoriginal owners to POVERGRID, retroactively from April 1, 1992. Revenuescollected after that date will be payable POWERGRID and charges alreadycollected by the generating companies will be payable by them to POWERGRID,adjusted for related expenses already paid. Starting from January 1993 billsfor transmission charges are being issued by POWERGRID on that basis.Collection of arrears on transmission charges billed prior to the effectivedate of de-jure transfer remains the responsibility of the original owners.

4.10 The process of establishing a direct commercial relationshipbetween POWERGRID and the SEBs is underway, following the promulgation of theOrdinance in January 1993. POWERGRID has signed Memoranda of Understanding(MOUs) with SEBs in the Southern, Western and Eastern Region. These MOUscover about 43? of POWERGRID's revenue and provide for letters of credits(LCs) to be established and also commit the parties to enter into comuercialcontracts (these are being prepared under the project, para. 2.18). The MOUsfor these three regions were finalized prior to the promulgation of theOrdinance on January 8, 1993 and did therefore not refer to the Ordinance,which transfers the right to collect transmission charges. An understandingwas reached with GOI and POWERGRID that this can be regarded as an acceptableinterim commercial arrangement taking into account that: (a) following theOrdinance, the SEBs concerned have already confirmed to POWERGRID that theywill treat the MOUs as regular agreements until the new commercial contractsare concluded; (b) POWERGRID's first LC has already been opened, by the KeralaSEB; and (c) POWERGRID undertook to provide the Bank, not later than May 31,1993, copies of LCs opened by the Damodar Valley Corporation and the SEBs ofBihar, Madhya Pradesh, Orissa and West Bengal or comfort letters from therespective state governments assuring that the provisions of the MOUs will beimplemented.

4.11 A model MOU for SEBs in the Northern Region, POWERGRID's largestgroup of clients representing 54? of revenue, was finalized in a meeting ofthe Northern Region Electricity Board (NREB) on February 16, 1993. NREBresolved that MOUs be entered into by all its constituents. Unlike the MOUsconcluded prior to the Ordinance (para. 4.10), the Northern region MOUs will

- 30 -

contain specific references to the Ordinance and therefore will provide, onceexecuted, a satisfactory basis for adequate Interim arrangement forsatisfactory revenue recovery until new commercial contracts are entered intobetween POWERGRID and the SEBs. In order to secure POWERGRID's revenuerecovery while POVERGRID pursues the execution of the new MOUs in the Northernregion, NTPC and POWERORID have entered Into a back-up arrangement. Underthis arrangements (i) POVERGRIDINTPC will bill the SEBs for the use oftransmission assets taken over from NTPC under the Ordinance; (ii) NTPC willcontinue to collect from the SEBs (as POWERGRID's collection agent) and thenpass on to POWERGRID, on a pro-rata basis of the total of the generation andtransmission billings, the corresponding transmission revenue to POVERGRID.NTPC's collection function will gradually diminish, as MOlU are signed. Theseinterim commercial arrangements were found acceptable by the Bank.

4.12 During negotiations, it was agreed that POWERGRID will formalizedirect commercial arrangements (including LCs in case of SEBs with anunsatisfactory payment record with NTPC) not later than December 31. 1994.This is in line with the agreed implementation schedule of the studies of bulkpower and transmission tariffs and transmission regulationss (a) completion ofstudies, including the preparation of a model commercial contract (a modelconnection and use of system agreement) by the end of 1993; (b) internalreview of recumendations and discussions with the Bank not later thin June30, 1994; and (c) implementation by the end of 1994 (para. 3.4). It was alsoagreed during negotiations that POWERGRID will keep the Bank informed on amonthly basis of its billing and collection performance and accountsreceivable position, as well as its progress regarding the signing of MOUs,opening of LCs, development of a commercial contract, and execution of suchcontracts with the Sns. During negotiations it was also agreed thatPOVERGRID will mainain its accounts receivable at a level not exceeding anamount equivalent to the proceeds of its transmission charges in the twopreceding months.

Financing of POWERGRID's Investment Program

4.13 A sunmary of POVERGRID's investment program during the EighthPlan period (FY93 to FY97) is shown in Table 4.1 and detailed in Annex 4.2.

Table 4.1: PRXD'.Z* In_v t Prose and Financing Ronuirement

FPt9S-PY7 FYOOF9-I2Re. Mfillion usM x R. MillIon US=I N

fundino Rwuir :

Caital Investmnt (inel. IOC) 97,81 2,71 74X 152,165 a,447 61XS Service 27,669 784 21X 98,629 2,246 405

Incroe In working capital S,8S1 161 4X (2,677) (70) -1X

Toal Funding Rquir ant 130,602 3,660 1005 246,617 5,624 1005

To Be Flnanced by:

Nab lntennal ceah gneration 5,089 1,422 3so 185,710 8,068 so5luiti contribution 2,779 88 23 462 11 0s

B orrowing:Loane contracted 19,287 561 1in 6,900 164 8aSInds 12,600 S64 105 20,000 456 OXPropoed Bank lown 10,60 809 OX 1,728 41 1XLoane to be contracted S4,569 937 263 U4,016 1,666 84X

lTal_tcuro 2"n 130.e0Q SAW 100= 246.617 5.624 1005

- 31 -

The composition of the program is discussed in paras. 2.13-15. Itsfinancing plan takes into account all loans already arranged and the proposedloan. It also assumes that the revenue level of the prevailing transmissiontariffs is maintained. Under the current tariff regime, POVERGRID's revenuesare driven by its asset base and its ability to put new assets into commercialoperation. Like in the case most regulated public utilities in the world,resource mobilization from internal resources is restricted because of thenormative tariff parameters. The financing plan assumes 001 equitycontributions amounting to only US$83 million equivalent during the EighthPlan period, which are partly financed through loans made directly to 001 bybilateral donors (such as OECP) and partly from general revenues. The levelof GOI equity support for POWERORID during the Eighth Plan was confirmedduring negotiations. Loans for a total amount of US$551 million equivalent tofinance capital expenditure during the Eighth Plan period have already beencontracted and US$350 million Bank loan is proposed for the project. Theremaining financing gap during the Eighth Plan, estimated at US$1.3 billionequivalent is expected to be covered by domestic bonds (US$364 million) andloans from bilateral and multilateral sources, export credits and othercommercial borrowings (US$937 million), including a possible ECO from theBank.

4.14 Current interest rates in the domestic bond market are relativelyhigh and in the current situation it seems unlikely that POVERGRID would beable to conclude Its planned bond issue of Rs. 2.5 billion in PY93. However,discussions with local institutional lenders such as LIC, UTZ, IDBI and IPCdabout a possible loan are in advanced stages of negotiations. These fundswould be used until such time that the domestic bond market improves.POWERGRID is also in advance stages of negotiations with bilateral donorscombined export credits for the financing of the Chandrapur HVDC back-to-backstation. POVERGIID has also received encouraging indications for continuedfinancial support from the ADB, ONCE and recently from the European InvestmentBank, which has now been authorized to conclude a protocol with India forfuture lending. POVERORID is also planning to raise about US$100-1SO millionfrom private sources, possibly through a private placement of securities inthe International capital markets, for the proposed project. The Bank may berequested by 001 to help POVERGRID mobilize such private cofinancing throughits ECO program. This will be further discussed with G0O over the next fewmonths. POWERGRID's investment program and overall financing strategy werediscussed during negotiations and considered acceptable. Purthermore it wasagreed that POVERGRID will furnish annually by December 31 its financial2rojections, including its investment program and financing plan, for Bankreview and comments.

Future Finances

4.15 POVERGEID's projected financial statements for the period PY93 toFY2002 are shown in Annex 4.3 and related assumptions are detailed in Annex4.4. The summary of the operating results for the period FY93-FY97 arepresented in Table 4.2.

- 32 -

Table 4.2s POVERGRID Prolected Financial Performance

Fiscal Year Ending March 31 1993 1994 1995 1996 1997

Average net fixed assets (Rs. million) 42,616 52,431 63,536 78,448 94,806Total operating revenues (Rs. million) 6,950 8,805 10,582 13,107 16,850Net Income (Rs. million) 3,025 3,506 4,189 4,852 5,697Return on historic assets (t) 11.3? 11.2S 11.2Z 11.02 12.2?Return on capital employed(Z) 10.9t 10.6? 10.92 10.8? 11.6SSelf-financing ratio (3 year avg) (2) 20.3? 20.42 20.4? 20.6Z 23.6?Debt service coverage 1.7 1.7 1.8 2.0 1.8Debt to equity ratio 49151 53147 60/40 63137 64/36Current ratio 1.4 1.4 0.9 1.1 1.8Receivables (No. of days) 61 61 61 61 61

4.16 POWERGRID's financial position be monitored by the Bank on thebasis of the annual submissions of the financial projections and its financingstrategy will be regularly discussed with the Bank. For the Ninth Planperiod, it is difficult at this stage to make a definite assessment about thefeasibility of the financing plan, but based on past trends and the projectedlevel of self financing the funding gap could be met. A number of sensitivityanalyses have been carried out. While increased interest cost can be largelyrecovered from its customers, POWERGRID's liquidity and resource mobilizationcapability are sensitive to delays in project implementation as cost recoveryonly starts after commissioning. With the average depreciation rate of 42p.a., POWERGRID should seek to limit its short and medium-tem borrowing.Possibilities in the international capital markets will be explored duringnegotiations. Only short maturities are available in the domestic bondmarket. Eperience from NTPC and other public enterprises has shown, however,that these debts can be rolled over at maturity to help ease cash flowproblems. The sensitivity analyses have demonstrated that these problems aremanageable, as long as POVERGRID is able to collect its revenues.

V. PROJECT JUSTIFICATION

Economic Anallsis

5.1 The analysis focuses on POWERGRID's entire investment program andthe benefits of improved coordination of power system operations. POWERGRID'sprogram is supported in part by the proposed Bank loan and the two investmentcomponents of the proposed project form an integral part of the program.

5.2 Economic Viability of POWERGRID's Investment Program. The economicrate of return (ERR) was calculated on the basis of the incremental cost andbenefit streams associated with the 1993-1999 time-slice of POWERGRID'sinvestment program. The time-slice period covers the System Coordination andControl component and the Transmission Reinforcement component of the proposedproject, as well as investments supported under the Northern RegionTransmission Project and other ongoing transmission projects transferred toPOVERGRID. The investment plan is discussed in paras. 2.13-15. Financialcosts of the program have been converted to economic terms by excluding taxes

- 33 -

and duties and by applying a standard conversion factor of 0.8 to the residuallocal costs. POWERGRID's incremental tariff revenue was used as a proxy foreconomic benefits. Transmission tariffs and regulation are discussed inparas. 2.16-18, billing and collection in paras. 4.9-10. Tariff revenue isregarded to be the minimum measure of the actual benefits as tariff revenuereflects only a portion of the total benefits of POWERGRID's operations(paras. 5.4-5.5); yet the ERR of the program is satisfactory at about 222 withthis conservative revenue-based benefit valuation (Annex 5.1).

5.3 Robustness of the Program. POWERGRID's tine-slice ERR is notsignificantly affected by chages in the costs of the investment program andin the implementation schedules of its individual components. This io due toPOVERGRID's ability under its tariff setting principles to fully pass on toits clients its actual investment costs and these account for the major partof POWERGRID's total costs. The tariff includes a provision for recoveringoperating and maintenance (O&M) costs as a percentage of investments (i.e. noton the basis of actual costs). Even if POMEMGRID's actual O&H costs exceededthe tariff provision, the impact on ERR would be negligible. The share of 0&Min PONERGRID's total cost structure is low as POWERGRID does not incur fuelcosts (as it is not involved in generation) and as its transmission systemlosses are carried by the distributors (the generating companies such as NTPCcharge the SEBs directly.

Improved Coordination of System Operations

5.4 Frequent power interruptions, uneconomic (out of merit order)plant dispatch and wide variations in system frequency are common features inpower system operations in India. They are caused by system constraints(including inadequacies in transmission and coordination and control systems)and inefficiencies in electricity pricing as well as underlying institutionaland organizational weaknesses; issues which POWERGRID is setting out toaddress (paras. 2.1-2.3). A major exercise to quantify the economic benefitsof improved system operations was carried out under the Bank's Long TermIssues in the Power Sector (LTIPS) study (para 1.1). In the short run, themain benefit is expected to be the reduction of unserved energy (electricitydemand left unserved), in view of the substantial gap between projectedelectricity demand and available supply. In the long run, operationalefficiency improvement through improved plant dispatch and cost savings fromdeferring capital investment, realized by making better use of existinggeneration and transmission facilities, will become more important (as thepower gap is reduced). LTIPS study analysis of the operations of theNorthern, Western and Southern regional power systems showed that unservedenergy in FY89 (over 10,000 GVh) could have been reduced by approximately 502through improved inter-regional coordination and power trading among thesethree regions.

5.5 Valuing reductions in unserved energy conservatively at Rs. 2.0|XwhLTIPS translated this to a gross economic benefit of over Rs. 20 billion forPY89. Taking into accotnt the economic cost of additional generation, the neteconomic benefit from a 502 reduction in unserved eulergy was estimated atalmost Rs. 8 billion. Extending the estimate to the whole country (to includealso the Eastern and North-Eastern regions) brings the net benefit estimate toabout Rs. 11 billion (about US$400 million) for one year. In comparison, theestimated total cost of POWERGRID's proposed investments in systemcoordination and control in India's five power regions is well below US$1.0

- 34 -

billion - these investments would thus be recovered in about two years. Theseorder-of-magnitude estimates demonstrate the strong economic returns and theattractiveness of Investments in facilities to improve system operations.They provide an independent measure of the merits of POVERORID's investmentprogram in system coordinatLon and control (and POWERGRID as an operator ofloose power pools), and complement the conclusions of the ERR calculationspresented in paras. 5.2-5.3.

5.6 Estimates prepared by POWERGRID's consultants for the Southernregion coordination and control system have concluded that POVERGRID and theSEBs will be able to recover their investment in the Southern region system inabout two years' of operations, without even considering the benefits ofinter-regional trading. Thls reflects the rudimentary stage of the currentcontrol facilities of the Southern region SEB$s the benefits to the SEBs ofmodern load dispatch and control systems, through improved management of theirown systems, are substantial and would alone justify the investments. Suchestimates give a clear indicatlon of the value of coordination and controlfacilities. International experience has confirmed that coordination andcontrol facilities are among the most essential and productive investments ofpower utilities. Additional justification of the proposed investments underthe Transmission System Reinforcement component is presented in Annex 3.1.

Proiect Risks

5.7 Technical RLsks. The project does not pose any particulartechnica risks ast (a) the 400 kV transmission system development under theTransmlssion System Reinforcement component will follow practices well-established in India. Tender documents are to be finalized prior to Boardpresentation (paras. 3.13) to accelerate project implementation anddisbursements after loan approval: and (b) the technology used In the SystemCoordination and Control component, although new to India's power sector, iswell proven internationally. Implementation arrangements have been agreed anda detailed implementation agreement has been finalized and signed by POVERGRIDand the SEBs in the Southern region. Implementation support will be providedby consultants to be engaged under the Bank loan, including training in theuse of the new facilities.

5.8 Financial/Commercial Risks. POWERGRID's tariff is designed toenable it to recover its costs, including the cost of the project, and earn areasonable return on its investments. The costs of the investments to be madeunder the proposed project will be recovered under these standardarrangements. The implementation agreement for the Southern region SystemCoordination and Control component provides also for the recovery ofPOWERGRID's investments. The financial viability of POVERGRID's investmentprogram is lnsensitive to changes in key variables: tariff allows POWERGRID tocharge its customers in additiod to investment costs also the cost of workingcapital, actual interest charges and a GOI-prescribed return on equity.POWERGRID's main financial risk therefore relates to its ability to recoverits charges from its clients. As long as it recovers, the level and structureof the tariff will safeguard its financial position. Special attention hastherefore been paid during project processing to ensuring that POW RGRIDdevelops adequate commercial arrangements to ensure satisfactory revenuerecovery (para. 4.10).

- 35 -

5.9 InstitutionallOperational Risks. Apart from the commercial(revenue recovery) risk, the main project risks relate to POVERGUD achievingits objectives as a coordinator of system operations. The transfer of thetransmission assets of central sector utilities has already been completed(para. 2.7) and agreement reached on the transfer of RLDC operations. Thiswill ensure that the foundation (ownership and operational responsibility) forPOVERORID becoming a transnssion utility and grid operator is in place andthat project implementation is not affected by uncertainties with respect tothe transfer of assets and operations. The rmaining risks focus ont (a) theability of various central and state agencies, SEns in particular, to coam toterms with POWERGRID's role and responsibility for coordination of powersector operations: and (b) their willingness to cooperate with POWURORID andamong themselves to improve system operations. To the extent the SEs do nottake advantage of the opportunities provided by POVERGRID to reduce theiroperating and investment costs (para. 5.4-5.5 present an estimate of thepotential benefits), the full potential economic benefits of POWUFGRID'soperations will not be realized. It should be noted, however, that theproposed investments in system coordination and control facilities would stillremain viable, as discussed In para. 5.6.

5.10 GOI's and POCERBRID's success in pursuing the implementation of therecommendations of the bulk power tariff studies will be essential, as furthertariff improvements (beyond the new two-part tariffs, paras. 2.20-21) will berequired to provide the SEE commercial incentives to coordinate theiroperations. It was therefore agreed thats (a) POURGURID will, not later thanJune 30, 1994, review with CO and the Bank the findings and recommendationsof the technical assistance under Part C (li0) of the project, and thereafterimplement the agreed recommendations in accordance with a time-bound actionplan satlsfactory to the Bank; and (b) POVERGID will, not later that December31, 1994, implement a new transmission contract (connection and use of systemagreement, including a new transmission tarlff) on the basis of the TechnicalAssistance (para. 3.4). Supervision missions will review progress in thisrespect and future Bank operations will pursue the Implementation of suchfurther tariff reforms. The signing of the implementation agreement for theSouthern region coordination and control system (para. 5.7) is a concrete signof the interest of the Southern region SEBs to improve their systemoperations.

VI. AGREEFENTS AND RECOMNENDATION

6.1 During negotiations, agreement was reached with GOI that:

(a) 001 shall: (i) continue to allow POVERGRID access to and use of allthe facilities at the existlng RLDCs; and, not later than byDecember 31, 1995, (11) transfer the ELDCs to POWERORID; and (111)transfer the related system operatian functions from CEA toPOVERORID. The first RLDC and lts operatlon shall be transferrednot later than December 31, 1993 (para. 2.8); and

(b) G0O shall enter into an agreement satisfactory to the Bank withPOZERORID for the payment of a guarantee fee of 1? per annum oan theoutstanding amount of the Bank loan (para. S.8);

- 36 -

6.2 During negotiations, agreement was reached with POWERGRID that:

(a) POWERGRID shall, not later than December 31, 1994, and June 30,1994, review with GOI and the Bank the findings and recommendationsof the technical assistance under Part C (i) and C (iii),respectively, of the project, and shall thereafter implement theagreed recommendations in accordance with tine-bcN.d action planssatisfactory to the Bank (para. 3.4);

(b) POWERGRID shall, not later than December 31, 1994, enter intocommercial contracts on transmission services with the SEBs (paras.3.4 and 4.12);

(c) POWERGRID shalls Mi) take all necessary measures to produce,starting from FY1994, funds from internal cash generationequivalent to not less than 202 of its capital expenditures (three-year moving average); and (ii) not incur any debt. if after theincurrence of such debt the ratio of debt to equity ratio shall begreater than 4 to 1 (para. 4.16);

(d) POWERGRID shall take all necessary steps to maintain its accountsreceivables at a level not exceeding an amount equivalent to theproceeds of its transmission services for the preceding two months(para. 4.12);

Ce) POWERGRID shall furnish to the Bank, for the Bank's review andcomments, not later than December 31 of each year, startingDecember 31, 1993, its financial projections, including itsInvestment program and financing plan (paras. 2.15 and 4.14);

(f) POWERGRID shall furnish to the Bank, not later than seven monthsafter the close of each fiscal year, its audited financialstatements, together with the audit report from the privateauditors and the comments of the Comptroller & Auditor General ofIndia, as well as the audit reports of the special account andwithdrawals made against statement of expenditures for the project(para. 4.4);

(g) POWERGRID shall, not later than December 31, 1996, in consultationwith GOI and the Bank, carry out a mid-term review of the project,including an assessment of POUERGRID's overall performance (para.3.22); and

(h) POWERGRID shall create, not later than September 30, 1993, anequitable mortgagelcharge in favor of the Bank in such form as theBank may reasonably require (para. 3.9).

Recommendation

6.3 On the basis of the above agreements, the proposed project would besuitable for a Bank loan of US$350 million equivalent to PONERGRID, with theguarantee of India, for a period of 20 years, including five years of grace,at the Bank's standard variable interest rate. POWERGEID would bear theforeign exchange and interest rate risks.

- 37 -

INDIA ANN 1.1

POIERGRID SYStEM EiVELOPNENT PROJECT....................................

Previous Loans and Credits to Indian Power Sector (as of December 31, 192)..................... .......................................... _...................

(Amawnt in USS Mitlion)Approval Closing Amount

Borrower IBRD Loans NLiber Date Date (a) Disbursed Status.......- ........... ...... ...... .-------- ......... . ......... ......... .... ......... .............................. ....

1 India First DVC - Bokaro - Konar 23 4/50 2/56 18.5 16.7 CompIete2 India Second DVC - Nalthon - Panchot 72 1/53 6/58 19.5 10.5 Coplete3 Tate Trabay Power 106 11/54 9/66 16.2 13.9 Coaplete4 Tata Second Trambay 164 5/57 9/66 9.8 9.7 Complete5 India Third DVC - Durapur 203 7/58 6/65 25.0 22.0 Complete6 India Koyna Power 223 4/59 4t65 25.0 18.7 Compalete7 India Power Transmission 416 6/65 12170 70.0 50.0 Coaplte8 Tata Second Kothaeud. Power 417 6/65 12/70 14.0 13.8 Complete9 Tata Third Trambay Thermal Power 1549 4/78 12/84 105.0 105.0 Comptete

10 India Rma_gursm Thermal Power C*) 1648 1/79 6/87 50.0 45.6 Complete11 India Farakka Thermal Power C') 1887 6/80 6/89 25.0 2.5 Complete12 India Second Remungdem Thermal Power C') 2076 12/81 3/92 277.2 277.o Complete13 India Third Rural Electrification 2165 6/82 6/88 304.5 295.5 Comptlete14 India Upper Indravati Hydro 2278 5/83 12V91 0.4 0.4 Coplete15 India Central Power Transmission C') 283 5/83 3/92 200.7 128.7 Complete16 India Indira Sarovar 2416 5/84 6/93 17.4 7.617 India Second Farakka Thermal Power C') 2442 6/84 12/93 278.8 222.018 Tata Fourth Trombya Thermal 2452 6/84 6/92 134.4 134.4 Coaplete19 India Chandrapur Therml Power 2544 5/85 12/93 280.0 185.920 India Rihand Power Transmission C') 2555 5/85 12/92 202.0 193.2 Closed C")21 India Kerala State Power 2582 6/85 9/93 176.0 45.222 India Coubined Cycle C') 2674 4/86 12/93 485.0 456.523 India Karnatake Power 2827 6/87 12/95 260.0 62.624 India National Capital Power Supply C) 28644 6/87 6/95 425.0 245.325 India Talcher Thermat Power C') 2845 6/87 3/96 375.0 90.826 India Second Karnataka Powr 2938 5/88 12/96 220.0 31.727 India Utter Pridesh Power 2957 6/88 12/96 24.4 24.4 Complete28 India Nathpa Jhakri Power 3024 3/89 12/97 485.0 36.729 India Neharahstra Power 3096 6/89 12/96 354.0 30.030 India Northern Region Transmission 3237 6/90 9/98 485.0 29.131 Tata Private Power Utilities (TATA) 3239 6/90 6/95 98.0 13.332 BSES Private Power Utilities (SSES) 3344 6/91 12/5 200.0 38.033 India Power Utilities Efficiency ' tprovemt 3436 1/92 1297 265.0 14.034 India Second Naharashtra Power 3498 6/92 6/98 350.0 0.035 India Renewable Resources Development 12/92 6/99 75.0 0.0

Total 6350.8 2870.7CTotal Loans for NTPC ProJects) ( 2318.7 )

IDA Credits.. . . _...

I India Fourth DVC - Durapur 19 2/62 12/69 21.9 19.9 Complete2 tndia Second Koyna Power 24 8/62 9/70 21.1 21.1 Cotplete3 India Kothagudem Power 37 5/63 12/68 24.1 24.1 Caplete4 India fees Equipment 89 6/66 6/74 26.6 26.3 Complete5 India Second Power Transmission 242 4/71 3/77 75.0 72.9 Coplete6 India Third Power Transmission 377 3/73 9/78 85.0 85.0 Cmplete7 India Rural Electrification 572 7T 12/8D 57.0 57.0 Complete8 India Fourth Power Transmission 604 1/76 6/83 150.0 149.9 Complete9 India Singrauli Thermal Power C') 685 3/77 6/84 150.0 150.0 Complete

10 India Korba Thermal Power C') 793 4/78 3/86 200.0 199.9 Complete11 India Ramegunda Thermal Power C') 874 1/79 6/87 200.0 200.0 Complete12 India Second Rural Etectrification 911 5/79 3/84 175.0 171.7 Complete13 India Second Singrauti Thermal Power C') 1027 5/80 3/89 300.0 292.8 CoWlete14 India Farakka Thermal Power C') 1053 6/80 12/88 225.0 225.0 Complete15 India Second Korbe Thermal Power C') 1172 7/81 12/91 388.7 367.1 Complete16 India Upper Indravati Hydro 1356 5/83 12/92 170.0 172.417 India Indira Sarovar SF020 5/84 6/93 13.8 0.618 India Indira Sarovar 1613 5/86 6/93 13.2 0.019 India Renewable Resources Development 12/92 6/9 115.0 0.0

Total 2411.4 2235.7(Total Credits for NTPC Projects) C 1463.7 )

................

C') NTPC ProjectsC") Closed on 12/31/1992. Disbursements not yet cemplete.(a) Net of cancellations

_ 38 -

Annex 2.1Page 1 of 3

INDIA

POWERGRID SYSTEM DEVELOPMENT PROJECT

POWERGRID in Intetnational Perspective

Reform Alternatives

1. Recent power sector reform efforts typically emphasize the creationof a level playing field (equitable treatment of public and private,established and new participants), easier entry of prospective suppliers andIntensified competition. These objectives may be promoted througharrangements involving either: (a) central generation dispatch: (b) loosepower pools and trading on voluntary basis; or (c) regulated (involuntary)transmission access for wheeling power through the transmission system of aninterconnected utility. Industry restructuring possibly involving theestablishment of grid companies often features in the first two, the thirdalternative relies primarily on regulation to force access rather thanrestructuring. Reflecting differences in prevailing industry and marketstructures, the objectives and scope of operations of the emergingtransmission utilities, beyond operating their transmission systems, are notuniform, as the examples in the following paragraph readily demonstrate.

Examples of Existing Grid Companies

2. In England and Wales, as a part of a radical power industryrestructuring and privatization program, the government established theNational Grid Company plc (NGC) to operate the main transmission grid,dispatch the generation system based on the basis of competitive bid pricessubmitted by the generators, and operate the settlement system. The marketstructure created in England and Wales is also a majer departure from pastpractices: the mechanism selected for competition in power generation is aspot market operated by NGC. Independent generators typically depend on long-term sales contracts (and they are often a pre-condition for obtainingfinancing). Financial hedging contracts quickly emerged to provide pricestability. New Zealand has also separated generation, transmission anddistribution and intends to create a competitive market structure. Thelnvolvement of TransPower, its new transmission company, in systemcoordination, beyond facilitating a power pool, is still being examined. Inthe Netherlands and Spain, transmisqion companies dispatch the systems andhelp achieve a more uniform national electricity price by pooling power fromthe generating companies; with very little trading. In contrast, the newtransmission company in Norway focuses on facilitating trading through a powerpool while in Sweden the new transmission company (at least initially)concentrates mainly on transmission service; in both countries plant dispatchremains decentralized with the generators and bilateral contracts betweengenerators and distributors dominate both longer term transactions and short-term trading.

- 39 -

Annex 2.1Page 2 of 3

Power Pools

3. Loose power pools are widely used in the United States, wherenumerous power utilities coordinate their operations and wheel power throughtheir transmission networks for interconnected utilities on a voluntary basisin order to realize the benefits (savings in investments, operational costreductions, and operational efficiency improvements) of cooperation. Theextensive domestic and international cooperation among European powerutilities is also mainly structured on this basis, without centralized controlor forced transmission access for wheeling. While there are a few centrally-dispatched (tight) power pools in the United States and in a few Europeancountries, experience and various studies have demonstrated that voluntarycooperation through loose power pools is much more readily acceptable to theparticipants and capable of achieving the same efficiency objectives that,theoretically, could be realized in tight puwer pools through strictcentralized command and control.

4. A still unresolved issue is whether regulated transmission accessvould improve the efficiency of system operations or is primarily a mechanismfor reallocating the benefits of cooperation. It appears unlikely thatregulated access would change the dispatch of existing stations as loose powerpools facilitate merit order dispatch. Regulated access may, however, have animpact on the location of new generating plants and thus have an impact onfuture generation. This is not an issue if a loose power pool is accompaniedby a grid company such as POWERORID in India (as location is not controlled byother generators), but may be a problem if transmission access depends onvoluntary cooperation by potential competitors.

Reaulated Access for Vheeling

5. The equitable sharing of the financial benefits of utilitycooperation in system operations is under active and intensive debate both inthe United States and Europe. The debate focuses on the access of prospectivesuppliers and purchasers (electrically connected only through '. transmissionfacilities of other parties) to use such transmission facilities to buy andsell electricity and on the need to reduce the potential mlsuse bytransmission-owning utilities of their monopoly position. In the UnitedStates legislation passed in October 1992 now gives an authority to theFederal Energy Regulatory Commission (FMRC) to enforce such access togenerating companies and utilities, facilitating regulated (involuntary)wholesale wheellng. The regulation does not extend to electricity end-users,i.e. it does not mandate retail wheeling. A directive proposed for the membercountries of the European Coanmity promotes regulated access (includingretail wheeling by large consumers) by 1996.

6. FERC's regulatory decisions and the new US legislation forwholesale wheeling are closer to the coumon carrier approach, while theEuropean proposal for wholesale and retail wheeling is more consistent withthe contract carrier approach. A commn carrier is an entity that is requiredto transmit electricity on a nondiscriminatory basis and, if necessary, toconstruct additional transmission capacity if the existing system isinadequate to meet all requests. A contract carrier is an entity that is

_ 40 -

Annex 2.1Page 3 of 3

required to transrmt on a non-discriminatory basis as long as there iscapacity available, but has no formal obligation to transmit or constructadditional facilities when capacity is not available.

Restructuring versus Regulated Wheeling

7. The terms and conditions of wheeling, and their application, arelikely to be controversial, as those who own transmission would be required toprovide transmission service to potential competitors at reasonable prices andon reasonable terms when they may have a financial incentive not to. Breakingvertically integrated utilities by separating generation, transmission anddistribution and establishing specialized transmission utilities offers asolution to address some of the efficiency issues, particularly the locationof new generation, and is likely to make transmission pricing much moretransparent. While the creation of a pan-European or pan-American gridcom?any seems highly unlikely, individual countries in Europe and elsewhereare therefore examining this option and a few grid companies have beenestablished (examples are discussed in para. 2).

8. Instead of industry restructuring to break vertically-integratedutilities, US utilities are exploring voluntary cooperation in transmissionunder regional transmission groups as an alternative to being possibly forcedby PERC to provide access to potential competitirs. In this context theimpact of ownership needs to be highlighted: (,) industry restructuring bybreaking vertically-integrated utilities is g' 3atly facilitated if only oneowner (e.g. the British government in the ca _ of the establishment of NGC) isinvolved; (b) compared to a situation (e.g. in the United States) where theownership of the utilities that would have to be restructured is widelydiversified.

- 41 -

INDIA Amex 2.2

POIERSID SYSTEN DEVELOPNENT PRWJECT...................................

POSEIGRID Transmission Projects(Ccopltted or Under construction)

....................................................................................................

Transmission Lines Substations.................. ...........

40kV 220/132/66kVS/C D/C CkI S/C 0/C Ckm Extn New NVA NVAr Remarks

NTPC ProjectsI Singrauli 1 502 502 22 Singrauli tl 1859 1859 6 1 1503Korba Stage 1 1412 1412 64Korba Stage 11 553 36 625 2 1s Rangundan 1 151S 267 2049 2 4 20336 Ransundm I 407 407 1 1 3157 Farraka 1 382 22 426 1 1 3158Farrakka Stge It 52 264 1100 85 85 2 2 1260 3009 Anta Gas 1 55 469 993 310 Aura1ya I Gas 180 186 552 183 366 3 1 630 6311 Kauas-I 6a" 165 330 312 CentraL Transmission 1229 180 1589 5 4 1761 28913 Vindschayal 1 702 592 1886 2 2 315 2514 Dadri 3 1260

NNPC Projects1Chukha 40 80 428 856 7 11302Salal 1 147 84 315 43 Tanakpur Bareilly 106 212 1

NEEPCO ProjectsIKopiLf HEP-I 78 105 288 2 78 km 132 kVla Additional System 473 413 2 2 20 Atl 132 kV2 Bohpur-ltanagar 43 43 13 Lohtak HEP 40 88 216 2 ALl 132 kV

Subtotal Existing 9313 1587 12487 921 1628 4177 60 19 9039 827

Ongoing ProjectsIRihand ftage I 1540 122 1784 1 5 1575 4502 Kahalgaon 1 174 325 824 2 2 1890 2003 Talcher 1 204 408 2 315 501I Jeypore-Rngali 6 7 934 2 6302Chauera 1 236 472 1 5003 Rmngit 202 202 3 132166 kV lines4 Noga-Ihiweni 70 209 488 2 1 630Slalal-II 60 233 526 1 16 Uri-Srinogar 100 200 10 20 2 7357 Naptha Jakri 245 789 1823 1 4 2205 50I Kakrapar APP 233 466 31 Ranganadf I2 Kalthaguri GBPS 1119 2238 20 40 4 2 1050 4503 Doyang 190 325 840 2 2 100 220/132 kV1 Duthasti NEP 630 1260 2 7352 Gandr GBCCPP 499 998 40 80 2 1 1298 1763 VindhyachaL Additional 995 1990 4 315 336 This Project4 Koel Karo 200 15 230 1

Subtotal Committed 2229 5710 13649 452 861 2174 31 23 11978 1712

Total 11542 7297 26136 1373 2489 6351 91 42 21017 2539... ... ____.............................................................................................................. .......

Powergrld Organization Chart(January 193)

andManain Director

FInance 1 prnJ~~~~~~~~~~~~~~~~~~~~ ~Exe Director

Pl one . lom &c

OhOIO? I (ConttSerieeHPersonnel eo

I'm >Welfa.re & Pwy AMdltra| tlo

1 "_~~~~~~~~~~~~~~& Protectio

Law q>1 91 Welone& UnI

8~~ EC

ftslem Rom NoewRl~Eeter

Fs 0- t OM:lt4~~~~~~olenRgo otenRgo IEsenRgo RS11IOO1 Wetr

9"~

-43 Annex 2.4

Page 1 of U

t~~ 8 1'l I,UE ig1 UP! 11!}lt

d di 4~I~ .

N ~ -K ' *i U| ~i5gj!1 'Ij j s$;3Im 3I2I! [e i* p|2 0fii

t "|l F~~~I !f1 0f|i 1§ 1 X|-

'4

I 4o

Pus2 anS ot onl Mt a

gm5 MtW an1 es mmn usan on up me sue am aem $-

~~~~oft gm out "a "StF

010 555 00 .3 65501 51

t OS esW 30 IU 013 001 * .USSO SU9 as on 1 5-3P

o w *n to MII

IS~ U 55 5 1 ,4 S 6 6-50*16

50 Ut 151 559 0155

. .. ., , >, . .. *~~~~~~~~~~~~~~~~~~~~s,j

zc~~~~~~~~~ U £NO cg n> 10-~~~~~~~~~~~~~~~*ml

Km on 4"n gm mm SW cm M a ~ ~ gm C ODX tXbW - 3"

^~~a on an "g o uW " on S a D O F ^ PD

es m ow * m e ot ma au we as t an M

aw is am-gm mui. msu0 a

4 ~~oI 101 40 15 55 m s u Ms4

mIlg on 0 15 am

so a on tit on gm s_momeve ~~~~~~~~~~~~gm

- UL 48) *-- 30

RU 1* so G0 1UImS'uso u ar o usa w am ar_' eaM

is a

- uw - ~ u 00

-~ ~ ~ ~ ~ ~ ~ s

I

wit _ st uN eMs agu m SWootqW.Inot 45 1a en 1gm set wc u _L

Ito we no Mt m a ont aml AC I

no NW an an IP an low NIl NIlI ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I

amao

|"~~~~~~~~~~~~s UMt gm no

Ww~~~~~n gm on "It no

w ~ WRW *-qM N U ._w

- . urn am - awW am

GsMv&SWIW*a 1ue so a * 1aeawtvA "us Ws *a

* ~~~~W.Ombs.siIrnmeam am wem a a a $e aewele"OUP m.Wa a O weSW so on St 4-AMOSSoode am a s .S 4 toldwU&Gdo on m am w u w st

GWOWW vauses mae St as

am tu o G we we aow-em anHidibs' tera of em swe t" men =so

btdst.Ua..fl-m iwe mate a we we swe tt?? ties net~~~i ma ans

smell, ~ t * .* . x

esadmAi am m 101e so ta In antw-I we B n 4 * *AWAIpk to* n tt us *I a In

*oaolki nz *0 so v"n

N" 4 tW4 to t .

lowvte w e a te " t w

9btilu4 n we ,u s ae m

sfouP u use ane is_hwd IL SW tUt It, .6 m 4 S?

o* m u"w *

DowdWu -a us use ti 4 to not we 06s-rn MN ae as "n e m s : e

abm,~ u. w 4e1 ts su w t ieOm ta"e am am 4

_--------------__--- _---- -- -_ ------------------------------------ ---------- -----------

Ymmbg-S am USt . - Si Ut et 5|1* MS 11

AbMel wet rNs as I an S em

_ww5e teem uses at me etee s_- - -s -te we- ----

- e e 4 eee e.… …… … ……nee ee

>phf .f" tr " " Z " Hf# tX-1 mit t ~~~~~~~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~S.' t it_ 11~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.t_*' *7t4

. . . ......... . ............... w w... w .urnueae.ue m uw uu .. fsu - us ean

am ss - -u - amm - - -- - W

urnm assa mess Omss ss Omas arns ass *si 1ss saws 6u'sussano G a g a noenSW an ame on .44A OeOoorns.- --- u -- - -- o- ua -a - a *-- - is ssC; OK - e ea so . 0 n mw4 ~ ~ ~ ~ ~ ~ ~ ~ u as is i s - su *44mP

as so isa so gm 14r0111001011

S --- w-------~~~~~~------------ --------- -**--------

on I ais SI mus uPM eui

-^~~~~g a$ 011 Su Om" t * tEton foa as 4" so * of"W IFV111

us. isi us is us iSu us 9 1w o op94usaAVAusa us, us us am as us s a usa~~~~~~~~~~~~m I

m a" usn * s pi two a avon us us us us Ns m am "Dfo_m

Z " " *n n " u~~~~~~~~~~~~~~~~~~~~~Mw _b

VW,*

urns sass us ns Wm as a" Om Wm

sass sas us* "a1ss 1st 1 w as b"

SW WS u 0n PdW OowS-^~~~~~g " m on I s 'an-^I~~~~~W * gm W Is .IS n-osUs5iA 5 on as a Om

a us us ino sMt "a us us sOss sumav

s AM. "W "s a am Om ss asn Ps MWeu

sas~ ~~ us as w cisg P ma

us as, n an g etc usmito W as is OMa SOMM.aba-Osa

tat 9M u4 so a ugm Am _Zo W *sWs gmsea "a AsU i-s

64 Mg a I W gm " ;owsla

as*90 go No S

en was ass sow ma sss on orns ammsse

No 4ow SW. N am s s so wsasmgemi! 19V ~ es as ainoea

am * as a we its we was554 ~ ~ 5 _ s5 ii s -aniass~ ~ s a as s u aiau# t~~~~~~~~~~~~sSs_._........................._ .............. _ .... .. _._ ......................................us... _.....us....

s. us s as ss

- 48 - ~~~Anex 2.4Page 6 of 11

1 *35 | E1{fs ;2s

Ii '' r s sI1lls2 g1 1

_U.~ ~~* : : * a"z ai. 54 :" ::11 -

i -11 ' {ll~~~if! -i Igl ~ ~~~~~~~ '£ :suxj!l0l || i!

.~~~~~~~~~~ . .I §§||||4 |l ll0

I *t 3" 3 !41 , ! ili 1 l I

- 49 -

Anex 2.4Page 7 of 11

10 {ti i1 2§ ussaja, I0~ ~ U !6§ If lal:: e l I

I 1 la2alal~: e111 I

4; ~ ~ ~ - : .: -- It |;}

l l E ~S lf ! I

X tt t!5 X 4~"1' | Itlw' Pl|l l l llllZ lfi l | § ||l l

1|i§gl 8{Z§ §Eg llil|§ l a§ "l

L1§l § III 1 -. 3 5. "

|l ~s lei §i lain s§ .XE l

IYIl 1IE1 1g" 1 .I

rt .Zm - 05-

t.o

*r

INN tel gun $1404 NMS WmS wagI ama nut OmRu"

ipg tsti suse IMe noi ami upt N5 am-S 95 q,

WI g~sI se~ pus us a gm *g AipeImpso so _ss us at _ess U , , -|t t tz nn | * N Ut A

un s sosn out WI us. U an =

as asn o sos at uano aniwa

£s $p goo gm Amw1on ow nt ga gm Om TA d4t :

t us go t us ea gm blvv

Ame gm "a "a uan NG gns0iUe

ISP - 305 5651 UN~~~tSl

_w w mtU 911 Xu.

-" n t "ats ams. sue we sue me urn PMs-u'"4 ~ ~ ~ eeeel .nala. ... w n.. .. l na .ln.nl.enf...

an on c sue u mm eMt "a sin sgm =Gem .sueuus-qaus.us'54 -~~~a ur cmt Su uso S gms' su it ugms sINin

,1 0 em. ue ems sue a snns am gm Aa5sQ1^;r o ae no 0w-

r4 ° OlBO"Mt No 149 an an as gm~ gm ms,s,s

eMs ts sog on Su us n u w us em am an a Xemw

m ~" CB we "a S: X

us us us us so *5 5a at o 5

o me Ha to o us "is iMuuwus in an o an urn sos su

su at me me I me oime onI us uses - meu me o us' s nuwpme

5 ps a9 u

04~~~~~~~~0

tn OM INS as 40 m to a~~~~~~s uI MA am m m on 09 tg~~ ~~~~ so * m swM-wHL

5 uisow o O m MWI

_ _ _ _ _ ~ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ,

' e,Ds at e u - so im "_ us me it s '- - - WIN *us~ it s ^

usw us' *~5 _ nSOW us 9 ei ~ urn W

w z ZC U WA,. tt " WB 3 mso g o me &ainsG.A.

* il . a t Gm "unmm wqsuso in W on at so o tan m vmuordo pwsus en us a so us me rnooumiqouk,01Mb.s"

us * 8 * 5* 3 usDai.o a to5 S s me s^sn4dke6a s m s s s me

sue em me me me I~~~~~~~~owa. -um

an # ant ADWI

r5atim P(Ret. Miliith

bmEARv.gs 1063 130 4 5 1" 1W

PA atolsm tb

somrAblnfoof Ms la t0 43 3S 12 t3**CPAU 16 on 114 UTo l' Otf 615 f0 Is? J5 12 13 31

11 NowmS o Uawo. m iU It teO$ 11 0 71 30°nIseOMPAIomos. 1e Gann I i6 O 1642 4134 4076 g5 6 347nour.hipovN am am 14 Ut 15 tt

*q70oouueg Ome to e asAddLTWO&h a *740 72 ISO 647 SmSW& *IOh g0 am as 842 tB6O amTmbuus a001 7ml 2S W7CapmI h*K 8006 13- 105 677

Toetd _ W74 te3 tO 16 3183 4761 15e 4826 m3 04Told rrmPmG em 0 is ts 134 ales 4764 6007 4232 713 Gm4Rawat olsemm raiui

Toed 'ExbIhToUdOMs 10 la 5 1t2 13 USToed Nsw 106 100 tue 31t5 4m 61o 423 13 Om4

Toed come" h_A . to 5 1*34 3.195 474 s,00 4.3 7tOt3 0.164

ToW1*b~TGWVspiW 10 w1 5 1t t2 US T@Ns' w0J 100 te 31 476 651t 4236 7613 me4

low tme" PeEl l16 85? 1.34 3,106 4.764 507 483 7813 ,2e4

o ~

I-A

I-

- 54 -

Annex 3.1Page 1 of 7

INDIA

POVERGRID SYSTEM DEmELOPMENT PROJECT

Detailed Proiect Description

1. General. This annex describes the components of the POWERGRIDSystem Development Project and presents their implementation arrangements:

(a)Southern Region Coordination and Control System(b)Vindhyachal- Dhule 400 kV Transmission Reinforcement(c)Ramagundam - Hyderabad 400 kV Transmission Reinforcement(d)Completion of CPT and Rihand Transmission Projects(e)Tariff Meters(f)Technical Assistance(g)Engineering services

2. Southern Region Coordination and Control System:

2.1 For a power system as large as the combined Indian power systems(70,000 MV installed capacity), the need for comprehensive system coordinationand control facilities is recognized world wide. It has been apparent forsome time that such facilities are urgently needed in India, but because ofthe institutional problems in the sector, there has been little progress intheir implementation. The Bank's study, "Long Term Issues in the PowerSector*, demonstrates that significant benefits could be achieved through7mproved coordination of system operations; the realization of the potential

benefits requires the installation of modern system communications and control(SC&C3 facilities in the regional and state power systems.

2.2 Under the Northern Region Transmission Project (Ln. 3237-IN) theBank is providing finance for the design and construction of a hierarchalsystem of SC&C facilities in the Northern Region. Similarly, under theKarnataka Power Project (Ln. 2827-IN), the Bank has financed the design andtender documentation for integrated facilities in the Southern Region. TheADD has indicated its interest in financing a similar project in the North-East Region, as soon as the scope of works can be defined, and it is proposedto make similar preparations for augmentation of facilities in the Eastern andWestern Regions in future loans.

2.3 Based on preliminary estimates it can be expected the eventualtotal investment involved for all such facilities expected to be fullyoperational by 2000 will be close to US$1.0 billion. While all the directbenefits of a functional SC&C in the Southern region are not easy to quantifywith great accuracy, it has been demonstrated that the scheme will help reduceunserved energy, improve operational efficiency and will lead to fewer systemcollapses, faster restoration after a collapse, better frequency and voltagecontrol, and less equipment damage. In the short run, the main benefit isexpected to be the reduction of unserved energy, in view of the substantialgap between projected electricity demand and available supply. In the longrun, efficiency isprovement and cost savings from deferring capitalInvestment, realized by making better use of existing generation and

- 55 -

Annex 3.1Page 2 of 7

transmission facilities, will become most important (as the power gap isreduced). LTIPS estimates indicate that the short-ternm benefits from reducingunserved energy would enable the investments to be recovered in about twoyears' time. Estimates prepared independently by POWERGRID's consultants forthe Southern region coordination and control system have estimated thatPOWERGRID and the SEBs will be able to recover their investment in theSouthern region system in about two years' of operations even withoutconsidering the benefits of inter-regional trading. This reflects therudimentary stage of the current control facilities of the Southern regionSEBs: the benefits to the SEBs of modern load dispatch and SCADA systems forimproved management of their own systems are substantial and would alonejustify the investments. Such estimates give a clear indication of the valueof coordination and control facilities. International experience hasconfirmed that coordination and control facilities are among the mostessential and productive investments of power utilities.

2.4 For the Southern Regional Power Grid!/ the scope of supply willinclude a central SC&C facility located in a new building at Bangalore,operated by POWERGRID. This will be interconnected through a fibre optic ormicrowave trunk communications network to the State Load Dispatch Center(SLDC) facilities at Hyderabad, Madras, Kalamassery, and Bangalore. Each SLDCwill likevise be connected to a number of facilities in the respective state,and central sector operating authorities. In turn these will be connected toRemote Terminal Units (RTUs) in all RV substation and power stations beingmonitored and/or controlled. Communications between the SLDCs, SCADAs andRTUs will utilize a variety of medium, including existing power line carrier(PLC), VHF radio, fibre optics or telephone circuits as appropriate to theamount of data to be transferred and quality requirements of the system. Thescope of work, in terms of the total number of installations involved, and anestimate of the costs to be apportioned to the operators involved aresummarized as follows:

C/ The Southern Regional Power Grid comprises ten State glectricity Boardsand other Agencies as follows: Andhra Pradesh State Electricity Board,

amrnataka Electricity Board (REB), Kerala State electricity Board (CSEB),Tamil Nadu Electricity Board (TTEB), Karnataka Power Corporation (KPC),Neyveli Lignite Corporation (NLC), Nuclear power Corporation (NPC), UT ofPondicherry Electricity Department, National Thermal Power Corporation, andPOREIRID).

- 56 -

Annex 3.1Page 3 of 7

Facilities Apportioned Costs in US$ M

Operator LDC SCADA RTU LDC Cams Infra Cons TotalIll~~~~~~~4

APSEB 1 4 78 20.87 27.13 6.53 1.17 55.7KEB 1 3 66 6.74 12.98 3.31 0.48 23.51KSEB 1 3 29 18.21 13.69 4.56 0.78 37.24TNEB 1 3 66 17.90 18.49 5.02 0.89 42.29UT Pond 3 1.94 0.49 0.52 0.06 3.01POWERGRID 28 10.86 15.82 4.95 6.89 38.53NLC 0.55 0.00 0.05 0.01 0.61NTPC 0.57 0.00 0.05 0.01 0.64Total 4 13 270 78.30 88.60 25.50 10.30 202.20

Apportioned costs to be covered in contracts with participating agenciesincludet

(1) Computers, software, terminal equipment, UPS services(2) Fibre-optics, PLC, VHF, multiplex equipment(3) Buildings, services, establishment, tools, maintenance equipment(4) Consulting services, training

2.5 POWERGRID will install and own all facilities, leasing SLDCs,SCADAs, and RTUs back to the participating SEBs who will be responsible fortheir operations. A contract between POWERGRID and participating SEBs will bebased on existing implementation agreement setting out the basis of chargingfor PONEBGRID facilities, and assigment of responsibility for theirmaintenance and operations. These will define interface arrangements, andclarify the basis for extension by the SEBs using their own resources.

2.6 Consulting Services will be used for the implementation of thePOWERGRID's program to introduce modern system coordination and control (SC&C)facilities throughout India. The services are also designed to assistPOWERGnID to establish the necessary infrastructure to manage investment insuch facilities which is expected to be as much as US$1.0 billion by 2000.The services will be in two principal parts (a) implementation of projects toinstall facilities in the Southern and Northern Regions, which will befinanced under this loan and under Ln. 3237-IN respectively; and (b)definition of the scope of similar facilities in the remaining regions whichis expected to be financed out of future loans. The terms of reference forthe consultants are given in Annex 3.5 covering five distinct Work Packages asfollows Mi) Review of POVERORID SC&C design concept and implementation plans;(ii) Implementation of SC&C facilities in the Northern Region (consultants tobe financed out of Ln. 3237-IN); (i11) Implementation of SC&C facilities inthe Southern Region; Feasibility Study and Design of SC&C facilities forEastern and Western Regions; (v) Feasibility Study, Design and (subject toseparate authorization by POVEMGRID) Implementation of SC&C facilities forNorth-Eastern Regions.

- 57 -

Annex 3.1Page 4 of 7

3. Vindhyachal-Dhule 400 kV Transmission Reinforcements

3.1 The Vindhyachal-Jabalpur-Itarsi-Dhule transmission lines will helpPOWERGRID strengthen its transmission system in the Western region to improvesystem reliability and reduce transmission losses significantly. The lineswill also enable NTPC to operate its existing Vindhyachal power station(VSTPP-1) without the current severe transmission constraints NTPC has 1,260MW (six 210 MW units) coal-fired generation capacity at Vindhyachal, yet thetransmission system is capable of transmitting only about 700-900 MW(depending on system conditions) with a low security margin and only about 400MW in accordance with conventional reliability (contingency) standards. Atpresent to ensure power system security, export from VSTPP-1 is limited toabout 900 MW, through the existing double circuit (D/C) 400 kV line; the powertransfer level being set to avoid widespread blackouts in the western regionsin the event of failure of either transmission line. Although the northernregion is short of capacity, there is limited transfer capability in thetransmission system which could otherwise have evacuated excess power fromVSTPP-1. Studies by CEA have shown the least cost solution is to reinforcethe existing lines, with a second D/C 400 kV line from VSTPP-1 to Itarsi4001220kV substation, and extend it a further 400 km to interconnect with thenorth-south 400 kV grid at Dhule substation. This will enable generationcapacity at VSTPP-1 to be fully utilized, or alternatively enable more powerto be imported from the Northern region through the 2x250 MW Back-to-Back HVDCconnector at Vindhyachal. The project includes both the new transmissionlines, and the extension of existing facilities at four associated 4001220 kVsubstations.

3.2 The design of the 400 kV transmission system follows establishedpractice utilizing double circuit lattice steel towers supporting DIC ACSRHMoose' (nominal Aluminum area 520 mu2) conductor. The choice of conductor

has been made taking into account the terrain of the country requiring about802 of the spans to be less than 400 meters. The towers will also carry twooverhead earth-wires.

The salient features of the design are as follows:

Maximum System Voltage 420 kVBasic Impulse Level 1550 kVPower Frequency Withstand Voltage 680 kVConductor Type MOOSE ASCR AL 54/3.53mm, Steel 713.53mmEarthwire 7/9 SWG Galvanized SteelDiscs (standard configuration) 2x23 280x145mmWind Loading (zone 2) 49.3 kg/sq m (speed 39 mlsec)Ruling Span 400 mTemperature Range min 0 deg. C, max 75 deg C.

3.3 Towers will be designed and built by turnkey contractors, usingboth structural and mild steel lattice structures, to ensure the minimum costat the lightest weight. For most of the route the line will follow theexisting 400 kV circuits, built during the first stage of the Vindhyachalpower project. The project will also include provision for spare towersmaintained in key locations elsewhere in POWERGRID's service area, in the

- 58 -

Annex 3.1Page 5 of 7

(infrequent) event of tower failure. These will be designed for ease intransportation, usually by helicopter, to effect quick erection underemergency conditions. They will be lightweight, of stayed design, to be usedon a temporary basis until a permanent replacement tower can be erected.Since all substations involve modifications to existing installations theywill be designed following standard practice with POWERGRID assuming the roleof project designer-manager. Brief technical particulars of the sub-project,Including base costs in US$M, are as followst

(a) 400 kV Transmission lines (DIC 'Moose*)

Section Km Circuits M SmVSTPP-Jabalpur 361 D/C 56.5 156,000Jabalpur-Itarsi 240 DIC 35.9 149,000Itarsi-Dhule 400 DIC 54.8 137,000Total 1001 147.2 147,000

(b) 4001220 kV Substation Extensions

400kV Reactors- Unit CostsCBS MVA $M k$IBay SIkVA

Vtindhyachal 2 2 126 6.2 1900 19Jabalpur 4 4 226 12.2 2075 17Itarsi 4 4 260 9.9 1375 16Dhule 2 2 160 5.9 1555 17Total 12 12 772 34.2 1725 17

4. Ramaaundam - Hyderabad 400 kV Reinforcement

4.1 To increase the transfer capacity between the Western and Southernregion systems, POUERGRID are considering various ways of effecting powerexchange at Chandrapur, without jeopardizing the security of either regionalsystem. During a trial period in 1990, POVERGEID demonstrated interconnectionto be technlcally feasible, using existing switching facilities at Chandrapur.However after a few days of synchronous operation, it was found to bedifficult to control power flows under current regional schedulingarrangements, without adequate load shedding facilities In the SBsubstations. To circumvent these problems in the short term POWERGRID iscurrently considering installing a 2x500 MV 8VDC Back-to-Back (B/B) connectorat the Chandrapur end of the existing 400 kV llne to Ramagundam. This willallow POWRIGRID operators to effect control of the transfer of powerimbalances when the two adjacent systems are operating asynchronously.Because both systems have different operation regimes the mechanism for powertransfer is still under discussion, but in each alternative, the transmissioncapability between Ramagundam and Hyderabad will need to be increased by about400 MV to supply the Hyderabad area. The proposed project component comprises

- 59 -

Annez 3.1Page 6 of 7

the construction of a 400 kV double circuit line as follows. Except for thewind loads (zone 3, wind speed 44 nIsec, loading 62.7 kg/sq m) the salientfeatures of the design are essentially as described In para 3.3.

Equipment Qtg Ratina/ Cost Unit CostUnits i $/unit

T/Ls 188 km 18.8 k$100/kmSubvtns 4 bays 7.0 k$1750/bay

4.2 The Southern region power system is characterized by a relatively highshare of hydro generation (50150 mix of thermal and hydro generation capacityin the 16,000 MW system) and severe shortages in both generation capacity andelectrical energy throughout the year except for surplus situations duringmonsoon periods. The Western region power system is dominated by thermalgeneration (85/15 mix of thermal and hydro capacity in the 20,000 MV system)and in the Indian context reasonable power demand/supply situation duringsystem peak periods and surplus of capacity and energy in the off-peakperiods. The interconnection and parallel operation of the two systems wills(a) improve capacity utilization of the Western region thermal stations in theoff-peak periods by transferring surplus to the South; (b) alleviate powershortages in the South, increase dispatch of hydro stations during peakperiods and increase the utilization of surplus hydro energy during monsoonperiods; and (c) improve overall system stability both under normal andemergency situations through short-term exchanges.

4.3 South-West Interconnection efforts were initiated by WTPC with theconstruction of a 400 kV line connecting Ramagundam (the site of NTPC's majorgenerating station) in the Southern region to Chandrapur (a main gridsubstation and also the site of a major generating complex of the NaharashtraElectricity Board) in the Western region. The line has not been effectivelyutilized, however, due to: (a) constraints in power transmission fromDamagundam to the Southern grid; and (b) differences- in operational practicesin the two grids, which allow synchronous interconnection (parallel operation)only under exceptional circumstances. Under the proposed project POWERGRIDwill strengthen its transmission system in the Southern region to transferpower from Ramagundam to the Hyderabad area (the main load center in AndhraPradesh) in order to improve system reliability, reduce system losses and helpachieve the benefits of interconnection.

4.4 The full benefits of the interconnection can be realized only if theoperational practices in the two grids are brought in line to allow continuoussynchronous operation or by installing an NVDC termimnal to effect a continuousasynchronous interconnection for controlled power flows between the tworegions. POWERORID is examining the need and viability of such an 8VDCtenminal proposed to be located at Chandrapur. At the projected average 351capacity utilization of the BVDC terminal (corresponding to about eight hoursof daily operation at off-peak periods), the transmission cost of powerexchange is estimated at about paise 60/kWh. The variable economic generation

- 60 -

Annex 3.1IPage 6 of 7

cost of existing stations in the Western region ranges from about paise 30/kWhat Chandrapur (a mine-mouth power station using low quality low economic costcoal) to about paise 50-60/kWh at load-center coal stations and combined cyclegas stations; the incremental cost of surplus hydro generation in the Southernregion during monsoon periods is negligible. The total unit cost of inter-regional power flows is therefore well below Rs. l.0/kWh most of the time andexceeds Rs. l.0/kWh only if additional generation is from load-centerstations. These values compare favorably with the economic cost of power ofnew power generation projects (which typically exceeds Rs. 1.0/kNh by a widemargin) and is well below the estimated economic value of power (estimates forIndia with conservative assumptions average at Rs. 2.0/k'Wh) and the economiccost of alternative energy (e.g. the cost of industrial. autogeneration andagricultural pumping is in the Rs. 3.0-5.0OkWh range).

5. ComRletion of CPT and Rihand Transmission Proiects

5.1 Several items of equipment of transmission lines and substationmaterials incorporated in the CPT and Rihand loans are were proposed forconsideration under this project. Although these have been appraised andapproved by the Bank under previous loan agreements, due to delays inimplementation the earlier loans have, or are about to be, been canceled.Final payments for the bulk of the equipment involved (about US$ 46 million)may be covered under the CPT-I Augmentation project, subject to confirmationby the Bank. The balance of equipment to be procured under this project(about US$ 9.5 million) is for switchgear, which is associated with four 400kV shunt reactors and transformers already contracted. The scope of work,full details of which are given In Annex 3.7, will include:

61 -

Annex 3.1Page 7 of 7

Substation Equipment TvOe I4VA US$M CostikVA

MJrhamaml Transfonmer 4001230kV 2W1S 3.8 6.03MurinabadWR Chandrapur Reactor 400 kV 50 0.9 18NR AgralCuddapan Reactor 400 KV 2x50 1.6 16SR Guzawaka Reactor 400 kV 2x50 1.8 16

6. Tariff Meters

6.1 Approximately 2000 additional specialized tariff meters are required tomonitor and record power flows for statistical analysis and billing purposes.In addition to the normal commercial export-import energy measurement andmonitoring functions, the meters would be required to measure and record time-of-day power (MW), and reactive power (MVAR) flows, including a specialfacility to monitor frequency excursions. The metering information will beused to facilitates (i) the introduction of appropriate regional and inter-regional and wheeling and tariff structures; and (ii) the eventual operationof a fully integrated synchronous system on a countrywide basis. The metersshould be fully under POWERGRID control, even if some may duplicate some ofthe functions of existing metering facilities owned by POVERGRID's customers.

7. Technical Assistance

7.1 The technical assistance is designed for the provision ofconsulting services to assist in the implementation of GOl's reform programfor power transmission and system operations, including: ti) POVERGRID'sinstitutional development and refinement of its development plans; (ii)utility collaboration arrangement with the National Grid Company of the UnitedKingdom; and (iii) studies on bulk power tariffs, transmission tariffs andtransmission regulation. The terms of reference of items (i) and (iii) aregiven in Annex 3.3 and Annex 3.4, respectively. The proposed loan will alsofinance the provision of consulting services in transmission planning,together with hardware, software, and training in the use of the facilities.The scope of this component, including terms of reference for the consultants,is given in Annex 3.6. It will provide POVERGRID with a means to manaw,e theoperations of its own networks, and to act as a service organization to itsgeneration and SEB customers. The facilities will allow POVERGRID to performprotection studies, and to formulate least cost expansion plans. They wouldinclude a comprehensive on-line interactive suite of computer software forload flow, fault study and power system stability applications, together withassociated software for design applications.

INDIA

PmuOD SE bWELMI PROECT

TRANSER OF SANK UUSU TRANINISSION ASTS FROM UTPC NM S UKPC TO TNE P@MRRIDCM__ mlltion)

A. NC Credits ad Loan--------------- Approval Closfng Credit/Loan Amount Disbursed Undisbursed Eatmted rek upCr dit/Loan Nusber Dat Date Original Cancelled Not (3/31/92) (3/31/92) NTPC P0UER6RID

________.____.................................................... _______..... ..............................................

1. Cr. 685-IN Singreuli Thermal Power 3M 6/84 1S0.0 - 150.0 150.0 I 128.3 21.72. Cr. 73-IN Korba Ther al Poer 4/78 3/86 200.0 0.1 199.9 19.9 9 163.5 36.43. Cr. 874-IN Rumgmundm Thermal Power 1/79 6/87 200.0 200.0 200.0 159.7 40.34. Ln. 1648-1u Rasgundem Thermal Power 1179 6/87 50.0 4.4 4S.6 45.6 - 36.0 9.65. Cr. 1027-IN Second Singrault Thermal Power 5/80 3/89 300.0 - 300.0 300.0 - 260.0 40.06. Cr. 1053-IN Farakka Thereal Power 6/80 12V8 225.0 225.0 225.0 - 210.0 15.07. Ln. 1887-IN Faraia Thermal Power 6/80 6/89 25.0 12.2 12.8 25.0 - 12.7 0.18. Cr. 1172-IN Second Korba Thermat Power 7/81 12/91 400.0 13.6 386.4 386.4 1/ 343.9 4239. Ln. 2076-IN Seeond Rahsgdm Thermal Power 12/81 3/92 300.0 22.8 277.2 277.2 1/ - 233.2 44.010. Ln. 2283-IN Central Power Tranamissfon Project 5/83 3/92 250.7 119.2 131.5 131.5 1/ - 3.4 128.111. Ln. 2442-N Second Farakka Thermal Power 6/84 12/93 300.8 U-.0 278.8 209.2 69.6 197.9 80.912. Ln. 25SS-IN Rihand Power Transmission Project S/8S 12/92 250.0 48.0 202.0 193.2 8.8 6.7 195.313. Ln. 2674-IN Combfned Cycle ProJect 4/86 12/93 485.0 485.0 456.5 28.5 485.014. Ln. 2844-IN National Capital Power Supply 6/87 6/9 485.0 60.0 42S.0 235.7 189.3 421.9 3.115. Ln. 2045-IN Talcher Thermal Power 6/87 3/96 375.0 - 375.0 87.1 287.9 340.5 34.6

Total NTPC Credfts and Loans 3,996.S 302.3 3,694.2 3,122.3 584.1 3,002.8 691.4of eihich: IDA Credits 1,475.0 13.7 1,461.3 1,461 .3 0.0 1,265.5 195.8

IBRD Loans 2,521.5 288.6 2,232.9 3,122.3 S84.1 1,737.3 495.6

B. hNPC loon MNPC Pt4ER6Rlb................. _

1. Ln. 3237-Ih Northern Region Transmission 6J90 9/98 485.0 * 485.0 27.6 457.4 10.0 475.0

SItuatIon after do-Jure transfer: NTPC PoGERRtID lIftI......... ......... ............. .

IDA Credits 1,265.5 195.81BRD Loans 1,737.3 970.6 10.0

Totat 3,002.8 1,166.4 10.0

NOTE * IDA CredIt waunts for SDR de dnated Credits re e_peesed In torws oftheir US dollar equivalents, as stabished at the time of CredIt negotiations 0nd as suAsequently presented to the Board. OQ

1/ Disbursed amount includes fmuds disbursed unttil lon accosut we closed. X

0h'

t14

INDIA

POtCuID StE DEVELOPNENT ROECT

TRANSFER Of UK FUNMDED TRA ISSI AMUETS FUN NTPC ASD NHPC TO POIEREID(USS mItlion)

Disbursed UndisbursedA. NTPC Credits and Los (as of 3131m2) (as of 3/31/92) Total.;i............... me ......... ................... ...................Credit/LoA uler amout NTPC POIRORID NTPC POERtRID ltPC POIRID

1. Cr. 665-Il Sngraul Theram Powr 150.0 120.3 21.7 - 128.3 21.72. Cr. 793-IN Korba Thermal Pow 199.9 163.5 36.4 - . 163.5 36.43. Cr. 874-IN R _Maaiadm Thermal Power 200.0 159.7 40.3 . * 159.7 40.34. Ln. 1648-IN R _maundn Thermlt Powr 45.6 36.0 9.6 - - 36.0 9.6S. Cr. 1027-IN Second Sngrault Thermal Poer 300.0 260.0 40.0 - * 260.0 40.06. Cr. 1053-IN farek Thmal Powr 225.0 210.0 15.0 - - 210.0 15.07. Ln. 1887-IN Farakka Theml Powr 12.8 12.7 0.1 - - 12.7 0.18. Cr. 1172-IN Second Korba Thermal Powr 386.4 343.9 42.5 1/ * - 343.9 42.59. Ln. 2076-1N Second Rsmdam Themal Powr 277.2 233.2 44.0 1/ - 233.2 4.O10. Ln. 2283-IN CentraL Power Transmssion Project 131.5 3.4 128.1 1/ - 3.4 128.111. Ln. 2442-IN Second Farakka Thermal Power 278.8 t77.2 32.0 57.7 12.0 234.9 44.012. Ln. 2SS-IN Rthand Power TranMissfon Project 202.0 6.7 186.5 - 8.0 6.7 195.313. Ln. 2674-IN Combined Cycle Project 48S.0 456.5 0.0 28.S 485.0 0.014. Ln. 284I4IN National Copital Poner Supply 42S.0 230.1 S.6 187.7 1.6 417.8 7.215. Ln. 284S-IN Talcher Theml Power 375.0 87.1 253.3 34.6 340.4 34.6

3,694.2 2,508.3 601.8 527.2 56.9 3,035.4 6S8.8

3. NNPC Loin mmPC POSERORID NPC POWENGRID NMPC POERRID.:.....Z.... ............ .................. ................... . .......... ................... ..................... .........1. Ln. 3Z37-IN Northerm Region Transmission 48S.0 - 27.6 10.0 447.4 10.0 47S.0

1 Di0sb4rsed amount Includes funts dfsbursed W,tIl tomn account was closed.2 Part of these credits and losim were originally passed on as equity to NM.

From the reaining part, originalLy passed on as a loan to NTPC, an ammmtof Rs. 1,312 million has been conwerted into equity.

- 64 -

Annex 3.3Page 1 of 4

INDIA

POWERGRID SYSTEN DEVELOPMENT PROJECT

Institutional Development of POWERORID

TERMS OF REFERENCE

A. Introduction

1. The creation of the POWERGRID is a major step toward therationalization of the power systems of India into a multi-level systemconsisting of organizations at the national, regional, and state levels, aswell as private power producers. There are a number of such multi-levelelectrical sector organizations in other countries, particularly in Europe andNorth America. The objective of the technical assistance is to define theorganizational structure and procedures under which the various agencies inthe power sector would cooperate to ensure reliable and economical electricservice to the present and future consumers of India, and to recommend a planof action consisting of specific steps that will lead from the presentconditions and relationships to that ultimate goal.

2. While physical and social circumstances in India are unique to thatcountry, there are nevertheless lessons that can be drawn from the way theelectrical sector is organized and operated in other countries with a multi-level arrangement. The recommendations made for India should reflect to theextent possible the experience of other countries. The assistance is dividedinto three Tasks, of which the first two deal essentially with the relationsbetween POVERTD and other organizations, while the third pertains to theInternal organization of POWERGRID.

D. Detailed Terms of Reference

Task 1:Refine Alternatives for Regional and National System Coordinationand Control

(a) Based on the basic concept of regional loose power pools operatedby POWERG ID, this Task will produce recommendations for how thephysical problems of coordination, control and dispatching ofgeneration shall be organized by POWERGRID. Dealing primarily withoperational aspects, these activities include the interchange ofcapacity and energy between regions, optimal dispatching of thermaland hydro resources, maintenance of frequency, system voltages, andsystem reliability. The consultants wills

(b) examine and compare methods used in other countries for thecoordination, control and dispatching of multi-level system.Consider various possible arrangements for dispatching generationand transmission systems at the regional and the national level;and

- 65 -

Annex 3.3Page 2 of 4

(c) review present practices for all activities related to transmissionoperation in India, including, in particular, operation, dispatchand power trading between various agencies within and betweenregions; recommend specific roles for all concerned organizationsin these activities; and recommend alternative practices that wouldimprove system economy and/or reliability.

3. The main deliverables under this task are: Mi) discussion andcomparison of methods for control of multi-level systems; and (il)recommendations for improved practices in transmission system coordination,control and operation, with detailed justification.

Task 2: Refine POWERGRID's Role in the Power Sector

(a) This Task deals with the organizational and financial aspects ofthe relationship between POWERGRID and other members of theelectrical sector, and includes the development of a plan forPOVERGRID to assume its ultimate role as the owner and operator ofthe transmission system and coordinator of system operations andtrading. The consultants wills

(b) review and recommend a detailed plan for POVREGRID's assumptions ofthe responsibilities recommended for it in Task 1 above. Define indetail the roles of POWERGRID and other agencies in the powersector (central sector generators, SEBs, REBs, CEA, and privatefirms), and how they will interface with each other. Consideralternative sequences of steps leading from present conditions tothe relationships defined in Task 1. In particular, consider thefollowing issues:

* Responsibility for manning, maintaining, and upgrading theRegional Load Dispatch Centers (RLDCs);

* Measures for the facilitation and control of inter-regionaltransactions;

* Measures to enforce performance of agreed-upon transactions;and

* Resolution of conflicts.

(c) assess institutional, operational/technical and financialconstraints in the implementation of the recommended developmentsteps;

(d) recommend the functions, responsibilities, and authority ofRegional Load Dispatch Centers and division of work between REBsand POVERGRID. Recommend how their expenses should be allocated.

- 58 -

information needed to make informed choices. The flow of technicalinformation perhaps could be increased by selective support of well-placed,reputable institutions such as the Association of Entrepreneurs, the BudapestChamber of Commerce and others that reach beyond Budapest.

(v) Regulations pertaining to private sector opei.:tions should bestreamlined and better implemented. As discussed above, entrepreneurs wereforced to wade through more red tape than necessary, and the number of permitsand licenses required could perhaps be reduced or at least consolidated. Theprocess of complying with regulations seemed overly complex, as evidenced bythe widespread use of attorneys to complete applications and the pervasivepractice of bribing officials to get necessary permits. Specific candidatesfor improvement are environmental regulations and import procedures.Implementation of existing regulations could be much improved by curtailingthe personal discretion of officials, particularly local officials.

- 67 -

Annez 3.3Page 4 of 4

as effectively and smoothly as possible. Indicate an estimated time-line for the phased development, and indicate criteria for determiningreadiness to proceed from each step to the next.

7. The main deliverables under this task are: (i) description andanalysis of present organizations (ii) recommended new ultimate organization.vith duties and areas of authority; (111) recommendations on personneldevelopment: transfer or hire, and levels of expertise required; and (iv) aphased plan for the development of POWERGRID as an organization, includingdefinition of steps in the development and criteria for readiness to proceedfrom step to step.

C. STUDY TOURS

8. As part of the technical assistance, the consultants will plan andhelp implement study tours, under which POVERGRID staff will visit selectedutilities in Asia, Europe and US to familiarize themselves with modern utilitypractices. Staff to be selected with criteria developed by the consultantswill be from various departments, including planning, construction,operations, finance and commercial, and personnel. Utilities to be contactedby POWERGRID for visits Include (but are not necessarily limited to) BOAT InThailand, PLN ln Indonesia, the National Grid Company in UK, Transpower in NewZealand, and selected power pools in the USA.

- 68 -

INDIA Annex 3.4Page 1 of 7

POWERGRID SYSTSEM DEVELOPMENT PROJECT

Bulk Power and Transmission Tariff andTransmission Regulation Studies

TERMS OF REFERENCE

Alternative Tariff Structures for Power Transmission andBulk Power Transactions

Introduction

1. The purpose of Part A of the studies is to examine the alternativeways of charging for power obtained by SZBs for power that they obtain fromCentral Sector agencies and from each other under a regime which encouragestransactions between entities for optimum economy and service reliability. Aworking group generally referred to as the *K. P. Rao Committee" hasrecommended the use of a two-part tariff structure (separate charges for fixedand variable costs) to replace the present one-part tariffs which arefundamentally only a method for allocating the cost of producing the output ofa plant in proportion to the energy received by each party, regardless of thecapacity used, the time the energy was produced, or the relation between theamount of capacity allocated to the users and the amount of electricityreceived by them at various times. The Conmmttee's report left a number ofissues to be decided by the Regional Electricity Boards, including the basisof allocation of the fixed costs. Their practices do not necessarily representthe generally accepted principle of allocating fixed costs according tocapacity, and variable charges according to energy supplied. As a result,generation dispatch does not follow economic merit order.

2. Some of the inefficiencies that have been experienced in the pasthave been failures on the part of various agencies to follow operating plans,i.e. to reduce generation during low-load periods, and drawing more than theirallocated share of Central Sector generation during peak periods. Some ofthese problems may be at least partly due to perverse incentives in which theagencies, or their personnel individually, benefit from actions which are notin the interest of the reliability and/or economy of the overall system.

3. The emergence of POWERGRID as an independent unit requires a newand thorough consideration of how the cost of the transmission system can beallocated to its users in a manner that is both just and perceived as just,and that will produce incentives for all parties to work for the common goodin both their Investments and their operations.

Scone of Work

Task A-ls Survey of practices in other systems

4. This task will summarize the theory and practice of settingtariffs, and their success in achieving the goals of optimal electric systeminvestment and operation. The consultants will review and discuss bulk powertariff concepts used in various parts of the world, including both

- 69 -

Annex 3.4Page 2 of 7

inter-utilities trading in bulk power and transmission services, including butnot exclusivelys

(a) procedures for interchange of capacity and energy;

(a) firm transactions and economy transactions;

(b) short-term and long-term transactions;

(c) system capacity and unit capacity transactions;

(d) transmission servicess rates and priority considerations;

(e) emergency capacity and energy;

(f) methods for sharing benefits from exchanges of capacity and energy;and

(g) contractual requirements.

5. The consultants will define the goals of various forms of bulk-power tariffs in terms oft

(a) financial goals and requirements;

(b) optimization of system operation both for the near term and thelong run;

(c) optimization of investment in the long term; and

(d) promotion of efficiency by consumers (SEBs and their final retailcustomers).

6. The consultants will also:

(a) discuss how, in theory and in practice as evidenced by actualperformance, various tariff structures produce incentives ordisincentives for the parties to contribute to overall systemreliability and economy; and

(b) examine the use of incentives to personnel and to organizations infostering good and efficient operation of power plants inaccordance with overall system objectives and requirements.Recommend measures to be encouraged in the operation of SEBs andCentral Sector agencies in India.

7. The main deliverables ares (i) survey of worldwide practices insetting tariffs for bulk-power transactions covering capaand energy; (1i) analysis of the benefits to be achieved by the use ofappropriate tariff structures; (iii) analysis of the reletionships betweenvarious tariff structures and achieving the desired goalst and (iv)examination of incentives for efficient plant operation and maintenance

- 70 -

Annex 3.4Page 3 of 7

consistent with system overall objectives.

Task A-2s Tariff structure for bulk-power transactions.

8. This task will review present bulk power tariff structures used InIndia, their effect in terms of the goals defined above for both centralthermal and hydro generation and recommend improvements on the basis ofidentified Inefficiencies and results of task A-1 on pricing theory andpractices and experiences elsewhere. The consultants wills

(a) evaluate proposals for power trading tariff modifications presentedby various parties in India, including frequency-based pricingschemes for inter-States inadvertent power/eaergy transfers(considering the varioub possible forms of power transfers:capacity, firm energy, opportunity transfers, emergency transfers,etc.);

(b) examine the applicability of other forms of tariffs to Indianconditions and requirements;

(c) recommend tariff structures to satisfy both near-term and long-runrequirements. In doing so, consider particularly the need foradjustments to rates for such variables as fuel costs, foreignexchange rates and inclusion of incentives for more efficient andeconomic operation; and

(d) develop a plan for the implementation of the recommended tariffstructuress sequential steps and conditions required to make theimplementation of each step practical and effective.

9. The main deliverables are: li) description of tariff structurespresently in use in India, and discussion of their effect oan power systemservice reliability and economic operation and investment decisions; (ii)evaluation of proposed alternate tariff structures for bulk-powertransactions; (iii) recommendation of tariff structures for bulk powertransactions; and (iv) recommended plan for the methodical implementation ofproposed new tariff structures.

Task A-3: Esamine and recommend transmission tariff structures

(a) This task will review present power transmission tariff structuresused in India, their effect in terms of the goals defined above forboth central thermal and hydro generation and recommendimprovements on the basis of identified inefficiLncies and resultsof task A-1 on pricing theory and practices and experienceselsewhere. The consultants will examines

(b) alternatives for pricing transmission services, including but notlimited to: (i) cost-based allocation; (ii) fized charges fortransmitting capacity and/or energy: and (iiI) value-based pricing;

- 71 -

Annex S.4Page 4 of 7

(c) examine the effect of various proposed power transmission tariffconcepts on grid discipline, overall system operating economy, andsystem service reliability. Consider aspects of tariffs that willencourage good performance on the part of generation owners,operators of the transmission facilities, and operators of LoadDispatch Centers;

(d) consider the different effects of tariffs during the present periodof generation capacity shortages, and long-run periods in whichgeneration capacity may be adequate; and

(e) develop a plan for the implementation of the recommended tariffstructures: sequential steps, conditions required to make theimplementation of each step practical and effective.

10. The deliverables ares (i) description of possible transmissiontariff structures for use in India, and discussion of their advantages anddisadvantages; (ii) evaluation of proposed alternate transmission tariffstructures; (iii) recommendation of transmission tariff structures; and (iv)recommended plan for the methodical implementation of proposed newtransmission tariff strsctures.

11. Qualifications of Consultants are: (i) experience with powertransmission tariff analysis and development in mixed-source electric systems;(1i) experience in tariff structures for thermal plants and for hydro plants;and (iii) international experience in inter-utility power/energy transferagreements.

12. Total estimated effort for Part A is 9 man-months.

Assess Regulatory Requirements and Recommend Key Reguations

Introduction

13. In the absence of full and free competition, some form ofgovernment regulation is generally considered necessary in order to preventany of the participants of the electric sector from taking advantage of itsmonopoly or semi-monopoly situation by charging excessive rates or providinginadequate service. The extent and intensity of regulation varies indifferent jurisdictions around the world, but it generally covers at leastsuch subjects as defining the rate-making process, including approval of theresulting rates, priorities in the use of limited resources, and the approvalof service reliability standards.

14. One of the most difficult problems to resolve when variousgenerating entities depend upon the use of the same transmission system tobring their output to their customers is the setting of priorities when thetransmission system is not capable of safely transmitting each generator'spower to its preferred customer.

- 72 -

Annex 3.4Page S of 7

15. The purpose of Part B of the studies is to assess regulatoryrequirements applicable to POVWRGRID, and to recommend key regulations forPOWERGRID's operations. including conditions on access to POWERGRID'stransmission system. It is not practical, however, to consider this subjectwithout at the same time considering the role of the CEA and other bodiesinvolved in regulating the transmission and power trading activities ofcentral utilities, the State Electricity Boards and private generators.

Scope of work

Task B-ls Survey of practices in other systems

16. This task will summarize the theory and practice of settingregulation, and their success in achieving the goals of optimal electricsystem investments and operation. The consultants will review and discussregulatory concepts used in various parts of the world, covering both inter-utilities trading in bulk power and transmission services.

17. The consultants will define the goals of various forms ofregulations in terms of:

(a) financial goals and requirements;

(b) optimization of system operation both for the near term and thelong run;

(c) optimization of investment in the long term; and

(d) promotion of efficiency by consumers (SEBs and their final retailcustomers).

18. The consultants will also:

(a) discuss how, in theory and in practice as evidenced by actualperformance, various regulatory structures produce incentives ordisincentives for the parties to contribute to overall systemreliability and economy; and

(b) examine and recommend aeasures to be encouraged in the operation ofSEBs and Central Sector agencies in India.

19. The main deliverables ares (i) survey of worldwide practices inregulating bulk power transactions covering capacity and energy and powertransmission; (ii) and analysis of the benefits to be achieved by the use ofvarious regulatory structures.

Task B-2s Review Current Situation and Assess RegulatoryRequirements

This task will:

- 73 -

Annex 3.4Page 6 of 7

(a) define the subjects of regulation required to ensure thatPO EUGRID's monopoly will not lead to excessive rates, inadequateservice reliability, or inefficient operation;

(b) determine to what extent the activities of other members of thepower sector-SEBs, Central Sector generation agencies, privatepower systems and private generators-should be subject toregulation. it should be noted in this respect the SEBs inparticular will retain some transmission facilities which mayaffect, or be affected by, the conditions on POVERGRID transmissionsystems:

(c) discuss the regulation requirements and capabilities of carryingthese out with appropriate government agencies, POVERGRID staff,and various SEBs, Central Sector agencies and private generators.

(d) determine what agencies are best suited to perform these regulatoryduties, and recommend the methods by which this regulation shouldbe carried out.

20. Hatters that should be considered as possible subjects forregulation includes

(a) rates for power transmission;

(b) rates for power trading among SEBs and other agencies andgenerators:

(c) rights, and priorities, of access to the various transmissionsystem for various types of generators and users of electricity;

(d) service reliability standards, and methods of enforcement of thesestandards:

(e) determination of the responsibility for paying for transmissionlosses: methods for determining the total amounts of transmissionlosses associated with specific transactions, and methods ofpricing these losses;

(f) methods of enforcing decisons made by REBs and RLDCs: and

(g) methods of enforcing the authority of regional system controlcenter operators with regard to operation of the system duringemergencies.

21. The main deliverables ares (i) scope of regulation to be applied toPOVERGRID and to other agencies of the power sector: (ii) recommendations onthe agency/agencies to be responsible for regulation of POWERGRID'sactivities, and those of other agencies: (iii) recommendations on methods forcarrying out regulation of POWEIGRID: (iv) methods of enforcing operationsdiscipline; and (v) recommendations for the treatment of transmission losses.

- 74 -

Annex 3.4Page 7 of 7

Task B-3s Outline Proposed Key Regulations

22. This task will recommend key regulations governing the operation ofPOWERGNID and defining the authority, rights and duties of all partiesconnected to the transmission system. These regulations should be so desipnedas to support the relationships between the various agencies as described itthe Institutional Development of POWERGRID.

23. Examples of subjects for key regulations to be recommended wouldincludes

(a) methods of determining the capability of the transmission system toperform various transmission services requested by centralutilities, SEBs and private generators;

(b) types of contracts for the provision of transmission services toSEBs and private generators;

(c) priorities in the use of transmission system by various agencies,generators, and customers; and

(d) methods for arriving at agreements concerning the operation of thePOWIEGRID and other agencies transmission systems, such as those ofthe SnB *, in regard to mutual concerns such as the maintenance ofadequate voltages and the limitation of the flow of reactive powerat interfaces between the systems.

24. For each form of regulation, the consultants will explain the needfor the regulation of this subject, and propose an appropriate approach forformulation an effective and implementable regulation.

25. Deliverables are; (i) list of proposed subjects for regulation,including an explanation of the need for the regulation; and (ii) outlines ofthe proposed re.ulations.

26. The consultant cualifications require knowledge of regulationtheory and practice as found in the United States and in various Europeancountries.

27. Total estimated effort for Part B is 9 man-months, the total forparts A & B is 18 man-months.

- 75 -

INDIA Annex 3.5Page 1 of 7

POVERGRID SYSTEM DEVELOPMENT PROJECT

COORDINATION & CONTROL SYSTEM PROJECTS IN INDIA

Terms of Reference for Consultants

INTRODUCTION

1. The Coordination and Control System projects in the Indian BlectricPower System include establishment, augmentation and modernization of fiveRegional Load Dispatch Centers (RLDCs), together with associated State andLoad Dir.patch Centers (SLDCs) and System Control and Communication (SCADA)facillties under each region including Iemote Terminal Units (RTU) in CentralPower Generating Utilities. The scope of the project includes planning,design, engineering and implementation of Coordination and Control Systemscenters vith associated tele-communications facilities in a phased manner overa period of 1993 to 1998. For background information about the Indian powersystem and the existing system coordinatLon and control facilities, pleaserefer to Annex 1 (a separate background paper attached to the request forproposals).

2. The Power Grid Corporation of Indla Limited (POVREIGRID) hasreceived a World Bank loan (Ln. 3237-IN) for the Northern Region TransmissionProject, which provides for the implementation of a coordination and controlsystem for the Northern region, and expects to receive a new loan from theWorld Bank for the implementation of a similar system for the Southern Region.It intends to apply a portion of the proceeds of the loans to eligiblepayments under the contract for which these terms of reference apply.Furthermore projects for Eastern, Western, and North-Eastern Regions areproposed to be considered by the World Bank and The Asian Development Bankunder future loans in the coming years. By 2000 the total investment in allsystem control and communications facilities throughout India is expected tobe close to US$ 1 billion.

3. When the projects are comn_.eted in all five regions, the IndiaElectric Power System should be equipped with the necessary modern managementsystem, to optimize the utilization of the Electric Power System resources andprovide more secure operations and a better quality of delivered electricalenergy. These state-of-the-art systems are considered essential to realizethe regional and national power grid which is the primary objective ofPOVERGRID. From the functional point of view, the total Coordination &Control center projects would comprise (a) Operatioas Planning System(Predictive Management) and (b) Real Time Control Systems. This would includeSCADA systems, advanced power applications software and microprocessor basedRemote Terminal Units installed in substationslpower stations along with UPSand power supply systems. It would also comprise (c) TelecommunicationsSystems to provide a high quality and reliable data and voice communicationand would mainly consist of optical fibre (OPGW), digital microwave, VI? andpower line carrier communication system.

- 76 -

Annex 3.5Page 2 of 7

4. POWERGRID will engage a consulting firm to assist in the planning,design, engineering and implementation of the system control and coordination

projects. The consultants will also be required to offer a retainer servicefor up to five years after project completion and commissioning. The tasks forwhich the consultants would be engaged are detailed in section II. Engagementof the consultant will be effected in accordance with the "Guidelines for theUse of Consultants by World Bank Borrowers and by the World Bank as ExecutingAgency*. The services will be financed out of the World Bank's loan proceedsusing the Bank's direct payment procedures, made only at the request ofPOWERGRID, and subject in all respects to the terms and conditions of the loanagreement.

5. For the purpose of designing, procurement and implementation, theconsultant will be assisting with the design and/or implementation of totalCoordination & Control systems divided into following logical entities i.e.

* Operations Planning Systems (OPS)* Real Time System (RTS)* Data Commnications Network (DCN)* Telecommunications Systems (TCS)* Remote Terminal Units (RTUs)* Local Interface (LC)

sAuxiliary systems

6. Implementation of the North & South Coordination and Controlprojects is foreseen for the period 1993 to 1998 and the consultant isexpected to be involved for the whole period. The extent of involvement woulddepend on the progress of implementation of the entire project, with thepossibility of an extension being required due to delays or an increase inscope. The scope of work is described below.

7. For the purpose of project implementation, the consultants may alsoconsider using POUERGRID staff andlor employing domestic consultants to assistthem in the implementation program. In the course of the execution ofassignment, the foreign consultant will conduct the meetings between vendorsand purchaser and be responsible for keeping the minutes.

8. The foreign consultant will provide services in specialized areasincludingt

* Review/updatinglreviaion of technical specifications,prequalification invitations and tender documents

* Advanced hardwarelfunctions* Advanced systems softwarelfunctions* Advanced applications softwarelfunctions

MAdvanced telecouaunications transmission, interfacing of variousmodes of communication, OPGW technology etc.

* Evaluation of prequalification and bid documents* Contract negotiation and work statement preparation of alternate

procedures* Functional and design specification review process

- 77 -

Annex 3.5Page 3 of 7

* Review and comment on all drawings, documents, tests,documents /procedures

* Participation in inspection of equipments, Factory AcceptanceTests, Field Tests and Availability Tests.

* Erection, Testing and Commissioning of equipments.

9. The consultants shall very closely involve POWERGRID engineersduring all the phases of works.

CONSULTANTS TASKS

10. The consultants will assist POWERGRID in planning, design,engineering and implementation of the coordination and control systemsconsisting of the following two main parts:

* Computer-based CoordinationlLoad Dispatch/SCADA systems at variouslevels in the hierarchy; and

* Telecommunication systems for voiceldatalfax/telexl etc. supportfor the coordination and control systems.

11. The consultants will be engaged up to implementation stage forNorthern and Southern regions projects. For the Eastern and Western regionprojects, the tasks are initially limited lip to preparation of design projectreport (DPR), technical specifications and tender documents, but may besubsequently extended to cover also the implementation, depending on projectfinancing being secured by POVERGRID. For the North-Eastern region the taskis initially limited to the review of existing project report, updating ofcost estimates and project preparation, but may similarly be extended to coveralso the implementation, depending on project financing being secured byPOWERGRID. The total work has been divided into five work packages, asspecified below. All five will be executed concurrently between 1993-1998.Consultants may bid for one or more packages in the following combinations:(a) Group A: Packages I&III; (b) Group Bs Package II; (c) Group Cs PackagesIV&V; and (d) any combinations of Groups A, t, and C. Nowever, POGERORIDreserves the right to retain one or more Consultants who can undertake all theGroups concurrently. Selection of the successful Conuultant(s) will be basedon the maximum evaluated points for each of the three Groups.

WORK PACKA:Z I - RVIDW OF POVERGEID SYSTUK CON)ONIC&TIORS U DCONTROL IK?LmKNTATION PLANS

12. Phases II & III of POWERGRID's development ( please refer to thebackground materials for details ) consist of physical and organizationalarrangements to complete the integration of the various regions into aNational Grid that will provide the opportunity for extensive interchanges ofcapacity and energy between the regions for greater economy and reliability.This task will examine the justification and need for a National SystemCoordination Center that would supervise inter-regional power transmission.The consultants will:

(i) prepare a pre-feasibility study and, if appropriate, recommenddetails of a National System Coordination Center (NSCC). Determine its

- 78 -

Annex 3.5Page 4 of 7

functions and evaluate its benefits; estimate equipment, software and database preparation and personnel requirements;

(Li) recommend what agency should own it and which one should be incharge of its operations

(ii) recoanmend principles for paying the costs of ownership andoperation of the National and Regional System Coordination Centers; and

(iv) define a time frame for setting up the NSCC with possibly aninterim plan for the immediate or short term when the regions areinterconnected with only a few DC tie-lines.

13. The main deliverables under this task area (i) functions,benefits, and costs of a NSCC; (ii) responsibility for operation of the NSCC;(ii) proposed arrangements for sharing the cost of the NSCC; and (iv) animplementation plan for NSCC, including interim stages if advisable.

WORK PACnGAE II - IOPLUHZTTION OF A COORDINTION AND CONTROLSYSTYW FOR TOB NORTERN REGION (Finf(cima from LU. 3237IN:Northern Resion Transmission Project)

SYSTEM COORDINATION AND CONTROL

14. The main tasks are:

Mi) Review of the DPRs and technical specifications for load dispatchsystems prepared by Central Electricity Authority (CIA) and/or theirconsultants. Review comments by the World Bank in the Northern RegionTransmission Project Staff Appraisal report 8172-IN June 1990 Annex 3.1.Updating of the DPRs and preparation of new technical specifications whereverrequired, in accordance with the overall POWERGRID strategy defined under WorkPackage III;

(ii) Preparation of tender documents for inviting bids as per World Bankguidelines and in accordance with the overall POWERGRID strategy defined underWork Package III;

(1ii) After submission of the bids by the vendors, the consultant shallperform a detailed techno-economic analysis of the various bids. Theconsultants shall evaluate the various bids and frame recommendations for thesward of the contract in accordance with World Bank procurement guidelines.The recommuendations shall be submitted for approval of POWERGRID, Governmentof India and the World Bank;

(iv) The consultant shall assist POWERGRID to carry out detailednegotiations and discussions held with the successful vendors for freezing thefunctional requirements and the system desipn. Based on these, detailedpurchase order shall be placed. In the purchase order umong other things, thefollowing shall also be incorporated:

* Review of vendors' design documents

- 79 -

Annex 3.5Page 5 of 7

* Training of purchasers personnel In the works of manufacturers.* Modalities of finalizing Procedures for inspection of equipment &

system and conducting Factory Acceptance Tests (FAT) and SiteAcceptance Test (SAT)

* Equipment delivery schedule* Schedule of software development at manufacturer works.* Modalities of submission of various drawing and design details and

their approval by the purchaser.* Schedule for submission on of manuals for storage, erection, and

testing commissioning, operations & maintenance etc.* Interface requirements with the existing plantlequipment etc.* Specifications for Control Center building design.* Modalities for review of progress of manufacture of hardware and

development of software.

(v) Consultants shall also provide guidance and advice during systemimplementation phase. Modern techniques of project management, resourcemanagement, cost control etc. shall be proposed and adhered to. This wouldcover the following responsibilities:

* Clarify respective responsibilities of consultants, POWERGRID, SEBsand contractors;

-- Finalization of training program and course ware (in-house as wellas In the vorks of manufacturer) and number of personnel for eachdiscipline;

* Co-ordination of site preparation activities;* Ensure through concerned agencies the proper handling, storage,

transportation, installation and erection of equipment at varioussitess

* 'Regularly review the progress of manufacture of various hardware atmanufacturers works and also review the software developmentalactivities. Ensure proper Installation, testing and commissioningof equipment and various sub-systems, in close co-ordination withpurchaser's and vendor's personnel;

* Formulate detailed Factory Acceptance Tests (PAT) and SiteAcceptance Tests (SAT) plans and procedures;

* Participate in FAT;* Supervise SAT and total systems commissioning and ultimately assist

purchaser in system take over;* lReview the design and supervise the entry of power system data Into

the database for the computer system;4* Review the design and supervise the development of user interface

displays.

15. The prime Consultants may employ qualified and experienced localconsultants for implementation support for above works. The overallresponsibilities of ensuring timely completion of project will however remainwith the prime consultants. The purchaser's engineers shall also beassociated with above works.

- 80 _

Arnex 3.5Page 6 of 7

16. The consultants shall also advise POWERGRID on the followings

* Complete Manpower training and Human Resources Development programincluding setting up of computer based training systems withinPOWERGRIDt

* Development of in-house expertise in the areas of applicationssoftware;

* Preparation of system data base and man-machine interfacerequirements for the RLDCs, SLDCs, and SCADA systems;

* Implementation strategy and Maintenance support philosophy andrecommended organizational set up. The role of external agencieswill also be considered; and

* Spare parts management and control philosophy.

TELECOMMWNICATIONS SYSTEM

17. The main tasks are:

(i) Review of the DPRs and technical specifications prepared byconsultants engaged earlier for the project and updating of DPRs and thepreparation of new technical specifications wherever required;

(ii) Preparation of tender documents for inviting bids as per World Bankguidelines; and

Ciii) Items in paras. 14 (iii)-lv) and 16 under system coordination andcontrol shall also be applicable for the consultants" work on thecoamunication systems.

V3RK PACKAGE III:s IPLMN!ATION OF A COORDiNATION AND CONTROLSYSTEK POR THE SOUTHERN RBGION

18. The tasks are the same as those covered under Work Package I1except that the first three tasks will be to:

(i)review and refine POWERGRID's overall strategy for the designand implementation of system coordination and control projects, to ensure theutilization of the latest designs incorporating open system architecture andmodular Implementation approach;

(ii)review the DPRs, technical specifications and tender documentswhich have been prepared by Electricite de France (EdF) under an earlier BankProject and updated in 1992193, to ensure that these are consistent with therecommended overall strategy. (i) above, and suitable for internationalcompetitive bidding. Prepare an evaluation report specifying recommendedmodifications; and

_ 81 -

Annex 3.5Page 7 of 7

(iiL) reviselupdate the reports, specifications and tenderdocuments, after the evaluation report prepared under (ii) above has beenapproved b; POWERGRID and the Bank and the work has been authorized topeooceed. -I

VORK PACKAGE IV: FEASIBILIm STUDY AND DESIGN FOR TEE EASTERN ANDVESTEN REGIONS

19. The main tasks under part A of Work Package IV aret

(i) review of the existing load dispatch and communication facilitiesin these two regions at the regional and state levels;

(ii) examine the necessity to augment and modernize these facilities inboth these regions so as to be compatible with the systems in other regions;

(iii) prepare a detailed project report and cost estimates for both theregions; and

(iv) prepare technical specifications and tender documents, followingthe overall strategy developed in Work Package III.

20. Part B of Work Package IV will be the implementation of the Easternand Western systems, as specified in detail in Work Package II for theNorthern region system. Part B need not be covered in the proposal. Once therequired clearances and funding for the implementation have been secured,POWEIGRID may extend the contract to cover the implementation, In which case acontract variation (involving additional funding) would be negotiated at thatfuture point.

WVORK PACK&GE Vs FEASIBILITY STUDY AND DESIGN POR TIM NORTH EASTENREGION

21. Under part A of Work Package V the consultants will review andupdate POWERGRID's existing Project Reports, update cost estimates, andprepare technical specifications and tender documents, following the overallstrategy developed in Work Package III.

22. Part B of Work Package V will be the implementation of the North-Eastern system, as specified in detail in Work Package II for the Northernregion system. Part B need not be covered in the proposal. Once the requiredclearances and funding for the implementation have been secured, POVEIGRID mayextend the contract to cover the implementation, in which case a contractvariation (involving additional funding) would be negotiated at that futurepoint.

7/ Copies of POWERID's documents for the Southern and Northern regionsystems wil be available for reference .uring th eprebid conference. whilethe short-listed consultants are encouraged to review the available materials,the proposals are not required to specify the time-requirements of thepossible required revisions, beyond stating their estimate of the expectedrange or work involved.

- 82 -

INDIA Annex 3.6Page 1 of S

POWERGRTD SYSTEM DEVELOPMENT PROJECT

Transmission Planningi, Computer facilities and Project Preparation

Terms of Reference For Consultants

Background

1. During the 1980s in India, many large power stations werecommissioned, and regional grids were further strengthened, based on a generalconcept of regional self-sufficiency. At the present time, severeoperational constraints regularly affect the operation of the transmissLonsystems, and cause poor service quality; these include low voltages in mnyparts of the system, especially at peak demand times, power swings followed byline tripping in cascade, system separation, massive loss of generation,voltage collapse, partial and sometimes total power supply failures. Inaddition, many potentially economic exchanges of power between differentregions cannot be achieved. One of the main reasons for these difficulties isa general inadequacy of transmission capabilities and control facilities.

2. All the transmission lines and substations presently being handledby a number of Central Sector organizations are being pooled under one singleCentral Sector organization, i.c. POWERGRTD. The mandate given by theGovernment of India to POWERGRID is construction of EHV AC and HVDC trans-mission lines, substations, load dispatch centers and communication facilitiesin a coordinated and efficient manner. POWERGRID is formulating its futureinvestment programs in bulk transmission and dispatch facLlities and needs toidentify and formulate a core group of high priority projects within theframework of overall power system expansion. The objective of the consultancyservices is to familiarLze POVERGRID with prevailing international practices,with special emphasis laid on the provision of methods, documents and softwareused in the area of power system planning, design and construction of thepower transmission and control systems; and on that basis help definePOWZRGRID's investment plan and prepare selected major components forPOVERGRID's investment program for implementation.

Detailed Terms of Reference

3. The technical assistance of the study consists of three tasks andthe supply of facilities to POWERGRID as follows; (i) Task 1: Examination andrecommendations for POVERGRID's and CGA's transmission planning facilities;(i) Task 2s Development of a power transmission plan; and (iii) Task 3:Preparation of selected major projects from POWERGRID's investment program forimplementation.

4. Task 1s Rain*ation and recommendations for POVERSGID's and CZA'atransmission planntma facilities

(a) Transmission system expansion plans are currently prepared by theCentral Electricity Authority (CEA) for the five Indian power regions, usingsome computer models for generation expansion planning and for the analysis ofrelated transmission requirements. CIA is presently planning to review and

_ 83 -

Annex 3.6Page 2 of 5

upgrade its planning mo041l. It ia anticipated that In the future POVEaCGUDwill perform the bulk of the technical transmission planning studies, with CIAin the position of verifying the reasonableness of POWiRGRID's expansionproposals, their consistency with plans of other parts of the electric sector,and the availability of funds. As POERGRID prepares to take on anincreasing share of the responsibility for planning and developing the Indian

transmission system, it is important to ensure that it obtains the mostsuitable modeling tools and develops suitable planning procedures for itsexpansion planning. These models and procedures should be coordinated andconsistent with tools used in CEA and possibly elsewhere for evaluatinggeneration investments, and possibly including models for economic evaluationof the Investment plans for the power regions.

(b) The consultants wllls

(i) examine the methods and modeling tools presently in use atPOWIGRID, CIA, (and elsewhere) in India for planning thetransmission system;

(i) describe system planning methods and modeling tools used in powersystems outside India for planning transmission system;

(Iii) define possible planning procedures and speclfic models suitablefor future use by POWIRGRID and CEA in the long-range and short-range planning of the transmission system at the regional andinter-regional level. Recommend the most suitable methods forPOWERGUID's and CIA's use for these purposes, that shall allow thetechnic.l and economlc optimizsation of decisions regardingexpansion plans

(iv) determine any additional equipment (computers, terminals, etc.) andsoftware that would be of value in hAlping POVIRGRID's and CEIAsnear-term and long-ternm planning processes;

(v) examine the desirability and practicality of CIA and POViRCRIDsharing the same planning tools for economy and for consistency Inplanning practices and decision-making;

(vi) recoammend additional tralning requirements, defining a trainingprogram teaching methods of planning, network model making, networkoperation and the use of the models recommended for POWERRGID's andCIA's use; and

(vii) recommend to what extent the supplier of modeling tools should beinvolved in the performance of Tasks 2 and 3, for the purpose oftralning POVIRORID and CIA personnel and for testing the use of themodeling tools on POVIZRGID's system.

(c) The main deliverables are% (i review of planning procedures usedIn India, and compare to those used elsewhere in the world; (IL) review ofplanning procedures suitable for POVIRGRTD and CIA use, and recommendations nuthe ones to be selected; (iii) specifications of the recomnended planning

- 84 -

Annex 3.6Page 3 of 5

tools; and (iv) recommendations on additional training requirements, (v)provision of planning tools (software and hardware) and related training.

S. Task 2: Development of a power transmission glan

(a) The basic aim of this Task is to help POWERGRID review its currentinvestment program and develop a transmission plan bringing out essentialelements to be included in the regional and national power grids by the year2002 and long term perspectives. The revew should take into account coomentsby the Bank in the Staff Appraisal Report 8172-IN June 4, 1990 for thaNorthern Region Transmission Project. The review process stould also providean opportunity to demonstrate the uses and capabilities of the new methods andtools to be recommended in the Task 1.

(b) The consultants will assist POWERGRID ins

'i) reviewing the latest generation expansion plans for the variousregions and make adjustments in the timing of projects in view ofactual and expected delays due to funding and other identifiableconstraints (an independent generation expansion planning exerciseis not envisaged to be undertaken under this study);

(ii) examining the potential for major inter-regional synchronous powerexchanges and requirements in generation and transmission for theirrealization;

(iii) reviewing prospects for implementing major inter-regional powerprojects, such as energy development in the North Eastern Regionfor large-scale power transmission to the Eastern and SouthernRegions;

(iv) examining present POWERGRTD transmission expansion plans anddevelop and optimize transmission plan up to the year 2002 andconceptualize long term perspectives, aiming at full utilization ofthe available generation capacity in all the regions; and

(v) quantifying the benefits of proposed synchronous interconnectionsin terms of energy exchanges and reduction of unserved energy.

(c) The consultants will also:

(vi) review POWERGRID cost estimates, and provide latest internationalcost information as required in the above work;

(vii) recommend a core group of high priority projects; special attentionwill be paid to possibilities for Immediate cost savings/improvedcapacity utilization by strengthening interconnections betweenneighboring states and regions; and

(v) define any additional studies to be made by POVERGRID to furtherimprove the transmission expansion plan.

- 85 -

Annex 3.6Page 4 of 5

(4) The main deliverables ares (i) interconnection and powertransmission planning study report for the year 2002; and (ii) recommendationson a high priority investment plan.

6. Task S: PreparaUon of selected malor proiects from POeRGUID'sInvestment program for imPlementation

(a) High capacity transmission system to evacuate Dower from North-Eastern and Eastern Regions to the other ReRions. The North-Eastern Region inIndia has an enormous power potential. CEA has projected surplus generationcapacity in the North-Eastern Region up to 4,000 MW during the Ninth Five YearPlan, and up to 6,000 MW during Tenth Five Year Plan. The surplus generationavailability in the North-Eastern Region should further increase in subsequentplan periods due to exploitation of hydro and gas generation potential in theregion and no possibility of commensurate load growth. The total hydrogeneration potential in the North-Eastern Region may stand close to 30,000 NW.Similarly the Eastern Region has a major potential for further coal-based

power development and several major project proposals, by NTPC and privatesector, are being prepared and examined. On the other hand, other parts ofIndia, especially the Southern Region, do not have enough potential resourcesto meet their growing local demands.

(b) In view of the above, it is essential to establish a high-capacitytransmission system from the North-Eastern Region to the Eastern Region andfrom the Eastern Region to other parts of India to meet immediate as well asfuture transmission requirements in an optimal and cost effective manner.Thus a pre-feasibility study is needed for phased development of a high-capacity transmission system to evacuate: (i) 4,000-6,000 HW power from theEastern Region to Southern, Northern and Western Regions; followed by (ii) anexpansion capable of handling additional power in the order of 10,000 MW fromthe North-Eastern Region through the Eastern Region to the other regions.This study shall bring out different transmission alternatives based uponseveral specific quantities of power to be transmitted to different regions.

(c) Implementation of Static Var Compensators SVCs are useful andparticularly effective in handling severe transient constraints and improvingsteady-state stability. In some specific cases, the Indian network suffersfrom transient instability and from a lack of voltage control that may besolved by the use of SVCs. The technical and economic justification of usingSVCs as against alternative solutions shall be examined before any decision ofinvesting such expensive components at two specific locations that will bedesignated before the beginning of the study.

(d) The scope of work under Task 3 covers:

(i) analysis of documents and reports already prepared by POIERGRID orother agencies;

(ii) assistance to POWERGRID in the definition and study of severalpossible alternatives and brief preliminary design of the variouscomponents for each alternative;

- 86 -

AnneS 3.6Page 5 of 5

(iii) assistance to POVERGRID to evaluate the costs and benefits of theproposed alternatives.- Review POWER6RID cost estimates, andprovide cost information as required; and

(vi) assistance to POWERGRID to undertake technical and economiccomparison between alternatives and recomuendation forimplementation; economic justification of the projects.

(e) The main deliverables for studies ares (i) a summary of previousreports and analyses; (ii) a description and analysis of alternativesolutions; and (iii) comparisons of alternatives and recommendations on theselection of the best alternatives.

- 87 - AnnexS 3.7Page 1 of 3

INDIA

POWERGRID SYSTEM DEVELOPMENT PROJECT

Completion of the Central Power Transmission Proiect

1. Loan 2283-IN for the Central Power Transmission project wasapproved by the Bank on May 15, 1983. However, the project was delayedinitially because of a dispute between GOI and certain state electricityboards in the Southern Region. During the delay, generation plans werechanged which in turn necessitated changes to the configuration of thetransmission system. The Bank approved those changes in 1986.

2. The project, as revised in 1986, includes the construction ofabout 1,000 km of 4Q0 kV double-circuit and 15 km of 400 kV single-circuittransmission lines ; construction and extension of related 4001200 kVsubstations2l; a back-to-back high voltage direct current (HVDC) substationin Vindyachal in Madhya Pradesh, to allow two-directional transfer of powerbetween the Northern and Western Regions interconnected grids; technicalservices for detailed equipment and system engineering and supervision duringconstruction for the HVDC link; and metering, instrumentation andcammunication facilities.

3. The implementation was begun only in April 1987, four years afterBoard presentation. While agreeing to GOI's request to revise the project,the Bank recognized that extension of the loan closing date would be needed,but reserved the right to review progress under the project and extend theclosing date when necessary. In March 1991, in an effort to acceleratedisbursements under the project, the Bank agreed in principle to finance itemsof equipment totalling US$27.2 million that were originally planned to befinanced by National Thermal Power Corporation (NTPC). The Bank reviewedprogress of implementation annually and agreed to extending the closing dateby one year each time, for a total of 36 months to March 31, 1992. The Bankdid not extend the closing date of Loan 2283-IN beyoid March 31, 1992, butinformed GOI that it would be willing to consider to include fundi-g thecompletion of the ongoing contracts (about US$23.2 million) under the proposedoperation. All of the expenditures would be covered under retroactivefinaIncing.

S. All the seven transmission lines and eleven substations areealready in operation. However, final payments to the contractors and

1/ 400 kV Transmission Lines built under the project (all have been completedand satisfactorily in operation)s (1) Ramgundam-Maumam; (2) Ihamunm-Vijaywada; (3) VIjaywada-Gajuwaka; (4) Nagarjunasagar-Gootyg (5) Gooty-Bangalore; (6) Ramagundam-Chandrapur; and (7) Singrauli-Vindyachal.

21 Sub-stations built under the project (all have been completed andsatisfactorily in operation): (1) Ihammam; (2) Vijaywada; (3) Gajuwaka; (4)Sooty; (5) Singrauli; (6) Vindyachal; (7) Chandrapur; (8) Ramagundam; (9)Bangalore; (10) Nagarjunasagar; and (11) Hyderabad.

- 88 - Annex 3.7

Page 2 of 3

suppliers and implementation of the contracts agreed in principle in March1991 have gone beyond March 1992. The Vindyachal HV)C back-to-back stationwas built under suppliers' credits and has been commissioned.

Central Power Transmission Proiect

:.atus of Expenses and Disbursements ProiectionsJanuary 13, 1993

…____________________________________.____________________…__________________Balance CommentsAmountUS$ million

…----------------------------------------------------------------__----------

1. Buffer conductors 5.29 Due to change In import policies,supplies got delayed and will becompleted now by January 1993.

2. Two Nos. of 315 MVA 3.23 Agreed by Bank in March 1991;auto-transformers awarded in June 1991. Suppliesand 4 Nos. of scheduled to be completed by50 MVARS Shunt March 1993.Reactors

3. Supply of conductors 4.67 To cover pending price variationclaims.

4. Two Nos. of 400 kV 0.58 Supply delayed because of qualitycircuit breakers assurance problems. Delivery

made in September 1992.

5. Erection package 1.65 For erection services duringFY92193; payments will be made inPY93194.

6. Control and Relay 0.75 Spares to be supplied against newPanels import license, issued in Oct. 1992.

7. Final payment for other 7.03ongoing contracts

TOTAL 23.20

Disbursements /Expenses Incurreds US$ million- during the first two quarters of FY92193 s 5.99- during the second two quarters of FY92/93 s 14.55

- Subtotal for PY92193 3 20.56- During FY93194 s 2.64

- Total s 23.20

- 89 - Annex 3.7Page 3 of 3

Comvletion of the Rihand Power Transmission Project

1. Loan 2555-IN for the Rihand Power Transmission project wasapproved by the Bank on May 28, 1985. The project consists ofs (a) a 500 kVHVDC line of about 910 km connecting Riband and Delhi and the associated AC/DCconverting stations for san initial capacity of 1,000 MW; (b) about 1,450 km of400 kV single and double circuit AC lines connecting the Rihani and Singraulipower stations with Kanpur, Delhi, Panipat and Jaipur, and associatedsubstations; and (c) thechnical assistance for the engineering, testing andcommissioning of the project. The project was cofinanced with Sweden and EXI1Bank of Japan. On May 29, 1987, the project was modified to extend the 400 kVtransmission system by a 250 km line to Malerkotla.

2. The project experienced delays in procu.ement, delivery andImplementation by the suppliers and contractors. The Bank reviewed progressof implementation annually and agreed to extending the closing date by oneyear each time, for a total of 36 months to December 31, 1992. The Bank didnot extend the closing date of Loan 2555-IN beyond December 31, 1992, butInformed GOI that it would be willing to consider to include funding thecosapletion of the ongoing contracts (about US$7.6 million) under the proposedoperation. About US$6 million would be covered under retroactive financing.

3. All the transmission lines, converter stations and substations arealready in operation. However, final payments to the contractors andsuppliers and implementation of the contracts will go up to Indian m11994195.

Status of Expenses and Disbursements Projections(Zzpenses incurred after December 31, 1992)

---------------------------------------------------------------- _--__--------

Balance Cc-mmentsAmountUS$ million

1. Circuit breakers 0.472. Shunt reactor 0.223. Static Voltage Compensator 2.394. Erection 0.665. Consultancy Services 1.206. Tower Equipment 0.927. Autotransformer 0.658. Other Ongoing Contracts 1.07

Total 7.58

Disbursements/Expenses Incurred: USS million- During the last quarter of FY92/93 s 5.02- During PY93/94 s 1.64- During PY94195 s 0.92

- Tctal * 7.58cr-r

Annex 3.8

INDIA

POWERGRID SYSTEH DEVELOPNENT PROJECT

Summary of Prolect Cost. and Financing Requirements

1. Financing Requirements By Source (USS eauivalent)

c..pon.nt IURO EURO Other ODA ADS P P130 St"t". TotaIFC LC FC FC FC FC LC LC FCILC

meter. 2.8 .4 2.7TA. 1.3 8.0 1.0 2.1 8.0

3SCC. U4.6 26.2 C8.2 80.4 28.9 19*.8E/A 10.8 2.7 18.1

Vind T 194.8 10.6 300.1Ram T/L 19.1 48.1 67.2CPT 86.9 2.6 39.4TA. 1.2 0.2 1.4

IDC 90.2 48.s 139.5

Totel 820.7 20.8 68.2 8.0 1.0 90.2 287.6 28.9 764.1421 ox OX 0o 12S 81X 8s 1001

* Inldel roision for aitional duty and taxation of US387.4 eilIon_eseeged during Loan nrgotitlons.

2. Index of Detailed Cost Tables from COSTAB reports

Annex Pages Title

3.8(i) System Coordination and Control1 of 2 Base Costs (Rs. M) and Equlvalent US$N2 of 2 Total Costs including taxes and

contingencies

3 * 8 (ii) Vindachayal-Dhule 400 kV Transmission Line1 of 2 Base Costs (Rs. M) and Equivalent US$12 of 2 Total Costs (excluding additional taxes of

US$33.6 million and contingencies)

3.8(iii) Ramagundam-Hyderabad 400 kV TransmissionLine

1 of 2 Base Costs (Rs. 4) and Equivalent US$142 of 2 Total Costs (excluding additional taxes of

US$3.8 million and contingencies)

wn , s ~~~~~~~~~~~~~~~~~~~~~~~~~~et ti gsg t -reI1 *S&- - '

-_ - - - - - .- - re - - ri -o -r - -_ _ _ _ _ _ r - - re* e t- - -O

r - - - - - - Si - - t- en ge - - _ramo-e - - re re tr - - rs - - t- Le r - -

Il- -- T gere- - e - -'t en - - ui,- - r t Si r - - S. in - 5i9 - - _

in- - ~re r ier - O MS - - *-i eIn *-i - - _ _

en - *et et on et SS- rg- notf*-et wt- eOt *-ni--

am - - - -- - - - - - - - - - :SuOMI

a-e - a - -t-o t-o et-o re-t-O IL-910 rt rtre re re te ne e e- s

re -- - - - - - -s $lo et &I t t et es*-*

re - rersve rerte -e eea l -le tn re- w'liI'

ree r ee en - en in-re ……e… i*ir Tn rn in en rI.ae-TIT

- --e- - -re e-e -en mnn t-O t-o t-OI ro r on

lea

pve r eTe *-e -a -I w*e VP AD tst - e-tl* 14 le - a a a' au V' a mTeaS

le . . . _ Ile _ - - ne e yse re- et

e - re re re r e -e -n *i aT n van ir *e- g's s"

*- … - --re rt r t - e e -I - e e-t -

ro- I' -t " T *" o e #s-

in … … … … i.a _ans i-n * tin * a- - :_n , e~ , r_e _e en: in en en 1- e° z-e- ~- au

a-e re……- * -t e - -n V" cloteet"t- - re n…e ro - rn - - - ntt *-n e - soaIt - . -- a I e n -re t,t - - - e-tt ett .gt - Amq.NXint- _e _ I' re $l* - - - * rt e e* r e - wrua.seti - - e `0 te re r - n - - -I*I gOt e I - _ _ ien _ . -. .~ ae ie en - Mm- - i- int in- _ t wzw

a . - - n TI ie gig - -e --i - lg c, f - q`e Otauala - -V'S - -Ile TIn _ _ - - t5t PI" rt - eww.3-- - - mnive zne- ens - a - rus nit in up.sin-i

e- - -_~ g *g gne e*ei - - - : oni n- en- - - .g g, re - e-g - a- - nit Iw t -B -e' m-u

* rs - re se r.e - eo n - - - e-Yt e*- tea - a

* Fnaee i eiini - anien eg * in nen -m it e-o i. rn rn g e en - n's muin.sie a,s - tot- 'wa's res re e t-t eqt rt ent : e-t ens evr e*-e **-m *engott- ens en in rin ro rr ent eg O ant- i -r rw t *-Ut s nt i if

*-n reg* re i.es ret i.e - i*ei n $ es r e en: i.se r mw t n- Se _A BT_m pa

i*ia tTet ii en ee an in - n e*m e **en e-n: ne eg *-_ .g9 rnve- ie eqtn n te ie - n rim rel g e.g *a* ro n -n- . eawtsme- ie*ieie- movsv t- . n meent en i g t*n ct e-n -

as en in in gg r e e* v -n - e ggm -n s m e-a Si eew - qmpsa

~~~~~~~~~~~~~~~~~~~~~a r,Xwz-ast mew;ttans

~~~~~~~° : 4-mu SW Wi im3

gt ~ ~ ~ ~ ~ ~ ~~O~O Ts u@pup*@. uAiaJ P X SL

- fT6 f-T6

- 92 -

WDTA

zmIUOU syu tm Deg1omnt ftojectAs

System Coor41n*ti.@ and Cocttol ato 2Detailed Cgats

(US4 m.uiou)UseOmof TtoSal

rot. (zit@l.

2.twavotmeat Coot"

NM ~~~~~~~0. 04 04.2 0.1 0.1 - .4 0.4 0.2 0.6Sutoataka * ~~~~~~~~~~1.7 3.4 6.4 2.9 3.0 1.0 10.3 12.1 6.4 UJ8.

Klaala 0-04 1.3 2.4 1.1 1.1 0.4 4.9 4.5 2.4 - .2alli Waft -1.4 3.4 4.3 2.0 3.0 1.0 10.1 119 642 - .1Ur of fadaftabety -0.2 0.4 0.7 043 0.3 0.1 2.8 1.3 0.? 2.0

NM --j60 2.1 3.0 . 0. 11. 7. jUSubtotal S33UMIN $MM-==4333 =24 i 1-- 7. U. -'T -8.

At - 2.4 4.9 4.9 4.0 4.1 1.4 21.0 31.1 - 4.8 25.0Sutoataka -~~~~~~~~~~~~ 12 2.5 4.5 2.0 2.1 0.7 13.1 10.4 0.2 2.4 13.1. -

SAsala - 1. 2.4 4.3 1.9 2.0 0.7 124 10.1 0.2 2.1 1U.4baRi 14e4u 1.6 3.4 4.1 2.7 2.8 1.0 17.6 14.0 0.2 3.3 17.4

Ut of laadlak.z - - 0.1 0.2 0.1 0.1 - 0.5 0.4 - .1. 0.5

subtotal 33 -e-+** fi -.- --d.I- -4i*i- *-67 -1-13.*83IAU -~~~~~~~~~~~~ ~~0.3 0.4 0.7 - 1.6 - 1.4 - 1.6kastataka * ~~~~~~~~~~0.2 0.5 0.4 - - -1.3 - 1.3 - 1.3

TaIla M" 0.2 0.5 0.4 1.3 - 1.3 - 1.3tsTaalIt -0.2oy 0.5 0.6 - - .3 - 1.3 - 1.3

NM ~ ~ ~ ~ ~ ~ -0.5 AA 1.2 - . - 2.0 - 2.0Subtotal ~INMRS?C!3 - r T 3.U - X . -17

M*d*a PX%dak - I* 1.5 1.7 - - 39 - 39 -3.9Mumataka -0.5 1. 1.1 Us - . a 24 -2.6!1aouWat - .5 1.2 1.3 3 30 - 3.0 - 3.0x"'ala -0.3 0.6 0.? -: - -1. .6' -12.4""ocaflbty 0.1 0.1 - -0.2 0.2 -0.2

NPLC - 0.4 ~~~~~~~~ ~~~~0.0 0.9 - - , -2.Subtotal U!IMSIII? T~~~~~~~ 1J 5T7 - - - 13s13.

Z. M=I. M I S 4 a UIIMndn ra zdeob - 0.1 0.1 0.1 0.1 0.1 0.4 0.4 0.6

Sutoataka - -~~~~~~~~~~~0.1 0.10.1 0.1 -0.4 - 0.4 -0.4

NM1 -03 - 03 -0.3Subtotal NMB. 20I a gum ~ 1 i ~*, j T

MM=x Pzad.ah - 0.1 0.1 0.1 0.1 0.1 0.4 0.6 - 0.6btsataka - ~~~~~~~~~~~~- 0.1 0.1 0.1 0.1 - 0.4 - 0.4 - 0.4

uzeala- - - 0.3 0.2 -0.1TaMI waft C .; 0.1 0.1; . 0.4 - 0.4 -0.4

ftedilbubeZ e MiSC- - - - . - - -

8. 33u02~~~~~~~~~~~~~~~~~~ascr~~~~~

3320 * ~~~~~~~~~~~~~0.6 1.2 1.9 1.3 1.3 -6.3 4.3 - - 6.3

Aftdh= P=dUh ~- - 0.3 0.4 0.3 - - 1.2 0.9 0.3 - 1.2Sutoataka - ~~~~~~~~~~~- 0.2 0.4 0.2 - - 0.0 0.4 0.2 - 0.0Sugala - ~~~~~~~~~~~~~- 0.1 0.2 0.1 - - 0.5 0.4 0.1 - P..5

?aBLl waft - - 0.2 0.4 0.1 - - 0.9 0.7 0.2 - 0.9

1*30 - - - ~~ ~~ ~~ ~~ ~~~~~~~~~~~~~~~~~~~- - 1-1 - * 1.

NM a - a a

Subtotal M1318D 0

Man Jaf t 1 19:02:30 1993

-93

POIIUOU SYSTU Dr zuparg nojzc Anaz 3.8 (1VOWDUACRAL..DUL Tra=wu atou Lin. page I. of 2

DeCtaled costs

la.cost -Ing M#EUUan

X. ZIwvastmenr. CostsA. PcaUn1nfaty4 a lYl WOxb 0-1 . 1.8 0 0.1

C. cii . a5. 35 17.3 04. 0.2 0.2 0., - 0.6

0. Vi.n-Jabalpuz ".in 2.2 10.6 6.4 - - 21.5 0.1 0.3 0.3 - - 0.7

T2oitO 99.9 349.4 399.5 99.9 49.9 998.9 3.2 .11.3 12.9 3.2 1.6 32.2conductor - 192.3 2S8.4 126.2 32.0 641.0 - 4.2 9.3 4.1 1.0 20.7

£art7wi4:e - 4.4 4.7 3.0 0.7 14.8 - 0.1 O.: 0.1 - 0.5

Insulator ~~- 30.2 45.3 2084 5.0 100.4g - 1.0 1.5 0.6 0.2 3.2

ffagdvace ritting - 13.4 20.1 8.9 2.2 44.4 - 0.4 0.4 0.-3 0.2. 1.4

Subtotal va-~Tab*.lp'wLinu-1 i:: * ,mi-N~I ___eA0. 5

Z. J410alpuc-ttarat LAneTw-z ~ ~ ~ ~ ~ - 43.4 317.2 222.1 31.7 434.5 2.0 10.2 7.2 1,.0 20.5

conductor - 42.0 210.2 147.1 21.0 420.3 -1.4 4.6 4.7 071.

ZUastkwie 1.0 4.9 3.4 0.5 9.7 - - 0.2 0.1 - 0.3Insulator - 5~~~~~~~~~~.2 26.1 '18.3 2.4 52.2 0.2 0.8 0.6 0.1 1.7

xagdware rltainq - 2.4 12.1 6.5 1.2 24.2 -0.1 0.4 0.3 - 0.6

conductor a 3arthwive 1.4 5 ±A 67T 0.8.34 0A 2 0.5

subrotal JTabaipwr-Itaxl uIn* - T113. 1767 405.0 ot 0.0 3r.1

09.7 314.0 351.9 69.7 44.9 697.2 2.9 10.1 11.4 2.9g 1.4 .28.9

Conductor 211.2 314.8 140.8 33.2 704.1 - 46- 10.2 4.5 1.1. 22.7

gacthwis. .4.9 7.3 3.2 0.8 14.2 - 0.2 0.2 0.1 - 0.5

Intsulator - 25.5 38.3 17.0 4.3 85.1 - 0.6 1.2 0.5 0.1 2.7

Mardvare I%tt±nq - 11.4 17.5 7.6 1.9 36.8 - *.4 0.4 0.3 0.1 1.3Conductor G Ba*thw1ze - 7. 11.4 ......IA -0.2 0.4 02 -06

Subtotal Izarai-Chule Line 111 7.-84 O's T 17

N. V±ndhytcbal - 4~~~~~~~~2.0 502.0 42.6 - 626.5 - 2.0 14.2 2.0 -20.3

400 kV - .7 28.7 20.1 2.9 57.8 - 0.2 0.9 0.4 0.1 1.946 XV - ~~~~ ~~~~~0.1 0.4 0.3 - 0.8

* O~~~~~~~R Panel - 1.0 5.2 3.4 0.5 10.4 - - 0.2 0.1 O .;

* . ~~~~~~Telaintr±nq Equipment - 0.2 0.6 0.5 0.1 1.5 - - - - -

91.0 LQtfl3? 0.6 3.1 2.2 0.3 .. 2 -04 .1 -0

Reactor 15.4 41.7 7.7 - 848 - . 2.0 0.2 O .7

6/ UXthy~ trcin2.0 10.0 7.0 1.0 20.0 - 0.1 0.3 0.2 - 0.6S/S Aix - ~~~~ ~~~~ ~~~0.7 3.4 2.5 0.4 7.2 - - 0.1 0.1 - 0.2

Overhead - 1.6 9.O 4.3 0.9 18.1 - 2.1 . j .Subtotal VindhyacMi __tton1T7!i: E T 0. *~~ .301.4 0.21

1. jbalpur Subst,-.Auto Tzansformo - .7 45.7 5.7 - 57.1 -0.2 1.5 0.2 - 1.8

400 XV Cquipma*t - 10.9 54.3 38.0 8.4 106.4 - 0.4 1.6 3.2 0.2 3.5

220 XV tquipment 0.6 2.8 2.0 0.3 5.4 - - 0.1 0.1 - 0.2

4o xv equipmen"t - 0.3 1.6 1.1 0.2 3.3 - - 0.1 - - 0.1

CR. Panel - 2.3 11.5 8.1 1.2 234 - 0.1 0.4 0.3 - 0.7

Telenetring Equipment - 0.1 0.7 0.5 0.1 1.4. - - - - -

12.0 - 1.2 6.2 4.3 0.4 12.4 -02 0. -04

ReactGape - ~~~~~~~~~~12.4 100.4 12.4 - 125.7 -0.4 3.2 0.4 - .4.1

Switohyard U*eoctlon - 4.1 20.6 14.4 2.1 41.2 -0.1 0.? 0.5 04. 1.3

S/S AUX 1.4 7.2 5.0 0.7 .,43A -0.

Subtotal Jaba.lpur Substation 31I1T1 15SIl ~ i 0If -31 0.3 1

JO0. Itaral £xtnL400 XV gquiLpment - 9.3 46.4 32.5 4.4 92.9 -0.3 1.5 1.0 0.1 3.0

44W1?v &=NMOT - 0.1 0.7 0.5 0.1 .1.5 ORt Panels.* 2.0 10.1 7.1 1.0 2o.2 Ol 0. O.; 0.2 O .7

Telenetrin.q Equipment 0.1 0.7 *GA 0.1 1.4 - - - -

914 equipment - 1.2 4.2 4.4 0.6 12.4 - -02 03 .Reactor - ~~~~~~~~~~~14.2 113.4 14.2 - 141.8 0.5 3.7 0.5 4.4

Wi4tchyard tr*aUtin 3.3 14.? 11.7 1.? 33.4 - 0.1 0.5 0.4 0.1 1.1

S/S AUX- 1.5 ...* 7. .... 0..44 j 0.2 -+I-u*Subtotal rtarai htn - 0. 6. . U Wr 311 I -2

10I. Chulae (MM)S S/S400 XV EquIpment - 4.0 20.2 14.1 2.0 40.4 -0.1 0.7 0.5 0.1 1.3

44K Ev quIpment - 0.1 0.4 0.3 - 0.8 CR Panelse 1.0 5.0 3.5 0.5 10.0 - - 02 0. 03

Te1emetrizm Equipment - 0.1 0.? 0.5 0.1 1.4 O.; O.;

92.0 Equipomet - 0.4 3.2. 2.2 0.3 4.2 O .1 0.1 - 0O.2

eA4ctor 9.0 72.1 9.0 - 90.2 - 0.3 2.3 0.3 - 2.9

Switoftyard graction - 1.5 7.4 5.2 0.7 14.9 - - 0.2 0.2 - 0.5

8/S Aux 0.6 3.9 2.7 0.4 7.80 - 0.1 0.1 - 0.3

Overhead - .7 6. 0 ... 0 .... a-% 0.3 9.2 0.4Subtotal Chula1 (HIfi 88 16.9Sj2 3±L 17jf - . 4.1

Total 11:!1,8.5, 1 M, .VII 4 I4 " U.

)4n an 11 16:21:07 1993

- 94-Annex 3.8 (tO)

1Gi3~RZD IUW UUVKZON2W UOJUC? eg I at 2

A. P"IlML"CY 4 Detaled oat

5. LArA CONPEnstt1@ 0.4 0.3 042 0.2 -0.0 0.6 - e.gC. CIVILL 30*w @41 0.5 0.4 - 0.9 - 0.9 - .0. Vtn-:SbaIUw UMn

TOWOe 3~~~~.. &.s 1642 4.2 242 39.7 20.0 9.9 1.0 30.7Clanducto: 7.4 11.7 S.d 1.4 25.9 1S.7 6.6 0.7 2s.s

gall-Owt" ~~042 03 CA - . 0.4 0. .XasuLatos 1.2 1.9 0.9 0.2 4.1 2.9 1.0 0.1 4.1

iada rittlnq 0.5 0.0 0.4 0.1 1.0 1.3 0.5 1.0condu&cte*J4 3aEW-I*. - 0.5 0.2 ....j.j fl. -

Subtotal Via-4abalpat ?n -37 I -33. 3-j Ta.6 -7". - "

3. jabolitur-tuAa*l LTo~o - 2.4 12.0 9.4 1.4 26.0 28.7 6.3 1.0 26.0Cooduoto: - 1.4 6.5 6.2 0.9 17.2 22.4 4.1 0.7 17.2gu11U4C0 -0.2 0.1 0.4 0.3 0.1 - 0.4Znmalat0* -02 1.1 0.0 0.1 241 1.5 0.0 0.1 2.1,ff"udva fittUag -0.1 0.5 0.4 0.1 1.9 0.7 0.2 -1.0

te~aso a aeu:,de --g j ja--d Ti0Sub.tal jabalu*s-1ta1 in - 4.4 23.4 -171 T ' 1Y1 44. .U.

t. XtaalObhule 11*.Tome: 3.3 12.1 14.6 3.6 2.0 35.6 25.0 9.9 - 23.0Conduct.: - 0.2 12.9 6.0 1.6 26.6 20.5 0.0 - 20.6Kagth4ce 0.2 0.3 0.1 - 0.7 0.5 0.2 - 0.7

tasulat" ,~~ . 0 1.6 0.7 0.2 3.5 2.5 1.0 - .Kanevas, Wttinq 0.4 0.7 0.3 0.1 1.6 1.1 0.4 - 1.6

cdu.t.sr a gaat1wl*e 03 0. . . .0 0.7 P.1~L - .suwa Iirt0* deLime 22 2 -30 -U. 3.9 7ll U.2 19. -

6.Toole - 2.6 23.0 3.1 - 26.7 - 20.7 -20.7

U.Vladyachal subtautlo400 Wi - 0.2 1.2 0.9 0.1 2.4 1.7 0.7 -2.4

.6 KV - a - a a - -

CR Wanol - . . . . 4 -0.4-

ftlemme*iaqtquipmat a 01 a a a0.1

V= gm, 9 :~a 0.1 0.1 a. 0.51 0.2 0.1 -0.3

fteaot@* 0.6 2.1 0.3 - 3.4 2.5 1.0 -3.4

awl cby*-"d Reetion -0.1 0.4 0.3 - 0.6 0.6 0.2 O .6S/a 'Aug 0.1 0.1 - 0.3 0.2 0.1 -. 0.2OV0*1W54 ..... A±I.A, A1 3 0.7 *±i 0.2 a0.7

subtotal Viadhytohl Substation - -I5J 1 11 TZ 11 1-i:i -T.

I. JabaPut Substation'Auto T=ssfoam0* 0.2 1.0 0.2 -2.2 2.2 - - 2.2400 Mr gUuipasat -0.4 2.1 1.5 0.2 4.3 4.3 - - 4.3220 KW quimwait - a0.1 0.1 a 0.2 0.2 - - 0.26 K11 Squlpeant - a0.1 - - 0.1 0.1 - - 0.1

cRP anel- 0.1 0.4 0.3 - 0.9 0.9 - - 0.9Telesastcu*quiint- - - 041 0.1 - -0.

- a 0.2 0.2 - ~~0.8 0.5 0.5Reac"Alpt.- 0.5 3.9 0.5 -4.9 4.9 - -4.9

switchysed ceaum 0.20.0 0.6 0.1 1.6 1.6 1.6

swtu t m 4wal - 4.- -T.I -- 37 - U. -1- 4

400 KW Uquimnat - .4 1.9 1.4 0.2 3.6 2.7 1.1 -3.0

" KW 6=UImm a - a - - 0.1 a - 0.cot V*AnlA . .1 0.4 0.3 - 0.0 0.6 0.2 -. 0.5?o155etiflg 'i5 0.1 a 0.1

9L~~Kqui~~sKt - a 0.3 0.2 - 0.5~~~~a 0.4 0.J. 0aReacts: - ~~~~~~~~0.5 . 0.6 a .6 4.1 1.6 -5.6

svitchysoazd ;eto 04. 0.7 0.8 0.1 1.4 1.0 0.4 a1.4

SIS hAu O.~4~ 4f-3--wJ

Kt. Saul. of=S S/S400 M Wi PiW.snt -0.2 0.0 0.6 0.1 1.7 1.2 0.5 1.7" IKV gquLpment - a - a a - a

cRlan.lLst . - 04 0. - 0.4 0.3 0.1 - 0.4T*eisstig qupsn - - a 0.1 a .1F= CqIAPBsnt a 0.1 0.1 * 0.3 0.2 0.1 a0.3

Reactor 0.3 2.9 0.4 - 3.7 2.6 1.0 -3.7

Svltdhyaud Enecttion 0.1 0.3 0.3 a 0.7 a 0.7 -0.7

S/S hAU - 0.2 0.1 - 0.3 0.2 0.1 -0.3

Oveghead - . 0.* 00subtotal Saul. (KIUMS /8 -: 4 33r.

MDO

POWRD System Developrent ProjectRUONDAlXMM-RABAYD Tr wu^8slon t9nes

Deatikled Costo

Base Cost (RS million) Base Cost just million)92/93 93/94 94/95 95/96 96/97i tota 92Z93 93/94 94/95 95/96 96/97 total

1. Invemtm_t CostsA. BADUMISSIlCU INBS

tcwoi 35.1 122.9 140.5 35.1 17.6 351.2 1.1 4.0 4,5 1.1 0.6 11.3Conductor - 52.4 78.6 34.9 0.7 174.6 - 1.7 2.S 1.1 0.3 5.63aztbeitz - 2.3 3.S 1.5 0.4 7.7 - 0.1 0.1 - - 0.2Insulator - 8.4 12.6 5.6 1.4 28.0 - 0.3 0.4 0.2 - 0.90agdwae rltting - 4.1 62 2.8 6.7 13.8 - 0.1 0.2 0.1 - 0.4Conduator a Daithbire - 2.6 3.9 1.7 0.4 8.7 - 0.1 0.1 0.1 - 0.3

Subtotal ?RSNSMISSION IIMS 3S. 192.8 -T-. 2 I 1.7 i :1i S8i. - i:i2 7.9 -2. 0.9t TE

a. TooLS - 63.2 316.1 221.3 31.6 632.2 - 2.0 10.2 7.1 1.0 20.4C. UIDRUAD S/S

400 V - 3.0 23.7 3.0 - 29.7 - 0.1 0.8 0.1 ; - 1.0CR Panel - 0.5 4.0 0.5 - , .0 - - 0.1 - - 0.2pwC uznnKw - 0.1 1.0 0.1 - 1.3 - - - - - -eltchyoard sUrcticn - 1.3 10.7 1.3 - 13.3 - - 0.3 - - 0.4aactor - 1.9 1S.0 1.9 - . 16.8 - 0.1 0.5 0.1 - 0.6

3/2 Am 6~~- .2 1.9 0.2 - 2.4 0.1 - __ 0.1subtotal NU3URMD 8,8--- :! TI71 - E T I1 -1 -

U'

400 RV 3qupl _t - 1.7 13.6 1.7 - 17.2 - 0.1 0.4 0.1 - 0.6CR namelat 0.5 4.1 0.5 - 5.2 0.1 - 0.2PLCC Uqui - 0.1 1.0 0.1 - 1.3 - - -Switchyard Brocti* - 0.8 6.2 0.6 - 7.7 - - 0.2 - - 0.28S uAM - 0.2 1.6 0.2 - 2.0 - - 0.1 - - 0.1Overbe d 0.3 2.7 0.3 - 3.3 - 0.1 - - 0.1

Subtotal RMIBaMr S/S - 3.7 2974 3.7 -- 36.7 - 1 0.9 0 - .

3. HVDC &tIflNa a WC comN. 937.5 3,281.3 3,750.1 937.5 468.8 9,375.3 30.2 105.8 121.0 30.2 15.1 302.4r. CIVIL - 10.8 54.1 37.9 5.4 108.1 - 0.3 1.7 1.2 0.2 3.5

total 37E16 31550.J 1743T128. T. 1,667-n Irrwniuuv r I E4? riTff-4T: -rii4m

fS San 12 1:38t14 1993

U'

0.

INDIA

POWBIRID System Development ProjectRANAjDlM-HYDERaM Transmission Line

Detailed Costs

Breakdown of Totolsmnci. cant.

Local DutiesTotals InoludiD2 Contingencies For. (axcl. a

92/93 93/94 94/95 95/96 96/97 Total Exch. Taxes) Taxes Total

I. *nostint CostsA. T?1A3Sa LInS

ToWS 1.3 4.7 5.7 1.S 0.8 14.0 9.0 3.6 0.6 14.0ConduJtor - 2.0 3.2 1.S 0.4 7.1 4.9 1.9 0.3 7.1Eathd.re - 0.1 0.1 0.1 - 0.3 0.2 0.1 - 0.3Inulator - 0.3 O.S 0.2 0.1 1.1 0.0 0.3 - 1.1HarA-are fttting - 0.2 0.3 0.1 - 0.6 0.4 0.2 - 0.6Conductor * Iarothw'Lr - 0.1 0.2 0.1 - 0.4 0.2 0.1 - 0.4

Subtotal AICUNSSICI OlNES L.T 9 .M 3 .S 1.3 2 3.4 -56 4T -0i.9 23.4

D. TOOMS - 2.6 14.5 10.9 1.7 29.7 - 29.7 - 29.7C. NIlRMAD SJS

400 RV - 0.1 1.0 0.1 - 1.2 0.6 0.3 - 1.2CR Pael - - 0.2 - - 0.2 0.1 0.1 - 0.2PLCC &=oUw - - - - - 0.1 - - - 0.1Switchyatd Etection - 0.1 0.4 0.1 - 0.5 0.4 0.2 - 0.5Reactor - 4.1 0.6 0.1 - 0.0 0.5 0.2 - 0.9S/8 AUX - - 0.1 - - 0.1 0.1 - - 0.1

Subtotal 3_D3A3A SIB - 0.3 '. - ' 9 2T: - 0.- -0.1 T.i

D. _MSIIA SiB400 NV Uqulpmeat - 0.1 0.6 0.1 - 0.7 0.5 0.2 - 0.7CR Sanelat - - 0.2 - - 0.2 0.1 0.1 - 0.2n?C Uqupmnt - - - - - 0.1 - - - 0.1Svitchyad Erection - - 0.3 - - 0.3 0.2 0.1 - 0.3sfs AU - - 0.1 - - 0.1 0.1 - - 0.1owerhead - - 0.1 - -0.2 - 0.2 0.2

subtotal RAN&GUMM S/S - T0.1 o . i - 7I o.s -

3. WmC IprU & AC cam. 34.2 126.0 151.2 39.6 20.7 371.6 270.0 83.1 18.6 371S6F. CMVL - 0.5 2.5 1.9 0.3 5.1 - 5.1 - 5.1

Total 51 13770 l ll.S 34.2 209.3 i125.3 9 19.6 434.2 I

Tue 5ama 12 39sM 1 1993

S.'

INDIAPOWERGRID - SYSTEM DEVELOPMENT PROJECT

Prolect Management OrganizationVindhyachal-Dhule Transmisslon System

| Chaimen and |MaruShgf Ditactor

Fanr (S Mane M r M e a

4001220kV -oiinj~ lbd~g kY on orbal EIua40n ofl sads

Sues*ain PA; nHstrotino 0k

F ojb r -oS a $Su e

I Construotion Construcion ConsItI ItIn Costuin

Masitalnane Marnonq.) Mafrn Mar aos r. S gra Mgt

4 40W2W D/C TofV 400 W C of 400 kV 4 400O220kV ONc T r 4 400)kV

subIsteson CL*bvupon d 400 - SuoNbbn of 400ILConstruction ;onucon C4s#onCorMuulTsi and Comsn

- Tr_n Ume TranSnsmbsZn ISl - Trarowsoifn LT,an.miin LsMahlergno Mafnfo Ma _drw M _akeac400 kV DIC 400 kV UC 400 kV Q/C 400 kV UC

Sr. Engr. Sr. Engr. Sr. Engr. Sr. Engr.

waXs~~ ~~~~~~~ _ Ma _wml Auxdlhaiy 13bFalsd o| a Swil) | |aWndt Commisbn sn | t oddPo

To1 Tlao8,n=n99

. i1t~~~~~~~~~~~~e

k_SO1b p

INDIAPOWERGRID - SYSTFiM DEVELOPMENT PROJECT

Project Management OrganizationTechnical Assistance StudWs

ChenrandO

I Obeclor~~anft ec

(A-I) Ph)Ians ia) .

Dom

A) Skx ces on TA2 8 Deveopeor Powor A) fIPowerng_ D a v lin sl Pns tPlantior Development o R

TrEasmitine and Bulk owerm Trrrid (84 m n mSB eATA)nternlewo POWRGanztio Phase3) anbit Structues in-3 am fgliCapcit EvcuatonIIIPwerfrolb r~~~~~~~~~~~~omEs and Wkw Region to

( e s n b pms ) 3ID A) Rp POWERbRIDs Pt c aO * Smtds ucon Rgr Btuk-Power CEaA Ftolrtles (1-1y) -eenr t POWERe Rgecor is2). -T _ansmisons -Amp-Dementa of Power lha _ Plsan P Plan for dekxet of P ERGRII)sExamh sand Recaronet TlbrafdW (B2) Intemale OrgWz 9 (-).Wd Soucbv P es In -oCepyy Eso o Power rom

* Review Current Striationh-Est andEa-A ARegonstR) eguRatony Reqy Reme qt( O8 R-g2) (32

Tbsion~~~~~~~~~~ - p# _ddo of SVCs (B 3.3)s urvey ot PracXlo in ttw 8yse

-1 RvewCurrent8itulloa0n d A _ssReu V ReqtSremz (82)

* Ou1 Proposed Key Regaons (843)

futinst D lopnt Stdes

A) Reviw of POWERG3IDs Phas II andPhas Il Plans- Alteaullves fbr Regkon adNatonal ystsm Conto (A-1)

9) ikaemiaslon Systm Deveopmet-Natonl SySIOM Contro Cent (9-3.1)

0'

INDIAPOWERGRID - SYSTEM DEVELOPMENT PROJECT

PROJECT MANAGEMENT ORGAIZATIONRamagundm-Hdrbed Un.

macwIan II~ mo

.~~~~~~~~~~~~~~~~~~~

TJCW"~~~~~~~~~~~~~~~~~~~~~~~~~~~'Iw vbdde l.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~II

,oex CIWUU of40W 42W

SoeTawmwds Lk oo* Suol at-8-a

-StVfiidon of TA.

400 kV 8C

I Mtenma. I II8hpw _ X_ Wks"

uw~~~~~. ;~~~0. X, .~~~~~~~~~~~'

C5 8~pmgsswww~- u.,~oo .q-euo~. imgi~ijuqj NOLLIV M 4 0.-90 A APSO Y UMqWWo I 4OM -01j1 lOMWWV9ftlo"Ummomm WOWOO0 qpw3.a-Nu uqmunoj.N Pj pijoieei.voi h,oopmlOosido-08 ago pUS&wftIommON .UN

.z M ~~~~~~~~I T4s I m I I I 444ovO". 1 t1 140 1 S4 I fI 3 3; _____ s6IIA ffi .. es

I~~~~~~ I "I I9 IT T~ A&I II T .l I s T _ F _T1_

+~~ ~~~~~ ri FF II I TIII' I oll II | e-

±3oBVU JJ8&1dO1A3 nUsA aUIU&3O

VIUNI

INDIAPOWERGRID SYSTEM DEVELOFMENT PROJECT

Implementaton ScheduleRamagundam-Hyderabad 400kV SIC Une

DO" 0 112 4 1 fl 17a19 5t 1 1t+k 24J 1i1 a u m 4' 4 llll4W 47 616 t Sc,s s "H Tr Ho".., "Wi k= eI11lsl tv+

Zero Oat. 31J/919Legend - NIT-Nte bwtIM g tender 06lD- Opening bid doc_en LOA- Leter d _war FON -founain C - Complet P - Pastt

MPG -EpLeaI_ ERCN - E O - M i EI - eey T6 C - Teedhg Oa ew ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o

0 jShur_ React(w 7

as~~~~e4tepe ~ ~ ~ i

NO'IAPOWEROftID SYSTEM DEVELOPMENT PROJECT

kg Ws 0taUo ScheduleCPaT A_unain

ERCN*Edion IDA WGCEYMITF I I

Zero Da~~~~~~8t.1242~="

Leg Aged-MT NaJ.bltedrO-OsM bi owee 8-LOuaadOB d

E~CN Eadan T 0-hiting& armlualing 01. Adity copute

Tmrwwnwm~~~~~~~~~~~~~~~~~~~W

rnSew..BO

INDIAPOWERGRID - SYSTEM DEVELOPMENT PROJECT

Implemntatlon ScheduleSou&em Region

Svtem Control and Coordindlon Project

Load Dwqgf 7

_ a I12 I Iss 1 ' 3 1 J.S I SII I II9 III 'II

3 ~~~~~~~~~~~~~~~~I I F FI I T

L_PECSP-

-..PREP. -oew

OlD%=2 Bd DowrfCONSLTS - ConMabtslECH-lbdw IEcN~ .jr

* _eb b o~~~~~~~~~~~~~~~~~~~~c

- 104 -

PROCUREMENT ARRANGEMENTS AND PACKAGES Pd SI$

TRANSMISSION UNES: VINDHYACHAL-DHULE, RAMAGUDAM-HRASAD

arm - uor - o yw Ul

P"

Am Woo DOCUMERNr-I DESINf ANM COtNTRC OF TPAIUWUO UNES OA =AM UAM

1.1 CESBNIOIIONOPUMU WAOSA-JABAUU400K N. 2.0 U83 US 4@u

DIOUNE

1.4 OWUMAUMOMON"U ffAU4MUNYDSNO40 a0 0.1 100 we fhC@n

Z2INS 06M40011MWO PAMAA0W04fV9M V llo . 414 lam1 8 t*ODNDOCUMUIf-t CONDCII ANW ACC1 .OR1E A . .

it 0016U0Oc"NOUC&aR BWDYIAL-AJMAIJ400 a 1* 10m 7 U a

2.2 ISUATM A IA& WIDYNMAS1.JAW"400% &S 4.Z4 Z.t U amOLE.

MONUOtO&EWWdIU W4OWA.JA6AUA40WKV lS 1.15 04 US S

13 COESSO tYUINE

is #~osumsus wow.

aV UNULAT&MRllM JA3ALFR-ITW0K0E0 444 to 2.21 US S

2s 00lUOTOA&ffAFnINIG AMAL-AMW400V am 0.51 04" UnS 8

27 CEONOiU- 0 11 US S

as W0UATOA&HUAV ITARSI-OH.4M0SCUWO S 7.00 4.8 OM5 on a

.0 COOIE8&0 A WAR860MU0KY We IAU am GM U a

2.10 OONOUOT&EAMIN RAMMW04MOVAS 400 W 10*a SAN 1A2 US aOw U.

2.11 NISULATCS&HA GAA05INM.4eAItVDBAD40 kV 2W 1.0 18 US awOw.c

2.12 OOWOUOIOS&IAM PAMAJNM-#GWEPA W 046 0.48 00 US aA 8OOM OUSUE

- 105 -hu 611

PROCUREMENT ARRANREMNES AND PACKAGES PMU8dS

SU9STATIONS (VINOHYACHAL, JABALPUR, ITARSI, OHULE, RAMAGUNDAM, HYDERABADKHAMMAM, MUNIRADA, CUDDAPAM, GA'UWAKA, CHANDRAPUR, AGRA)

mwrO . M F WM V -W

01N6 DOCIAMEN-0 IRANSPOMMER&REAMTRS 68.11. 61.".88.88

.1 M NFOIuR&MAr@JW= u_AA MA CoME 11" M 4* U S.

61 MTO ~~~~VRWAMI1L. S*APJS MO 18.1 OM1 OM5 we See

8. 2o MWASA 0* .1 0.tt US 4

SIOGDOCUMW4T-4 JWBSAYTN8 SSWITCGAR4

4.t CGROWl UE t OVr. W@4YA*L.J IJRJTA&AN 11*7 87 LG0 we WNE

4* OLAOIWHOA VIOWEWAOMS.ABALRWAOMC am0 8.44 LaE Ks *GEK

4* CW4 WIE .VT PAMMAIAZAMHVDAA8 1.10 1.* 0* S

4= NOLAT0SAN"hOS*AWD PAMAeUMADM WtSA0 Los GM0 S 54

CONTROL&REYHPMR R_HYAA OAM HfCAa0 0.19 0IL4 In 8

4. PLCOOUINET MUNAAAIHtDAVWa 0.18 0.0 OM0 US 550

UIDOINOOCUMIT-5S UBSAT1ONSWUVTCI4GER 81.. A 841 U4US

Li cG4OW9SESMKcrv..WQUOMAPAKAMGA06 U*U 4*0 am7 La US am8

8.8 ONTRL&OMLAY 51068. amAUMMWR8AOWW . 80 S.1" US 54.m

BIOOIGDOCUMENT-S SIUSTAnONCONTROL OUUILPMB $1.A.5 81..5 68.4*

81CONTROL&.AYPANAL WWUYSAMLAMAIAPRMOMWI 8.6 US 177 U 66

GA PW@WJWUSITS VIMMACHL.WMURWUAILO 1*1 1.0 0*8 Ice 6.6.0

laNDiNG OCUMSIS-? SUIWrATION STRUCTtUtES.SA 8.6 0.

7.1 81 ROBIOWNGTOMMOV V W46MOCHALARAMP.MOMUH 87 8.18 so0 US 0.0.6.

SSUIATIRO II'ClNVI

U_ OlrDOCUMIT-s SUeUSATO WIOURESd SA 68 S218

0. 1 mPA ULATCOM 0i 6 US 1ti AONAINSIU8 & W.ZNKA.OHMEORARW4MM

WADONMGRPUYNEU WYS^ H l 19 17 l

F! -S X j X

0 U Ii fi fits t of

g~~ 3 I X ts

00 i| Ij l g b |i| | tiiit

I I I I 11gI I ~I I | .X II 9i a

; : s : d

- 107 -

Anne: 3.12INDIA

POWERORID SYSIEM DZVLOP1N PROJECT

Schedule of Disbursemnts(US$ million)

The Bank Loan

hln FIWl Year Rol "Il IuvtIwoEndir Dua r _oa Dlrburner

FINDoember 81, 1998 a/ 80.7 80.7Jun. 80, 1904 80.6 61.6

FM6December 81, 1904 20.0 71.6jun 80, 105O 80.0 101.5

FY#0December 81, 1006 W0.9 162.4Jun 80, 19906 7.4 220.0

FY07Deemr 81, 16 20.0 267.6June 80, 1007 48.2 80M.3

FY00December 81, 1007 11.2 812.0jame so, 1998 16.7 828.7

FY00Deceber 81, 106 6.7 88C.4Jun 80, 1099 10.0 846.4

December 81, 1000 1.0 847.2Jun 80, 2000 2.0 860.0

Closlng Dat of the Loan Juo B0, 2000

*/ ncludse depo10 Itnto the Special Account (O1161 IIIIon)

The Prolect

Seek Other Leel IKYesw ud FInn Fli4Fne i

10s4 61.5 1.0 158.7 40.81006 60.0 0.4 121684 266.51006 127.8 11.1 8821.8 756.7lo7 72.0 20.2 1512.6 1042.01990 27.9 0.0 228.1 1186.81999 16.7 9.8 76.8 U7.02000 4.0 8.2 66.1 509.0

Toutl 0.0 62.2 6000.8 4807.9

- 108 -

Annex 3.13Page 1 of 4

INDIA

POWERGRID SYSTEM DEVELOPMENT PROJECT

Bank Supervision Plan

Bank Supervision Inputs to Key Activities

1. The staff input indicated in the table below is in addition to theregular supervision needs for the review of progress reports, procurementactions, financial statements and audit reports, and associatedcorrespondence. In the first year about 20 staffweeks will be required toreview progress with project preparation and establish appropriate proceduresfor monitoring the program. Thereafter an average of 12 staffweeks per yearwill be needed to supervise the project timed to coincide with projectmilestones as indicated in the schedule on page 4. Site visits will generallybe combined with the supervision of other Bank-financed projects underexecution.

Bank Staff Inputs for Prolect Supervision

Asproximt. Dates ActivIty to DOcember 2000 t I In

11/91-8/98 during Establishment of PORTID and defne cope of operations.projet Dfine financial ovnante.prepration Review of POERMID project mnagement procedurs, monitoring

and control of projects.Review amet transfer arrangements.RviewUs/drft contras with tReiwl technical guidelines modl bidding documents,eironma cearans requirenta quality asurancecoetrol requlr.

6 & 11/98 Review of projoct Implementation proress recruitment of Institutional/ 8proet conasultanta, prearatlon for lmp.mntationof ytem Economicecoordination and control. Engineering/ 7Reviw of Initial procuroemnt actions and disbursements. FrocurementReview of consultant recruitment for and Implementationof Finance 2technical assistance (tariff tdee, institublonal dvelopmentNd utility collaboration with #4CC).

Review of inetitutional performnee, takeover of RLDSr.Review of financial performance, commercial contracts, lettersof credit, revenu collection.

8 a 9/94 Review of project implementlon proress. Institutional/ aReview of recommenastions of tariff sties and Economicslmplennutaon/rocomendatione of tochnical assistance for Engnerin/ 7instltutIonl development of PERRD. Procu ntReview of proureomnt and disureonmn. Finane 2

Review of implemention of actions plane on tariffs andInstitutional development, ubtilty eollaboration with MCC.Review of Institutional performnc.Review of financial performnce, commercial contracts, lettersof credit, revenue colloction.

- 109 -

Annex 3.13Page 2 of 4

Two sugervision mi*sions _er yer / ntitutlonal/Ig01uis Eonomics S

Review of project Implemntation progress. Engitneerti/Revi1wof procure_et and dIsbursemnts. procrement 7Review of Implemnt.tion of actions plans on tariffs and Finanoinstitutional developmnt, utility collaboration with NOC. 2ReviCw of Institutional performnce.Review of financtal perforamnce, comercill arrangemnts,revenue collection. Insttutional/

Economies 8Project Completion Report preparation Engineering/

2000 Procurmmkt ?Finance

2

l/ 1996 missions will also undertake mid-term review.

Quarterly ProRress Reports

2. Quarterly progress reports will be prepared and submitted byPOVEIGRID, at the end of March, June, September and December of each year.The reports will provide an update ofs (a) project implementation,procurement, contract awards, withdrawal applications, disbursements; (b)technical assistance implementation; (c) financial performance; (d) executionof commercial contracts, letters of credits and revenue collection. Thereports will monitor performance against appraisal schedules and projections,analyze deviations, and present mitigating measures.

Project Management

3. POWERGRID's Project Management Structure involves considerableinputs from POWERGRID's staff in the regional offices. Day-to-dayimplementation is largely undertaken at the regions; with headquarter supportfor design, procurement, contracting and financial operations. A projectcoordination office has been established in the Project Department atcorporate headquarters. Site supervisors at each project location reportthrough the field organization to the General Managers of their respectiveregions. The regional General Managers chair monthly review meetings attendedby concerned project staff and senior executives of concerned headquarterdepartments to review progress and authorize payments to suppliers anderection contractors. POWERGRID management receives monthly progress reportsand reviews each project in detail in quarterly Management Committee meetings.Additional management-level meetings are also convened at short notice whenneeded to resolve urgent issues in project implementation. POVERGEID iscurrently introducing computerized project management systems to help scheduleand monitor project implementation and facilitate comprehensive and timelyprogress reporting, critical in POWERGRID's centralized project managementphilosophy.

- 110 -

Annex 3.13Page 3 of 4

4. Project consultants will be recruited under the proposed Bank loanfor the implementation of the System Coordination and Control component, Theproject consultants will manage and supervise the procurement and installationof the Southern region system coordination and control project, includingtraining of POUERORID and SEB staff, using contractors to undertake themanufacture, installation and commissioning of the facilities. Consultantswill also be engaged under the loan to prepare similar projects for theEastern, Western and North-Eastern regions. POWEIGRID has established adispatch and commanications office in the Project Department to work closelywith the consultants with the intent of taking over operations of thefacilities after commissioning. POWERGRID will also form a core supportgroup, which will provide additional training for POVERORID and SEB operatingstaff as required.

S. The Transmission Reinforcement comPonent will be executedsubstantially in line with POWERGRID's standard project management philosophyand transmission construction approach. Contractors will design, supply anderect transmission line sections, while POVERGRID will oversee the lineconstruction and be responsible for procuring selected materials in bulk. Asan innovative feature to be introduced under the proposed project, a ContractReview Panel will monitor the liplementation of the transmission supply anderection contracts. The Panel will consist of three members, one nominated byPOVERID, one by the contractor, and one will be a joint appointee. It willreview and is expected to settle most disputes about matters such progress.quality and payments, without having to proceed to time-consuming and costlyarbitration or alternative legal settlement mechanisms. the Panel is beingintroduced to attract wider international participation in competitivebidding, In view of POWERGRID's desire not the engage independent consultantsto manage its conventional transmission line projects.

IND'A

POWEROD PoW Systs D0 _iWu Proet| | 1 1992 ~~~~~ ~~~~1993 1994 11956 1ZB low7 199 1111 201ID lAt nI n 1Q2103104101102103104 102lQ3la4loiia2lQ3la4il2lc3la4letll3ia4lotio2lQ31Q4lQ1lQ2la3lo4leTl-2

I MWN PRiOCESSNIII 0w .- 2 SA_ _ _OW sa3w _ ..3 LOANUNe"_ 1w

4 lloWdeAPPG SW

S Low Efflanhs 13w X6 SueWbM*b-P .o1jecthdesm 283.1w

7 R_PAW Pctn qMu0 Pam 4w ;8 R.dewSyvmWonbidCordPt*I 4w

Rl System CWMYh t1 PrM _ 4w9 cotk RAM 4w

Is RvuEPA*.trPwAV8hiSkS 4w

10 RAWCPTCqMM&Tlp 4 t .3 b1aped & PCR CPTflhUd Pr*i 4w 17 R_dTaf& la-pigiag 4 l

12 R.w PCRtbr_m1puguu 4w12 k.psh POR .remeg&4 b Lb. 4w

14 _ __ . B16 !A Io. &PPR8ybm Coi_ 8 _d 4w

1X N__ R*d~~~~~~~~~~~~pap I

tDtA

P011536MW SY8TEN DfEWLOPUe] PROJECT.....................................

POMERSRID: B8tance set a of April 1, 1992(eafr. debt equity cosmrsion) . Aons

Total of Wich:ASSETS: POWERGRD mtPC NNPC UEEPW NPC NLC POSIR ID

- *~~~~~~~. . . ... .. . . . ... .... . ... . . .. .... *. . ..

Met fixed asets in operation 35,379 71X 30,617 2,632 573 958 599Work In-progress 8,819 18X 2,915 2,062 749 230 2,6S9 204Storem end advances 2,323 SX 729 515 186 5B 665 170Current ssets 3.160 6X 576 2,584

Total assets 49.681 1001 34,837 5.2G9 1508 288 4,282 3,557

FINANCED byt............

Equity 18,349 37X 13,291 1.632 1,016 108 1,691 611Retained earnings (18) (18)Foreign currency loans onlent by G01 4,499 3,826 647 26Other dbestic borroiIng 4,447 2,420 509 320 821 377Direct foreign currency loa 9,m 9,260 Sl 21~~~~~~...... . ...... . .. ...... ...... . .. ...... ......... ............ ..... ...-.-

Subtotal lons 18,719 3 15,506 1,667 320 0 821 405and 9,870 201 4,309 1,712 172 180 1,497 2,000

Currant lifbilfties 2.761 ax 1.731 198 273 S59

Total liabilities 49,681 lOOX 34,837 5,209 1,08 2J8 4,202 3,557

1001 701 101 31 1X 91 7X

POWtOs: Net fixed asets fn operatfon b refion

Total Region:PQC Northrn I Eastern N. Eastern Southern estern keadquarters

net fixed asses in operation 35.379 19,001 4,326 s7 5,08 S,848 S43(as of Witl 1, lM)

lO(X 54X 12X 2X 14X 17x 214K

t.

IDIA

PORID SYSTEM DEELOPMENT PROJECt

POlDst IINESTIMEIT PRORWM and UINAIICIO REJIERBIEMTS

(Rs.Nlltien)---**--------.......................................................----........... --.... --...... _ _ _....................................

DESCRIPTIJO rr enig R.E. s.E. --------- ProJected-----p Total ' ..- Pro.....ect..Proleeted#-- ...---.... s TotatMarh31st 1992-93 1993-94 1994-95 199-96 1996-97 8th Plan 197-98 199899 1999-00 2100-01 2001-02 9th PLan

................ ........................................................... ..................................................................................................................................................

FUNDING RESIRENENTS :

Capital wnnstaint ( inct. IOC ) 9005 15449 27.852 23,316 21 769 97,391 27,377 22.737 33,921 33 346 3476 152.165Total debt service 3.601 4.597 S.147 6.021 8.493 27.859 13,384 16.,J93 21.903 21.650 26,239 99.529

0 0 0 0 0 0 0 0 0 0 0 aIncrea ( decr¢e ) fn lorkine Capital 1,207 1,553 (2,712) 1,427 3,876 5,351 (2,779) 1,746 (4,412) 1,133 1,434 (2,877)

Total fdino RequIremEnts 13,814 21,S99 30.287 30.764 34,138 130.602 37,982 40,576 51,491 56,308 62,458 248,817

FINANCED 8Y t

Met fnterat cash Generation 6,217 7,914 9.514 11.796 15.247 50.689 20,466 23,665 26.463 29,846 35,270 135.710Equity 411 1.199 424 157 S86 2.779 104 40 318 0 0 462

(1 oreig MAma nm t: y Northe Regfon TRoansmlIenon 498 39 2,178 2,920 3,191 9,180 4,720 937 0 0 0 S.657other onwoing eloans 690 420 34 0 0 1,144 0 0 0 0 0 0

- 0thei onwoing multitateral/bhlateral loans 4U0 1,635 1.860 345 118 4,438 170 185 0 0 0 3560 0 0. 0 0 0 0 0 0 0 0 0

(if) Other Dmxestic Borrowing 2 427 21 1,052 2,216 3 718 235 17m 193S5 1,624 2,350 7,919(ill) Bonds 2,50 2,500 2,50 2,500 2,500 12,500 4,000 4,000 4.000 4,000 4,000 20,000

Total Doeestic lorroming 2,502 2,927 2.S21 3,S52 4.716 16.218 4.235 s,m 5,935 5,624 6,350 27.919

(Iv) Direct Foreitw currency loans :- Proposed World San loan 1,132 1t913 4,135 2,399 1,259 tO,1838 95 625 136 1,726- Nulttlaterat/bilaterat loans 992 3.574 4.440 6.779 7,924 23,709 4,067 5,684 11,837 13,S13 13,947 49,048- other coin.rcial borrowing 2,559 4.071 9.253 6,080 4.405 26,369 8,144 4,788 6,802 7.32S 6.892 33,9f1

0 0Total Foreign currency Borrowfng 4,603 9,558 17,828 15,258 13,588 60,916 13,177 11,097 18,M 20.839 20,839 84,726

Total Sources 13,814 21.S99 30.287 30,7n 34,138 130,602 37,982 40,S76 S1,491 56,308 62.458 248,817

ISIA

POMSESID YSTEN ODEWOPHEST PROJECT

POUERGRIsI INWE ISATEN3ITS............ .................... .......

(Ra.Khllion)............................ ............................................................ ........................... ^.

DESCRIPTION FT ending t991-98 R.E. 8.E. .----- ProJectedE- <--3 -.. . Projected.- -------- DNHaeh 31st Audtal (* 1992-93 I99-94 1994-9f 15-96 1996-9 199t-98 199899 1999-00 2000-01 2001-02

........................................ ...................................................................... _ ..........

Operating RevenueslTo=sdson Ch4re 0 6,460 8,314 10,091 12,616 16,359 21,989 25,634 28,957 32,948 39,258O or lInrx ( (*1) 217 491 491 491 49 491 49 491 4 491 491

TOTAL OPERATING REVENUES 217 6,50 8,805 10,582 13,107 16,850 22,479 26,12S 29,448 33,439 39,749oprating Epses:

Operation and Nminte,mnce 233 460 617 795 1,03? 1,330 1,740 2,156 2,712 3,319 4,206Salary Wan 58 115 154 M99 259 332 435 547 678 830 1,051Operational Igares 116 230 309 397 519 66S 70 1,093 1,356 1,60 2,1030thw rO.& N. Expenses S8 11S 154 199 259 332 435 s47 678 830 1,051

Depecitiontfn 0 1,406 2,051 2.370 3,176 3,r10 4,620 s,958 6,834 8,459 9,622 U.,= r1city Duty 0 0 0 0 0 0 0 0 0 0 0 'others 0 273 23 27 273 m 273 273 273 m 273

TOTAL OPERATING EXPESES 233 2,140 2,941 3,438 4,487 S,313 6,633 8,418 9,818 12,052 14,101 1

Operating Ineore Bfore Interest (16) 4,811 s,863 7,1U4 8,620 11.538 15,846 17.707 19,629 21.387 25,648

Interest Chargeable to Reenvuw 2 1.786 2.457 2,s55 3,768 5,841 8,687 10,358 11,393 12,507 U1.77

Profft before Tax (18) 3,025 3,406 4,189 4,852 5,697 7,159 7,349 8,236 &,O 10,87n

LaesPrw1isin fortax 0 0 0 0 0 0 0 0 0 0 0Profit after Tax (18) 3,025 3,406 4189 4,852 5,697 7,1s9 7,349 8,236 8.8 108,s72

Prir Period na_m (Not) 0 0 0 0 0 0 0 a 0 0 0Xet Insxse (18) 3,02S 3,406 4,189 4,852 s5.9 7,1S9 7,349 8,236 8,880 10,872

Divided 0 0 0 0 0 0 0 0 0 a 0

Retained Earninos (18) 3,025 3,406 4,189 4,852 5,697 7,159 7,349 8,236 8,880 10,872Averae Net Fixod Asset (Historfc) 42,616 52,431 63,536 78,448 94,806 118,90 141,110 166,009 19,869 236,07%Rate of Returm n nHistorie Asset ) 11.3 11.2 11.2 11.0 12.2 13.3 12.5 11.8 11.1 10.8 01,Return on Capital Eployed (W) 10.9 10.6 10.9 10.8 11.6 12.7 12.1 11.S 11.0 10.6 1 Xoperating Ratio CX) 30.8 33.4 32.S 34.2 31.5 29.5 32.2 33.3 36.0 35.5 0

(*1) IncLudes prltiinwy OXpnee,boen anpenees,rabete to estt and contingencies.('2) Incudes trnfer values of assets as an Narh 31, 992. w

toIA

P .ERI S,Ml OE,LOPNET PRECt

IOURCS AID APPLICATIOI OF RNIDS.................................

(b.RIUin)DESCRIPTION PY ending 1991-92 3.1. 3.1. 4--P--ProJetedF--s3 ..--------- -----ProJeced d----------- Etb Plbn 9th Plan

arNo 31st Actual (* 1992-93 1993-96 1994-95 19WS-95 1996r97 1997-98 1498-99 1999-00 2000-01 2001-02 Total Total....................................................................................................................................................................

1OURC or PimDS

Operating Iruan befoge interest (16) 4,811 S,863 7,144 8,620 11,536 1S,846 17,707 19,6m 21.387 25,648 37,915 100,218Pior ledio mam (Not) (0) 0 0 0 0 0 0 0 0 0 0 0 0Depreiation(') 0 1.406 2,051 2,370 3.176 3.710 4,620 5.958 6,834 1,459 9.6*2 12.713 35.493

Total Intnal Cah Generation (16) 6,217 7,914 9,514 11796 15,247 20t466 23,o65 26,463 29,846 35,270 50,49 135,710

Equity Contrfbut 23,999 411 1,199 474 1S? S86 104 40 318 0 0 2,719 412Capital Receipt

Lon. Contrwcted 13,018 2,741 3,46 5,468 3,845 32717 5,217 1t390 158 I3 0 1237 6,900Bonds 9,87 2,500 2,5OO 2,500 2,S00 2,500 4,000 4.000 4,000 4,000 4.000 12,500 20.000Loa to be Contracted 0 1,944 6,S19 12,381 12,466 12,087 8,195 11,481 20,SS3 22,327 23.189 4S,397 85,744 $

Total Borrofngs 22.88 7,186 12,485 20,349 18,811 18,304 17,412 16,871 24,710 26,462 27,189 77,14 112,64S

TOTAL SIES 4,870 13,814 21,599 30,287 30,764 34.138 37,982 40,S76 S1,491 56,308 62.4S8 130,602 28,S17

APPLICATION OF FUNDSInvestent Progr_:

Capitat Investmnt 45.83 8,208 14,319 25,506 19,691 18,284 24,971 20,409 31.439 30.751 32,8 26,007 10,407Interest During Construction 618 797 1,130 2,346 3,626 3,45 2,405 2,328 2,481 2,S95 1,949 11,314 11,58

0 1,122 1,337 2,72 1,681 1,663 1.73 1,777 1,525 2,079 (82) 8504 7,011Total nuest_mt 46,511 9,005 1S,449 27,852 23,316 21.769 27,377 22,737 33,921 33,346 34,78S 97.391 lS2,145

Debt ServiceInterest Card to Opeatia n 2 1,786 2,457 2,955 3 54141S 868? 10.358 11633 2 6,507 1 63 16827.920Amortization of Loans 0 766 844 1,270 1,40 1,635 384 4,735 6.046 6,823 7,963 6,054 29,436Amrization of SOndS 0 1,050 129 922 712 1,017 829 1,000 4,S44 2,S00 3,500 4,998 12,373Totat Debt Sevice 2 3,601 4,597 5,147 6,021 8,493 13,384 1o0,93 21.983 21,8130 26WsU9 27.89 99,529

Dlvldm aon Shwe Cpltatl 0 0. 0 0 0 0 0 0 0 0 0 a

incrse (DIeea) in Mrking Capital 358 1,207 1,553 (2.712) 1,427 3,876 (2,79) 1,746 (4,412) 1,133 1,434 S,351 (2,8)Provision for Tax

TOTAL APPLICATION OF FS 46,870 1,814 21,599 30,287 30,764 34,138 37,962 40,S76 S1,491 56,308 62,458 130.602 2A,017 i

Contribution to Constrution (Anual) 20.12 20.52 20.42 20.42 21.08 28.3X 30.52 20.32 20.6" 21.8 20.52 24.31 t.Contribution to Construction (3 yer Avg.) - 20.32 20.4X 20.42 20.6X 23.6X 26.6X 25.72 23.02 20.921 21.3 -Dbt Serwv CcwrAg - 1.7 1.7 1.8 2.0 1.8 1.5 1.5 1.2 1.4 1.3 1t8 1.4 °

POMESSID SYSTEN DEVELOPNENT PROJECT

.. . . . . ..... ................ . ........... .PCEO :KO SALNE SHEETS

................................. ............................................................ %............................................... *...... ..... .............. ..... ..... . , ....... ,... ,,,,,,,,,,,_DEUCRIPTIoN FY endfng 1991-92 R.I. B.E. 8 --------Projected- .- Pr.-**.-........Projectedd...-.-^-....>

March 31st Actual (* 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 19900 2000-01 200t-02ASSETS

rosa Stock 35,379 51t260 58,465 77,892 93,836 117,493 1S0,518 172,327 213.107 239.342 279,598LesstDepreciation 0 1,406 3,457 5,828 9,004 12,71 17,334 23,291 30,125 38,585 53,206Not Fixed Assets In Operation 35,379 49,854 55,007 72,064 84,833 104,779 133,184 149,036 182,982 200,757 2a6,392VIPCapftitl Woks In Progress 8,819 3,318 9,914 16,654 22,551 21,041 16,522 17,264 11,m 17?466 16,889Stores 8 Adva 2,145 770 2,419 4.104 S,578 S,201 4,071 4,256 2,885 4,307 4,413Niscetlane Assets 177 177 17 177 17 I7 177 177 177 1n 177Total Ffxed Assets 46,520 54,119 67.518 92,99P 113,139 131,198 153,f95 170,734 197,821 222,707 247.671

Current AsetsCah nd tan Stanle 22 200 200 200 900 1,00 600 1,000 200 200 200Shot Term deposits 2,163 918 2,3t8 9t8 1,318 3:01o 918 2,018 0 0 aReceivables 0 1,t42 t,471 1,U69 2,190 2,81% 3,?S7 4,366 4,921 S,So18 6,43ctnwentortes 429 429 429 497 648 831 1,068 1,367 169 2,075 26,64Loans & Adanes 512 564 620 682 750 825 908 999 1,099 1.208 1,329Otber Current Assets/Debtors 35 38 42 46 51 56 62 68 75 82 90total current Assets 3,160 3,311 5,081 4,112 5,858 9,146 7,332 9,817 7,989 9,153 10,891

TOTAL ASSETS 49.681 S7,430 2,599 97,111 118,99? 140,345 161,287 180,SS1 205,810 231,661 258,762LIABILITIESquSitySha Capital Issued 23,950 24,Ut 25.660 26,085 26,242 26,828 26,932 26,972 27,20 27,290 27,290Share Deposit 100Retained Earning (18) 2,885 5,991 9.701 13,896 18,757 24,902 31,451 39,43 47,932 58,826Basih Red,enton Reserve 0 121 421 900 1,55T 2,393 3,407 4.207 4,471 4,843 4,821tottl Eq Aty 24,031 27.467 32,073 36,686 41,695 47,978 55,241 62,631 1,185 80,065 90.937L.T. DebtLoe rontrwted 13,018 14,993 17,615 21.813 24,118 26,196 29,616 28,965 26,760 25,04S 22on60Bonds 9,870 11,320 12,524 14,102 15,890 17.372 20,543 23.543 22,999 24,500 25,000twoan to be Contracted 0 1,944 8,463 20,844 33,311 45.401 51.525 60,313 77.181 94,536 111,946Total Lon TeOM Loans 22.888 28,257 38,603 '56,760 73,318 88,970 101.684 112,821 126,941 144,08 159,806Leas: Current Maturities 0 2,140 2,192 2,252 2,652 4,697 5,735 10,S90 9,323 11,4 11 463LuateLi Debtilt8 22,8 26118 36.411 54,507 70,665 84,272 95,949 t02,231 117,618 132,617 148343Current Liabilities

d>Cash Credit 0 814 6S2 350 800 1003 1,015 1,520 1,520 2,135 2,794other Current Liabilities 2.761 89 1,270 3,314 3,184 2,393 3,346 3,579 6,164 5,580 5,224 , (DCurrent Maturities of LT Debt 0 2.140 2,192 2,252 2,652 4,697 S,735 10,S90 9,32 11,463 11,463XTotal Current Liabilities 2,761 3,844 4,114 5,917 6,636 8,094 10,095 15S689 17,007 19,178 19,481 4Total Debt 25,649 29,962 40,52S 60,424 77,302 92,366 106,045 117,920 134,625 151,74S 167,824 o.TOTAL EIIUITY AND LIABILITIES 49,681 57,430 72,599 97,111 118,997 140,345 161,287 180,551 205,810 231,861 258,12 wDebt:Equity Ratio 49/51 49/S1 53/47 60/40 63/37 64/3 43/37 62/38 62t38 62138 62/38Current Ratio - 1.4 1.4 0.9 1.1 1.8 1.S 1.5 1.0 1.2 1.4AJceoants ecivabso ( of dsys) - 61 61 61 61 61 61 61 61 61 61

- 117 -

Annex 4.4Page 1 of 3

INDIA

POWERGRID SYSTEM DEVELOPMENT PROJECT

POWERGRID: Assumptions for Financial Projections

Price Escalation and Exchange Rates:

----- Inflation - ExchangeYear Rete Local Foreign US$1----------------------------------------------------------

1992/93 10.OZ 3.12R9. 28.61993194 8.0? 3.12Rs. 31.61994/95 7.02 3.11Rs. 36.11995196 6.0X 3.12Re. 38.21996/97 5.5 3.12Rs. 39.91997198 5.O 3.12Rs. 41.51998/99 5.0? 3.1%Rs. 43.11999/00 5.02 3.12Rs. 44.32000/01 5.0? 3.12Rs. 45.62001/02 5.0? 3.1Rs. 45.6

Income statements

1. Revenues and Tariffs: POVERGRID is a service organization, itsprojected revenues are not derived, as occur in most power utilities, fromdemand for electricity in a specific market, but are a function of the assetsit operates. POWERGRID's transmission charges are the sum of the operatingcosts which includes normative operation and maintenance expenses, actualinterest on loan funds, depreciation oncapitalized assets and a reurn on theequity portion of its average net fixed assets in operation. The presentreturn onequity for existing asstes allowed is 122, but taking into accountthe expected increase in return on equity from 12? to 16? for new powergeneration projects, the same rate has been assumed for new transmissionprojects.

2. Operation & Maintenance: Projected on the predefined norm of 1?of the capitalized cost of the assets in operation. Revluation of assets isnot allowed, but the value of the assets on which OM costs are calculated,are adjusted from time to time by decision of GOI to account for inflation anddevaluation of the Rupee. A 10 annual escalation as allowed under theexisting contracts has been assumed. In line with current budget estimates,O&M cost are assumed to comprise Salaries & Wages (25?), Operational spares(502), and administration and other expenses (25?).

3. Depreciations As per GOI guidelines, POWERGRID uses a straightline depreciation method. The current depreciation rates allowed by GO0 are3.4S for transmission lines and 5.06Z for substations 5.06?. An averagedepreciation rate of 4Z per annum on gross fixed assets (opening balance),with a salvage value of 10 has been used in the projections. Additionaldepreciation due to increased project cost and capitalized foreign exchange

- 118 -

Annex 4.4Page 2 of 3

rate variations is calculated at the same rate of 41 per annuu over theremaining depreciable life of the asset.

4. Dividend on Share Capital: No dividends have been assumed and allprofits are ploughed back into POWERORID' operation to help finance therapidly expanding capital expenditure program.

5. Interest chartess For existing loans contractual interest ratesare used. They are sumarized belows

A. IBRDIIDA loans through 001 I 152

S. Bonds - Existing tax free 6 92 and lO0Existing Taxable 0 131 and 141

C. Direct loanst IBJ Japan 5 5.72 (avg)EXIM Japan 6 61SEB Sweden 6 31EDC Canada 6 9.51

D. Other ioans through G0I 6 15l

Z. Domestic loans 1 151

For new projects the following assumptLons have been used:

A. IBID and other multilateral loans 6 92 (incl. guarantee fee)

S. Bonds - (1993-95) 6 181(1995-96) 6 161(1997-2007) 6 151

C. Direct foreign currency loans l 1O0

D. Other loans through 001 615

L. Domestic loans 6 151

SOURCES AND APPLICATION OF FUNDS

1. Investment; Investment phasing is based on POVERGRID's EighthPlan projections ai submitted to Planning CommLssion and its own investmentproposals (Annez 2.4).

2. Sources of Finances Up to 1991-92, equity and loans are based onexpected transfer values from the original owners. 001 equity support forogoing projects are in line with existing agreed arrangements. No further001 equity support is assumed.

- 119 .

Annex 4.4Page 3 of 3

3. Repayment term assumed.

IBRDIother multilateral - 5 years grace period 4 15 year repayments.

Bonds - Total repayment in the 7th year. A bondredemption reserve of 50X of repayments(spread over 7 years) has been created.

Other loand - 5 years grace period + 15 yearsthrough GOI repayments.

Other foreign currency loans - 5 years grace period + 10 years repayments(from date of first drawl).

BALANCE SMElT

1. The balance sheet as of March 31. 1992 is based on the estimatedbook values of assets and liabilities transferred as per the NTPC, NIPC,NEEPCO (Acquisition and Transfer of Power Transmission Systems) Ordinance,January 8, 1993.

2. Work in Progress: VIP is calculated as the difference between thecumulative investment during the years and fixed assets value of all completedprojects at the end of the fiscal year. The total capital work in progress isshown under two headings namely (i) work in progress, which is estimated atSOX of the total capital work in progress and (ii) stores and advances, whichis estimated at 20? of the total capital work in progress.

3. Cash and Bank Balances Minimum cash of Re. 200 million ismaintained throughout the projected period.

4. Short Term Deposits: These are created out of unutilized bondmoney.

5. Receivabless Projected as equivalent to 61 days of revenue asoutstanding.

6. Inventoriess Projected as 62.52 (74 months) of operations andmaintenance.

7. Loans and Advances: Projected as 25S (3 months) of totaloperations and maintenance.

8. Other Current Assetss Projected to increase by 10? per annum.

9. Short-Term Liabilitiess Estimated as 4.1t (15 days of totalinvestment, 1.92 (7 days) of OM, and 25Z (3 months) of interest chargeable torevenue.

10. Current Maturities of Long-Term Debt are not treated to be part ofworking capital.

- 120 -

INDIA Annez 5.1Page 1 of 3

POWERGRID SYSTEM DEVELOPMENT PROJECT

Economic Analysis

1. The analysis focuses on POWERGRID's entire investment program andthe benefits of improved coordination of power system operations. POWERGRID'sprogram is supported in part by the proposed Bank loan and the two investmentcomponents of the proposed project form an integral part of the program.

2. Economic Viability of POVERGRID's Investment Program. Theeconomic rate of return (ERR) was calculated on the basis of the incrementalcost and benefit streams associated with the 1993-1999 time-slice ofPOWEIGRID's investment program. The tlme-slice period covers the SystemCoordination and Control component and the Transmission Reinforcementcomponent of the proposed project, as well as investments supported under theNorthern Region Transmission Project and other ongoing transmission projectstransferred to POWERGRID.

S. Costs. The investment plan is discussed in paras. 2.13-15 of themain text and detalled listing of its components is given in Annex 2.4.Projects shown in Annex 2.4 to be completed during the time-slice period weretaken as the time-slice investment program. Pinancial costs of that programwere converted to economic terms by excluding taxes and duties and by applyinga standard conversion factor (SC?) of 0.8 to the residual local costs. Theresulting total time-slice investments are shown in Table 5.1. Also shown inTable 5.1 are POVERORID's incremental (in excess of 1992, base year of theanalysis) operations and maintenance (OWM) costs, taken from PoVEEGRIDtsprojected financial statements given in Annex 4.3 and converted to economicterms by excluding taxes and duties and by applying SCP to the residual localcosts. O&M costs of the last year of the 1993-1999 time-slice investmentperiod were kept constant in real terms for the assumed 2000-2020 operatingperiod of timn-slice investments.

4. Benefits. For the purposes of ERR calculations, POWERGRID'sincremental tariff revenue was used as a proxy for the economic benefits ofits investment program and operations. Transmission tariffs and regulationare discussed in paras. 2.16-18 in the main text, billing and collection inparas. 4.9-10. The resulting tariff revenue is shown in POVERGRID's projectedfinancial statements given in Annex 4.3. Incremental revenue of the last yearof the 1993-1999 time-slice investment period was kept constant in real termsfor the assumed 20-year 2001-2020 operating period of time-slice investments.Tariff revenue is regarded to be the minimum measure of the actual benefits astariff revenue reflects only a portion of the total benefits of POVERGIIDSoperations (para. 6); yet the ERR of the program is satisfactory at about 222with this conservative revenue-based benefit valuation. The net present valueof the program at 12S discount rate is about Re 27.4 billion.

- 121 -

Annex 5.1Page 2 of 3

5. Robustness of the Program. POWERGRID's time-slice ERR is notsignificantly affected by changes in the costs of the investment programand in the implementation schedules of its individual components. This is dueto POWERGRID's ability under its tariff setting principles to fully pass on toits clients its actual investment costs and these account for the major partof POWERGRID's total costs. The tariff includes a provision for recoveringO&M costs as a percentage of investments (i.e. not on the basis of actualcosts). Even if POWERGRID's actual OEM costs exceeded the tariff provision,the impact on ERR would be negligible. The share of O&M in POWERGRID's totalcost structure is low as POWERGRID does not incur fuel costs (as it is notinvolved in generation) and as its transmission system losses are carried bythe distributors (the generating companies such as NTPC charge the SEBsdirectly.

6. The above revenue-based analysis reflects only a portion of thetotal benefits of POWERGRID's operations and still yields a satisfactory ERRof about 22Z - hence further ERR calculations are not required to establishthe viability of the program. Paras. 5.4-5.6 of the main text and Annex 3.1discuss the merits of POWERGRID's investments and operations and the benefitsof the specific project components. An in-depth analysis of the benefits ofimproved coordination of system operations in India is given in the Bank'sstudy of the Long Term Issues in the Power Sector, December 1991. A copy isincluded in the project file.

6

- 122 -

Annex 5.1INDIA Page 3 of 3

POWERGRID SYSTEM DEVELOPMENT PROJECT

Economic Rate of Return (ERR) 1/

YEAR INVESTMENT 0 & M REVENUE NET BENEFIT 2/

1993 6,917 (6,917)1994 7,904 114 1,713 (6,305)1995 11,749 221 3,125 (8,845)1996 7,195 347 4,994 (2,548)1997 5,368 475 7,647 1,8041998 9,238 636 11,424 1,5501999 5,767 779 13,435 6,8892000 3,502 779 13,435 9,1542001 703 779 13,435 11,9532002 779 13,435 12,6562003 779 13,435 12,6562004 779 13,*..5 12,6562005 779 13,435 12,6562006 779 13,435 12,6562007 779 13,435 12,6562008 779 13,435 12,6562009 779 13,435 12,6562010 779 13,435 12,6562011 779 13,435 12,6562012 779 13,435 12,6562013 779 13,435 12,6562014 779 13,435 12,6562015 779 13,435 12,6562016 779 13,435 12,6562017 779 13,435 12,6562018 779 13,435 12,6562019 779 13,435 12,6562020 779 13,435 12,656

ERRs 22.1%

NPV: 27,432 (at 12%)

1/ Investments completed in the 1993-1999 time-slice period from POWERBRIDIUInvestment Plan (Annex 2.4); O&E and revenue related to these investmentsfrom POWERORID's financial projections (Annex 4.3)

2/ Investment, 0&K, Revenue and Net Benefits in Re Million

- 123 -

Annex 6.1INDIA

PO1WERGRID SYSTEM DEVELOPMENT PROJECT

Related Documents in the Project File

1. Long Term Issues in the Power Sector, World Bank, December 1991.

2. Report on Current Operations and Development/Assistance Needs,Messrs. Herbert Limmer and Gilles Nicoud, World Bank/ADB consultants, February1992.

3. Memorandum of Association and Articles of Association, the NationalPower Transmission Corporation Limited, including a copy of the originalCertificate of Incorporation, October 1989; and a copy of a Fresh Certificateof Incorporation Consequent on Change of Name, the Power Grid Corporation ofIndia Limited, October 1992.

4. The National Thermal Power Corporation Limited, the NationalHydroelectric Power Corporation and the North-Eastern Power CorporationLimited (Acquisition and Transfer of Power Transmission Systems) Ordinance,1993. No. 10 of 1993. The Ministry of Law, Justice and Company Affairs,January 1993.

5. Annual Reports for FY91 and FY92; Personnel Report, POWERGRID,October 1992; and Annual Performance Report for FY92, Operations andMaintenance, POWERGRID, 1992.

6. POWERGRID's Financial Projections, POWERGRID, January 1993.

7. Environmental Assessment Report, including copies of environmentalclearances !ssued by the Government of India and concerned state governmentsfor the project, POWERGRID, June 1992.

8. Southern Region Coordination and Control System reports, includingupdated Feasibility Report, POWERGRID, November 1992, Final Project Report,Electricity de France, December 1992 and invitation documents for projectconsultants, POWERGRID, February 1993.

9. POWERGRID project reports for the Vindhyachal-Dhule and Ramagundam-Hyderabad Transmission Lines and the Chandrapur Back-to-Back HVDC terminal,tender documents for the design, supply and construction of transmission linesand supply and line and substation materials.

IBRP 24518

INDIA 780 800 0 20

POWERGRID SYSTEM DEVELOPMENT PROJECT .Power Grid Corporation of India

Function Map of SouthernRegion System Coordination and

Control Facilities

-160 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

g 2 /ANHR

A~~~~~AA-PROPOSED UNDER THE PROJECT-

mREGIONAL. I.DC (LOAD DISPATCH CENTER

REMOTE TERMNAL UNITS (RTU)

RTU/ SUB.- LDC FUFNCTIONAL U 9NACC I STATE - LOC ̀ UNcTIoNAL LINK

STATE - LOC I REGIONAL - LDC FUNCTIONAL

- STATE OR UNION TERRITORY BOUNDARES

I - - ~~INTERNATIONAL BOUNDARYI

0 50 100

FEBRUAMY 1993

PAKISTAN NORTHERN

by rd B a VINDHYACHALN

of easr a d in ortnerna ueof The uWrl Bnand the beendaniss shown t^S=PT-r br -If iIsW onthann%dontanhr c{m=k; ~~~~~~WE TER R> E G <1 1 I 0 N any iodmet on th iego( D ' t 7oatn7of-n Qtttoyo n7norsent oracceptanc aldore

Asoj Joblpu r

2?

D ~~~~~SAITP \

< ' ~~~~~~~ ~~Dhule / Bic

ARABIANSEA

£1 ~~IJJOj r 2

I N D I A / POWERGRID SYSTEM DEVELOPMENT PROJECT

Power Grid Corporation of India momTransmission System Reinforcement Hyderobod

PROJECT EXISTING S U H :R G OPROJECT -XISTING 400 kV TRANSMISSION LINES

H.VD.C. TRANSMISSION LINE* POWER SUB-STATIONS NAGARJUNASAGAR T Vjoyyod,

THERMAL POWER STATIONS RAICHURH.V.D.C. Bt8.

REB BOUNDARIES

- INTERNATIONAL BOUNDAIY /, To G /dp_ 0 Mnrbad T Grooty /tCdpoco I.