-%3/AI L-83FUAE C|0PX RESTRICTED

F This report is restricted to use within the Bank'.

INTERNAT'IONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TECHNICAL REPORT

ON THE

DAMODAR VALLEY CORPORATION

BOKARO - KONAR PROJECT

IN

INDIA

March 162 1950

Loan Department

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TABLE OF CONTENTS

Page

Summary

The Damcdar Valley 1The Unified Scheme of Development

of the Damodar Valley 1The Project Submitted for Bank Financing 3The Damodar Valley Corporation 3Installed Electrical Generating Capacity

in the Region 5Mlarket fQr Power 5Description of the Project 8Stage Twlo of Damodar Valley Development 11Cost of the Bokaro-Konar Project 11Schedule for Completion 13Work Accomplished to the end of January

1950 1Contracts Placed 15Phased Requirement of Funds 15Availability of Power from Sindri 18Cost of Production and Transmission of

Energy 18Rates Proposed by DVC for Energr and for

Irrigation YJater 19Financial Analysis 20Comments 21Conclusions 23

Annex: -

Statement of Dollar Contracts andPayments

Statement of Contracts in ForeignCurrencies Other than Dollars

Letter from S. N. Mozumdar, datedMarch 5, 1950

Pro Forma Estimate of FinancialReturns

IMap

S U M 0IA

The Damodar Valley Corporation was created by the Indian Legislature inMarch 1948 to carry out a unified scheme of development of the Damodar Riverwhich envisages the construction of 8 multi-purpose storage dams, 2 additionalhydroelectric plants without storage, a thermal plant of 200,000 klr, an 80 milenavigation canal and a network of irrigation canals to irrigate 967,000 acres,including the 185,000 acres now seasonally irrigated from the Damodar River.The total cost of the scheme is estirnated at the equivalent of $,142.3 million.

The Bokaro-Konar Project which the Bank has been requested to assist infinancing is part of the Damodar River development. It will consist of the150,000 kwr Bokaro thermal plant located on the Konar River (a tributary of theDamodar River), the Konar No, I Dam and powerhouse located 12 miles upstreamfrom Bokaro, and 470 miles of transmission lines with the necessary substationsand swlitching stations, The total cost of the entire project is estimated atthe equivalent of about f>5?.8 million. A loan of 418.5 million is desired fromthe IBRD. No request is made for reimbursement of expenditures made prior to1 January 1950 or for interest during construction. The project will be ad-ministered by the Damodar Valley Corporation.

The Corporation, which was patterned after the TVA, is administered bya board of 3 Directors appointed by the Central Government. While it has a cer-tain degree of autonomy, the scopq of the Corporation's activities is limitedby certain powers conferred in the Act on the Central and the two participatingProvincial Governments of Bihar and West Benga;. The entire capital require-ments of the Corporation are supplied by the 3 participating governments as con-tributions to capital on which interest is payable. The Corporatiori will deriverevenu.es from the sale of energy, of water for irrigation and other uses andfrom navigation fees. The net profits are to be divided among the participatingGovernments. The Act gives the DVC a virtual monopoly of the generation anddistribution of energy in the Damodar Valley.

Coal for the Rokaro thermal plant will be obtained from a seam -1/2miles away to be leased by the DVC, containing sufficient coal to supply theplant for about 30 years. It wrill be delivered to the plant by aerial ropewayat an estimated cost of 9 rupees (t1.89) per ton. Ample cooling water for theplant will be provided from the Konar Reservoir. Water from Konar will alsobe utilized by a 10,000 kw hydro plant at the dam and, through existing irriga-tion canals in the lower part of the Damodar Valley, to irrigate about ho,0oOacres during the dry season.

The contract for the machirery and equipment for the Bokaro plant hasbeen awrarded to the International General Electric Co. The Kuljian Corporationof Philadelphia has been retained as consultants to supervise erection of theplant and train personnel for operation. The design of the Konar Dam was prep,-ared by a French consulting firm, Societe de Construction des Batignolles. Theplans for the transmission lines' were prepared by the Central Electricity Com-mission of India. Contracts for a large part'of the transmission and substationequipment required have been placed with firms in the-U.S,, the U.K,, Canadaand Italy,-

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The government-owned fertilizer plgnt now under construction at Sindrion the Damodar River, which will have a thermal power plant with an installedcapacity of 80,000 kw, has earmarked 30,000 kw for the DVC. With thermal powerfrom Sindri and Bokaro and hydro power from Konar, the DVC will have availablein 1954-55 an installed capacity of 190,000 kw and a firm capacity estimated at132,000 kw. At a 6O% annual load factor the Corporation's production is esti-mated at 694 million kwh three years after conpletion of the project.

A thorough power market survey of the Damodar Valley and adjoining areashas indicated that the demand will be ample to absorb all of the power fromthe unified scheme. For computation of the reverues for the gokaro-Konar proj-ect, which will be the first phase of the unified scheme, only loads which aremore or less assured have been taken into account. Within 3 vears, they willabsorb all of the finm power of the project. The cost of production-and-tran-smission per kwh will total about 7.6 mills 1/ per kwh for delivered energy. Theproposed rates are estimated to produce an incoQme of about 7.9'mills per kvjh.W1ater sales are estimated to bring $3.15 per acre annually for perennial irriga-tion.

Four years after the completion of the Bokaro-F(onar project, it is ex-pected to produce a net income of about 20 million rupees (M.3 Diillion) be-fore interest and depreciation. After depreQiation estimated at ccnventionalrates, interest (estimated at 4% on the IBRD loan and at 3-1/2% on cther fumds)vould be earned about two times. The net income would comfortably providefor all debt service during the life of the IBRD loan.

The DVC has been handicapped by a long delay in the appointment of aChief' Engineer. It will provide for technical supervision satisfactory to theBank before the execution of the loan agreement.

In view of the anticipated financial return from the investment, whichwill make the project self-liquidating, and the fact that the project will sup-ply urgently needed pover for India!s most highly industrialized area and alsowater which can be immediately utilized in existing irrigation canals, it isconsidered financially and economically justified.

y 1 mill 1/10 U. S. cent

THE BOKARO-KONAP PROJECT

Damodar Valley Corporation, India

The Damodar Valley -

The Damodar River flows about 300 miles in a general easterly directionthrough the southern portions of the Provinces of Bihar and 'est Bengal andempties into the Hlooghly River about 30 miles downstream from Calcutta. It hasa drainage area of about 8,000 9quare miles, Tn the Damodar River Valley, vrhichis about 80 miles wide at its widest point, the population numbers about 3.3million representing a density of about 415 per square mile..

The upper part of the Valley is gently rolling country suited best forforests, but the lower valley consists of fertile alluvial soil suitable foryear round cropping, provided an adequate supply of water is available, Atpresent the lowfer valley is served by 26 mile6 of main line and 21 miles ofbranch line canals and about 2h2 miles of distributaries wvhich provide waterduring the monsoon season (15 June - 15 September) for the irrigation of about185,000 acres. During the dry seasons there is no flow in the Damodar fliver,

The area extending roughly 125 miles north and 100 milep south of theDamodar River, which might become the "Operational Area" of the Damodar ValleyCorporation, is the richest mirneral and the most highly developed industrialregion in India. In this area are deposits containing an estimated 15,500million tons of workable coal (about 75% to 85% of India's reserves) includingcoking and non-coking coal, 8,000 million tons Qf high grade iron ore and sub-stantial and workable deposits of manganese ore, copper ore, limestone, mica(tlhe world's chief source of supply) bauxite, asbestos, kyanite, clromium, vana-dium, gold, fire clay, soapstone, silica, sand and gravel,

Practically all of India's coal production (20 to 24 million tons), 95%of its steel production (1,000,000 tons), all of its mica production (100,000cwts) and a large proportion of its copper ore production (400,000 tons) comefrom mines and plants in t4is region, Other industriep in the area include:rod mills, wire and cable plants, steel sheet and tinplate mills, foundries,pipe plants, steel fabricating plants, locomotive works, machine shops, paper-mills, ohemical plants, lime and cement mills, stone quarries, ceramic glassand refractory works, textile mills, shoe factories, sugar mills, aluminumplants, cycle and wragon factories.

The Unified Scheme of Development of the Damodar Valley -

Prior to the enactment of the legislation creating the Damodar ValleyCorporation, a unified scheme of development of the Damodar Valley was formulat-ed by the Central Technical Power Board of the Government of India. This schemeenvisaged the ultimate construction of:

a) 8 flood control storage dams with hydroelectric plantshaving a total installed capacity of 182,ooo kw;

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b) 2 additional hydroelectric plants without storagehaving an installed capacity of 16,750 kw;

c) a thermal povwer plant of 200,000 ki ultimate capacity;

d) approximately 600 miles of transmission lines to servethe Damodar Valley and adjacent areas;

e) a navigation canal about 80 miles long; and

f) an irrigation barrage on the lover part of the DamodarRiver to divert water into a netvwork of 477 miles ofmain line and branch line canals. These canals vwouldprovide irrigation for about 967,000 acres, includingthe 185,000 acres now irrigated from existing canalson'ly during the monsoon season.

The total cost of the entire scheme of development has been estimated at .l1h2.3million (630,000,000 rupees) of which CIO million (190,000,00 rupees) would beforeign exchange costs. The anticipated benefits would include:

i) The prevention of floods vwhich frequently disrupt railand1 road communication between Calcutta and North India,destroy crops, damage land and urban property and causehuman suffering;

ii) An increase in food production by making year round cul-tivation possible on 967,000 acres as against 1835000acres now seasonally irrigated;

iii) The provision of about 300,000 kvw of firm power formining, industrial and domestic use;

iv) The supply of water for industrial use and the reliefof shortage of drinking water during the dry seasonby providing year round flow in the Damodar River;

v) An additional means of transportation by the 80 milenavigation canal connecting the Damodar with theHooghly Piver about 30 miles'above Calcutta;

vi) The cultivation of fish in the'reservoirs to addto the food supply.

The first project to be undertaken is that wlich the IBRD has been re-quested to assist in financing (Bokaro thermal plant, Konar I dam and tranamis-sion lines). It has been given priority over others primarily in order to sup-ply the urgent demand for additional electical energy in the Damodar Valley regionbuit the Konar Reservoir will also provide water for industrial and domesticuse and for a small amount of irrigation (40o000 acres).. Later these works willbe integrated into the unifiqd scieme of development in which the thermal plantwill be utilized to maximize power production and the Konar reservoir wil. con-tribute i'ts share of flood storage and powers

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The Project Submitted for Bank Financing -

The Bokaro-Konar Project will invol3e:

a) The construction of the Bokero thermal power plant of150,000 kw, located in the Province of Bihar on theKonar River (a tributary of the Damodar River);

b) The construction of an eartlh fill dam to be known asthe Konar No. I Dam on the Konar River about 12 milesupstream from the thermal plant. The purpose of thedam will be to create a multi-purpose storage reservoirwhich will provide cooling vwater for the thermal plant,storage capacity for flood water, and water for irriga-tion and the generation of 10,000 kw of electricalenergy; and

c) The construction of transmission lines and substationsto carry the energy throughout the Damodar Valley andadjacent territory,

These vworks are being constructed and adTninistered by the Damodar Valley Cor-poration, which was established by an Act of the Central Indiar Legislaturein 19ho. The IBRD has been requested to finance the portion of the dollarcost still required for the completion of the project.

1 7he total cost of the project is estimated at the equivalent of ,52.8million-'. The local currency requirements are estimated at 19.5 million andforeign exchange requirements other than dollars at $7.4 million. The totaldollar cost of the project is estimated at about $25.9 million, of which i,7.million had been already paid on contracts as of 1 January 1950, leavingOla8,5o, 00 as the amount desired as a loan from tho ThRD. Of thie t8.5million, the equivalent of Al.5 million is for purchases in Canada. No re-imbursements of amounts spent prior to 1 January 1950 or interest during con-struction are requested.

The Damodar Valley Corporation -

The DVC was created in liarch 19h8 as a public corporation to executethe unified scheme of development of the Damodar River. It was patterned afterthe Tennessee Valley Authority in the United States. It is adninistered by aBoard of Directors consisting of a Chairman and two other members, all of 'whomare appointed by2 he Central Government after consultation .with the two Provin-cial Governments-J, Bihar and Vrest Bengal, in which the Damodar Valley lies.The Secretary of the Corporation, who is the Chief Executive Officer, and theFinancial Adviser are also appointed by the Cqntral Government. Other officersand servants are appointed by the Corporation. In August 1949, it had 1,270permanent employees, 436 of whom were classified as technical and OBh as non-technical.

1/ Including the cost allocated to flood controlit/ At the inception of the Indian Republic on 26 January 1950, the provinces

became known as States.

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While the Corporation enjoys a large measure of autonomy, the scopeof its activities is limited by certain povwers cDnferred in the Act on theCentral and the two participating Provincial Governments which provide all ofthe Corporation's capital. The Act provides that the Corporation shall beguided by such instructions on questions of policy as may be given by theCentral Government and that the Central Government alone will decide whethera question is or is not a question of policy, The Central Government may alsomake rules regarding the salaries and alloy,an es and conditions of service ofthe appointive officers, the duties of the financial advisor, the forms of thebudget, the manner in which the accounts of the Corporation shall be maintainedand audited, and regarding dams and other works which may be constructed in theDaamodar Valley without the approval of the Corporation.

The relations between the Corporation and the Provinces are set forthin the Act, which provides that the Corporation must: a) have the approval ofthe Provincial Governments before constructing canals and distributaries;b) consult with the provincial Governments relative to the rates to be chargedfor irrigation-water and the minimum quantities of water to be made availablefor such purposes; and c) obtain the permission of the Provincial Governmentsbefore supplying electrical energy beyond the limits of the Damodar Valley(or its Area of Operation) or selling energy directly to a consumer at lessthan 30,000 volts.

The Corporation is subject to the income taxes Qf the Central Governmentan(i has the power to sue and be sued. It also has the right of eminent domain(compulsory acquisition of land).

The Central Government may, after consultation with the Provincial Gov-ernments, by notification in the Official Gazette, direct that the Corporationshall carry out such function and such powrer in such area other than the Valleyas may be specified which area shall then be called the "area of operation"of the Corporation.

Regarding the supply and generation of electrical energy, the Act statesthat no person in the Damodar Valley may in the future generate electrical energyat an installation having an aggregate capacity of more than 10,000 kw, or sellor transmit energy at a pressure of 30,000 volts or more without the permissionof the Corporation. Existing generating stations of more than 10,000 kav maycontinue to operate but cannot expand. The Act also provides that the Corpora-tion may extend its transmission system and sell energy beyond the pamodarValley, with the permission of the Provincial Government concerned. Thus by lawthe Damodar Valley Corporation has a virtual monopoly in supplying electricalenergy in the region in the future.

The capital requirements of the Corporation are provided by the parti-cipating Governments (the Central Governmept and the Provincial Governmentsof Bihar and West Bengal). On the capital so provided, the Corporation is re-quired to pay interest to each participating Government, at a rate fixed by theCentral Government from time to time. As there is no provision in the Actfor the repayment of the capital, the amounts provided are in the nature ofshare capital. If any Government should fail to supply its share of capital,the Act provides that the Corporation may, with the permission of the CentralGovernment, borrow in the public market to make Up the deficit at the cost ofthe Government concerned.

The capital costs.of.poluer are shared equally by the three participat-ing governments and the. capital costs of.irrigation are the responsibility ofthe Provincial Governments...The capital cost:of flood control, up to 140million rupees, is shared equally between .the Central and. t,est Bengal govern-ments. Expenditures'for'flood control in excess of 1LO million rupees will bethe liability of the'West Bengal Government.

The.net profits .of,the Corporation, if any, are credited to the parti-cipating governmenits in proportion to their contri,butions and net deficits will,according to the Acet,'be made good by the participating governments in the sameproportion except that the net deficit in respect.to flood control is the re-sponsibility of the W1'fest Bengal Government, the chief beneficiary. For a periodof 15 years,.'however,.if the Corporation runs in deficit,' the Act ptovides thatinterest charges and.all other expenditures shal).be added to the capital costand all receipts shall be taken in reduction of such capital.cost. The Corpora-tion will.derive income from the sale of electric energy, the sale.of vwater forirrigation.industrial and domestic use and from navigation fees.

Installed Electrical Generating Capacity in the Region

The installed electrical generating capacity in the loperational area"determined by a suryey made in 1948 wras about 391,600 kvt, not inicluding the80,ooo kw power plant now under.construction at the Sindri Fertilizer Plant.The installations consisted of 2h,000 kwr in small plants in 12 tovms andvillages, .269,300 akw' in.industry,'and 9a,300 Itw in 39 independent power stationsand 3 major licensee power netvforks in the coalfields. The maximum demand onthe 391j600 kw installed was about 200,000 kw.

In addition there was in use in the area a total of 465,6bo kvr of steamand internal combustion engines supplying powqerfor purposes other than the gen-eration of electricity, The maximum demand on these engines was assessed at250,000 kwr.

In 11 of, the 12 power plants in towns and villages, the condition of theplants was unsatisfactory and their operation had become unecorlomical., Themanagements wiere reported to look with favor on,-receiving power. rom outsidesources at reasonable rates as at most of$thp.plants the installed capacitywas inadequate and old. The power plants at the major,industries were, as arule, fairly ell maintainedd bt these industries cannot expand their plantswithout goverrment consent or coopera:tion. Mlany.of the colliery plants are oldancd need replacement. Expansion of these existing-,plants is likewise dependenton government consent or cooperation.

14Iarket for Power -

An exhaustive load survey was carried out in the Operational Area byengineers of the Government of India!A Central Electricity Commission, duringthe course of which they covered 243 localities and practically all of the in-dustries and mines in the area. Their report dealt writh all types of prospec-tive loads. Estimates of the.-prospective.loads likely to develop by l955, 1960and 1965 were made and also of the amounts of the existing sapaci,ty likely to

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be available to supply the demand. The difference between the prospective loadsand the effective capacity available indicated the probable demands to be metby the Damodar Valley Corporation's projects.

The load grovith from 1950 to 1955 was estimated to be very small (450M.W, to 494 M.V!.) because very little new capacity was expected to be added.From 1955 to 1960 the load was expected to grow from 494 1W. to 680 M.VI., about6,6% compounded annually; from 1960 to 1965 the load was anticipated to growslowly from 680 }I.W. to 772 DI.jJ. or at a rate of only 2.6% compounded annually.For the total period 1955-65 the rate of increase was L.6% compounded annually.

To supply this dem4and, however, it vwould be necessary to install addi-tional capacity at a more rapid rate than the rate of growrth of the load inorder to offset the deterioration and obsolescence of the existing equipment.This situation is shown in the table below which gives the estimated load growth,available effective capacity and balance of demand.

Table 1

Load Growith Estimated by DVC

1955 1960 19655ys. l~3s. lF~s.

(i) Anticipated load 494 Ur 680 mW 772 ? il

(ii) Available generating capacitywithout new installationsand making due allowance forold plants likely to go outof operation 188 uiir 182 1lT! 174 Iwix

(iii) Balance of demand 306 T':r 498 mnw 598 ixr

Demand for additionalgenerating capacity, as-suming a diversity factorof about 1.10_1 282 IN 459 ior 550 TV

The balance of demand to be supplied by the DVC projects as shown aboveindicates an anticipated increase of 10.3% compounded annually for the period1955-60, 3.7% for the period 1960 to l965, and 6.9% for the entire period1955-l965.

The net balance of demand - 282 to 550 MIT - was composed of six classesof loads as showm in the following table.

1/ A diversity factor takes into account the fact there will be a diversityas to the time! of individual demands on the plant.

Table 2

Classes of Prospective LoadsIn miegawatts

Class 1955 1960 1965

1. Town and village areas 33.5 50.6 65.82. Hleawy and special indus-

tries 153,2 221,6 258,93. Coal fields 87.2 137.2 176.3h. .lica mines 6.6 8.4 10,85. Irrigation 8,0 12.0 17.16. Railway Elect0 18.0 68.6 68.6

Total 306.5 198.4 597.5Allowing diversity factorof about 1.10 282 I59 550

As the DVC estimated the maximum demand that could be suppuiied safelyby all of its proposed hydroelectric projects and the Bokaro thermal plant with200,000 kw installed at 389 M.V7.r, the DVC concluded that at sometime before 1965it would be necessary to import power into the operational area.

In the opinion of the IBRD's Engineering Staff, the load survey wascarefully made and its projections of increases in loads and effective capacityavailable are reasonable on the whole, except that the loads expected to dev-elop from irrigation and railwray electrification are somqewhat optimistic as torapidity of development. If these loads were eliminated from the estimatefor1955,it would then be 280 1-B, a demand considerably more than the Bokaro-Konarproject could supply by 1955. Howrever, the "operational area" of the DVC h-iasnot yet been extended to include the area covered by the load survey and in factthe transmission lines contemplated in connection witlh the Bokaro-Konar projectwill cover only a portioh of the area surveyed. The DVC, therefore, for initialcomputation of revenues for the Bokaro-Konar project have taken into accountonly the loads listed below, vwhich according to DVC, are more or less assured.

Prospective Load Bokaro-IKonar Project

Source Amount in IF

Coalfields 5°Locomotive shops, Chittaranjan 7Tata Irpn & Steel Co., Jamshedpur 35Karagpur, incl-. Mach. tool plant 18Burdwan area 10Towns and miscellaneous 12

Total 132 H,jf

The DVC assumed that the development of the above load would be 60% inthe first year of operation of the Bokaro-Konar project, 80o in the second year,and l00% in the third year.

A spot check of the prospective rmarket for the 4bove power revealed thatin all probabi4ity a demand of at least 132 Pm! would develop within 3 years after

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the completion of the Bokaro-Klonar project. The sales would be entirely tolarge consumers. As these types of consuners are prohibited by law from ex-panding or building their own generating plants without express permission fromthe DVC, they will be forced to buy from the DVC.

In view of the age and condition of most of the generating equipment inthe area, the desire and necessity of the region to expand mining and industryand the relatively high cost of production at existing thermal plants (there isno hydro production), the market for the Bokaro-Konar power seems assured.

Description of the Project -

The three main features of the project are:, a) the Bokaro thermalplant; b) the Xonar No, I Dam; and c) transmission lines and substations.

The Bokaro Thermal Plant - The 1 0,000 kvf Bokaro thermal plant will bean essential part of the powver development program of the DVC. It vwill compriseabout 38% of the ultimate capacity contemplated under the unified scheme of dev-elopment and will be expected to carry the base load of the entire system for 37weeks out of the year wvith the hydro plarnts carrying the base load the remaining15 weeks during the monsoon season, Although the 10 proposed hydro stationsin the scheme will have an installed capacity, according to present plans, ofabout 198,000 kw, the firm powzer available from them would be only 100,000 kwat a 600 load factor. By integration of tile hydro power with the thermal powerfrom the Bokaro thermal plant with 200,000 kvw installed, it will be possible toprovide about 300,000 lvi of firm power at a 60% load factor from the DamodarValley system.

The location of the Bokaro Plant was carefully selected wiith respect tocoal and vrater supplies. It vwill be situated on the bank of the Konar River about4-l/2 mniles above the confluence of the Konar and Damodar Rivers and about 4-1/2miles from the ooal loading points of the mine which will supply coal. Whilethe plant will be designed for an ultimate installation of 200,000 kw, the ini-tial installation will be 150,000 ky., consisting of 3 turbo.-.generator units of50,C00 kw each. Each unit will consist of a multi-stage steam turbine, directlycoupled to and driving a hydrogen cooled 3-phase electric generator which willgenerate at 13,800 volts and 50 cycles. Three main station transformers of65,ooo kva eaoh will step-up the voltage from 13,800 to 132,000 volts. Each unitwill have a condenser capable of maintaining a vacuum of 28.3 inches Hg. (mercury)and the conventional accessory equipment. For each turbo-generator unit therewill be two boilers designed to burn pulverized coal with an ash content up toabout 270. Each boiler will have a capacity to generate 300,000 pounds of steamper hou:r at 850 pounds per square inch pressure at 900 degrees Fahrenheit. Coalwill be inoved to the plant by an aerial ropeway or (in emergencies) by rail. Itwill be taken either from track hoppers or storage pile by belt conveyors. Asheswill be removed by a sluicing system and will be used to fill depressions in thevicinity pf the plant. Coal consumption is estimated at 1.33 pounds per kilowatt-hour.

The international General Electric Company has the prime contract to sup-ply the turbo-generating units, boilers (manufactured by Combustion EngineeringCo.) and accessory equipment, including the equipment for the coal and ash handling

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systems and the water softening system. The IGE will also design and supplycomplete architectural and structural drawings for the powerhouse. The Beth-:Lehem Steel Co. has the contract to supply the structural steel for the plant.The DVC has retained the Kuljian Corporation of Philadelphia, Pa., as contract-ors for the erection of the powerhouse and for the design and installation ofthe necessary piping, wiring, etc. and as consulting engineers to test equipmentto coordinate the services of erection supervisors'of the various manufacturers,to train operating personnel (partly in the United States), to install a systemof log sheets, daily reports, etc., to insure proper control of plant operationsand to establish a standard form of aqcounting procedures. The Kuljian Corpora-tion will also purchase for DVC items to be obtained in the United States whichare not included in the IGE contract.

The coal required for the Bokaro plant will come from the Bermo Seam ofthe Kargali colliery. The loading point of the mine is located about 4-1/2miles from the plant. The Bermo Seam is about 40 feet thick and the totalreserve of coal in the seam is estimated at more than 50 million tons. Thecoal will have a calorific value of 11,200 B.T.U., (dry basis), 20% volatilematter, 53% fixed carbon, and about 26.6% ash. The DVC has decided to trans-port the coal by aerial ropeway, the capital cost of which is estimated at2 million rupees ($420,000). The cost of delivering coal to the plant isestimated at about one rupee (about 21 cents) per ton including operation,maintenance, depreciation and interest. The cost by rail would be 2 rupees3 annas (about 45 cents) per ton, and in addition, the DVC might be requiredto supply special railroad cars, the estimated cost of which would exceed thecost of the proposed ropeway. Rail connections between the mines and theplant will be provided, however, for emergencies.

The requirements of the Bokaro plant with 150,000 kf installed, areestimated at about 300,000 tons annually. The DVC will sub-lease a Part ofthe seam from the Railway Board containinig about 10 million tons (30 yearssupply) and will mine the coal by open cut methods, either by contract or byits own forces. It is estimated by the Chief IvMining Engineer, Railwvay Board,that coal can be mined and delivered to the ropeway for not more than 8 rupees($1.68) per ton at a maximum and perhaps leps. / The delivered cost at theplant would, therefore, be 9 rupees or about $1.89 per ton. The controlledprice for this grade of coal purchased in the open market at present would be12 ($2.5?) to 13 ("2.73) rupees per ton at the mine.

Water supply for the plant will be obtained from the Konar River, the flanof which will be regulated by the construction of the Konar No. I Dam about 12miles upstream from the Bokaro plant. As the Konar River has no flow during thEdry season, it would be necessary, without a regulated flow in the river, toconstruct expensive cooling towers or other facilities to provide adequatequantities of cooling water, but as the Konar Dam was scheduled to be constructein any event as a unit of the multi-purpose scheme, it was included in the thernal power development scheme to supply cooling water at Bokaro. A small barrageabout 2,700 feet long with a lift of 12 feet will be constructed at the site ofthe plant. 'This will create a pool from which water will be taken through ductsto the circulating pumps by gravity and will pr'ovide a small amount of dailyregulation. After the water has been utilized at the thermal plant, it will bereturned to the stream, except for evapo'ration losses, and wvill be used downstre

1 An' independent estimate made by an' engineer retaired by*,"the IBRD indicatedthat the cost of ooal delivered to the ropeway vwould be 5 to 6 rupees perton, provided a reasonable amount of mechanization were used. The cost of8 rupees per ton therefore is considered conservative.

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for domestic and inaustrial purposes and for the irrigation of about 40,000acres in the dry season through existing canals and distributaries located inWest Bengal.

Konar IIo. I Dam - The Dam, designed by the French firm Societe de Con-struction des Batignolles, will be an earth fill structure about 12,600 feetlong with a maximum height. of about 160 feet. The initial hydroelectric instal-lation will be about 12,1X00 kva (10,000 kw at..80 power factor). The reservoir,which has a maximum capacity of 260,000 acre feet and a dead storage of 25,000acre feet, vrill provide useful storage of 235,000 acre feet. of this the DVCproposes to reserve 95,000 acre feet for flood storage. Evaporation lossesare estimated at about 22,000 acre feet (about 5 feet in depth over the reser-voir). The net useful storage available for cooling water and povwer, tlherefore,wiJ'l be 118,000 acre feet from which a regulated flovw of 250 cusecs could beobtained. The estimates of inflow into the reservoir are based on rainfallrecords of 34 years and streamflow records of 15 years duration.

The maximum cooling water requirements for the Bokaro thermal plantwith 150,000 kw i nstalled and operated at 100% load factor would be 165,000gafons per minute or 360 cusecs. As the. load factor at the plant will probablynever exceed 60%, the normal cooling rater requirements would be about 216cusecs. The minimum regulated flovw from the Konar reservoir during a dry yearunder the most unfavorable assumptions (flood storage empty) of 250 cusecs wouldtherefore meet Bokarots normal reouirements.

The Transmission System included in the project will consist of 350miles of '132 kv double'circuit lines, 30 miles of 66 kv single circuit lines,and 90 miles of 3.3 kv double circuit lines together with nine 132 kv, five 66kv, and1 ten 33 kv svwitohing and distributing substations. The conductors ofthe 13:2 1v lines will be aluminum and the towers will be steel. The conductorsof' the 66 kv and 33 kv lines vwill be copper carried on tovrers made from steelrails. Orders have been placed for about 25% of the transmission and substa-tion equipment. The Associated Electrical Industries (India) Ltd., local repre-sentatives of the Aluminum Union Company, Ltd,, of M.1ontreal, Canada, have con-tracts for some conductors and accessories, the International General Electric,N. Y., for some oil circuit breakers, lightning arresters, insulators and ac-cessories, the English Electric Company, Ltd., for some transformers and theSocieta Anonima Elettrificazione of JT ilano, Italy, for the steel towers for the132 kv lines.

The transmission system has been designed for. almost twice the initialload anticipated and has been laid out to include the Sindri Fertilizer Plant,other'lhydro plaits to be constructed at some of the proposed multi-purpose damsas well as load centers such as Tata Iron and Steel Works expected to developquickly, This procedure will be more economical in the long rn than construct-ing initially a transmission system designed to serve only the immediate loadsand plants and later expanding it to a larger capacity. Lines to serve onlythe immediate needs would probably cost only 20Y to 25% less than those proposed.The area to be served by the 470 miles of transmission lines vwill be entirelywithin the Damodar Valley except the area served by 147 miles of 132 kv doublecircuit; line to Kharagpur which will include the Tata Iron and Steel Company atJamsheclpur and about 30 miles of the 132 kv line to Burdwian. In the second stageof development, it is proposed to externd the transmission lines to Calcutta.

11 -

Stage Two of Damnodar Valley Development -

In three years after the completion of the Bokaro-Konar project, StageTV!o is expected to be completed. The second stage is not before the IBRD forconsideration, However, since Stage .Two is expected almost inmediately tofo:Llow and wvill be so closely related to the project under consideration, abrief description of the scope of this stage follows. It provides for the dev-elopment of additional'hydro power at two sites below Konar No. I Dam, knovmas Konar Nos. II and III, and the extension of the transmission system. Theinstalled capacity at these two sites is expected to be about 40,000 kwv, of which30,000 kw will be firm power. The two hydro stations, which will have no storage,will use the regulated flow from Konar I. The transmission lines, under theplan for Stage Two, will be extended to Calcutta from two directions, therebyproviding a closed circuit over vwhich Calcutta can be fed. This will providefor added security of service. The additional transmission facilities requiredwill consist of 125 miles of 132 kv double circuit and 10 miles of 33 kv doublecircuit lines and one substation of 25,0oo kva capacity. The additional powxermade available by Stage Two is expected to be absorbed in two years.

The cost of Stage Two povwer plants and transmission facilities, exclu,-sive of interest during construction, is estimated at 10,034,000, of which$1,463,000 will be for purchases in the dollar area.

Cost of the Bokaro-Konar Project -

The total investment required for the-project, inclusive of interestduring construction, but exclusive of the portion of cost of Konar No. I Darnand reservoir allocated to flood control, is shown below, broken dovrm to showthe foreign exchange requirements.

Bokaro-Konar

Total Cost of Project

M i ll i o n s Total ex-U.S. Canad&tn SterF- Swiss pressed in

Item Dollars Jollaro ling Francs Rupees US Dollars_

Bolcaro Thermal Plant

a) Land _ _ _ _ e90 0b) Roads &c colony - - 7.53 oc) Barrage at plantsite - - 3.00 -d) Powerhouse bldg. 1.20 - - - 2.90e) Machinery installaticns1 6.45 - .10 2.67 0f) Erection equippment ,17 - - - -g) Custom d4tiea-loca

hauls - - - 6.ooh) Ocean freight 20- .23 - xi) Engineering costs .50 - - 2.00 j) Esculation charges &

contingencies l.95 - - - 2.00 c

Sub-total 2047 - .33 - 27.00 27,o6Int.dur.construqction 2,78 - .03 _ 2.56 3.4o

Total 23.25 _ .36 _ 29.56 30,46

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Bokaro-Jonar - Total Cost (cont.)

Item l1 i o n Total ex-U.S. Canadian Ster- Swiss pressed inDollars Dollars i4ang Francs Rupees USDollars$X

Coal

a) Ropeway & bunker - - - 2.98b) -line development - - -

Sub-total -- - - 4.69 .98Interest - - - - .32 .07

Total - _ - _ 5.01 1.05

Konar Dam & Power Housea) Land et reservoir clearing 2.5ob) Roads and colony - - - 1.20c) Dam & appurtenances .66 - .39 33.9kd) Poirerhouse, civil works - - - - 1.20e) Powerhouse machinery - .23 - .50f) Engineering & contingencies - - - .50 1.23

Sub-total .66 - .62 .50 40.57Less amt.chargeable toflood control 16.3k

2k.23 7.39Interest .10 - o0 .04 1.77 .65

Total .76 _ .66 .54 26 .oo 8.o4

Transmission Lines andSubstations

a) Land and surveys - - - .50b) Transmission line

equipment 1.39 2.4l .51 _ _c) Substation equip-

ment 1.14 _ .56 7.20 -

d) ErectiQn and con-tingencies .02 - - 16.02

Sub-total 2.55 2.412 1.07 7.20 20.52 13.65Interest .59 16 .10. .5a 1.87 1.41

Total 3.1k 2.57 1.17 7.70 22.39 15,06

Total Cost 23.68 2.41 2.0o 7070 76.44 49,o8Total Interest 3.47 .16 r .54 6.51 5.53

Grand Total 27.15 2.57 2.2i 8.24 82.95 54.61

A/ Using tiwio rates Sf conversion: (1) pre"devaluation rates for expendituresprior to September 1950, and (2) post-devaluation rates for expendituresafter September 1950.

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Ihe cost per kilowatt installed i2n the Bokaro thermal plant, amountsto about $180. This compares favorably with the cost of about P;180 per kilo-watt for the 110,000 kw thermal plant now nearing completion in Calcutta, theequipment for which sas ordered in 1945 before large increases in prices wereeffective. Both costs are somewhat'high if compared with the costs of similarplants constructed in the U.S. in-19h9, which ranged from dp140 to 165 perkilowatt. However, if costs included in the Bokaro plant consisting ofIndian customs duties, travel and extra pay of erection personnel and oceanfreight amounting to 12.2 million rupees were deducted, the cost per kilowattwould be 417 less or about $163 per kilowatt which would be not fla out ofline with U.S. costs and well within the range of European costs.-

For the =rupose of estimating the financial returns of the project,only the cost of the Konar No. I Dam allocated to power and irrigation areincluded in the capital cost of the project, as neither the cost nor thebenefits from flodd control enter into the financial calculations.

Schedule for Completion -

! The entire project, except for about 20 percent of the transmissionsystem is scheduled for completion by mid-year 1953; however, the DVC plansto put one 50,000 kw unit of the Bokaro plant into operation by mid-year 1952.Consequently, the completion of Konar No. I Dam to create a reservoir sufficientto supply cooling water for the one unit in Bokaro and the partial completionof the transmission system to take the power to the coal fields by mid-year1952 are proposed. The final completion of the transmission lines and sub-stations is scheduled for 1954. The IGE contract calls for the delivery ofone turbo-generator unit to be shipped from the factory not later thanSeptember 1951 and for the complete shipment of all equipment during the monthof. January 1952. The table below shows the anticipated rates of completionof the various components of the entire project.

I/ The estimated cost per kilowatt of thermal units totalling 1,000,,000 kwproposed by OEC Electricity Committee for installation in Europe in 1950 -1951 was: France $175; Italy $160; Greece $;)200; Austria $180; Benelux,k165-

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Table 3

Schedule for Completion

% Completed Anticipated Progressat end of r Completed during Calendar Yr.

1949 1950 1951 1952 1953 195M

Bokaro Thermal Plant

a. Roads and colony 10 70 20b. Barrage at Plantsite 20 50 30c. Powerhouse bldgs. 60 30 10d. Miachinery installa-

tions 20 55 25

Konar I Dam & Power Station

a. Reservoir clearing, re-location & resettlement 25 50 25

b. Dam construction 20 45 35c. Power station

i. Civil Works 15 55 30ii. Machine installa.

tions 70 30

Transmisson Lines

a. 132 kv lines (350 miles) 10 25 25 20 20b. 66 " ( 30 "'.~ ) 75 25c. 33 " ( 90 ) 22 33 20 25

Substations & Switching Stations

a, 132 kv substations (9) 10 40 30 20b. 66 " (5) 60 h0c. 33 kv switching

stations (10) 40 30 10 10 10

(The percentages show the progress of physical work).

Work Accomplished to the end of January 1950

At Bokaro, the foundation investigations for the plant had been com-pleted and grading of the site had started; grading and placing of culverts in2-1/2 miles of the 5-1/2 mile access road had been completed and short railwaysiding for unloading supplies had been constructed; a layout of the colony hadbeen made and the construction of some housing, water supply works and warehouseshad been started; poles for the 3 mile transmisaion line to bring constructionpowrer to the site had been Dlaced and surveys of the route of the aerial ropewayhad been completed; preliminary investigations to determine the depth to rock andsome core drilling along the center line of the barrage at the plant site had

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been undertaken; surveys of the stream bed for 10 miles above and below thesite had been completed and arrangements had been finalized to have modeltests of the preliminary designs of the barrage made at the River ResearchInstitute of Bengal.

At Konar, detailed surveys of the dam site and reservoir area anddesigns of the dam had been completed; core drilling (with h drills) forfoundation investigations was under way and'test pits had been put dovm atregular intervals along the center line of the dam. Numerous soil sampleshad been taken and soil tests were under way; a graveled access road 8-1/2miles long had been completed; the construction of the'colony, warehouses,vwater supply, a small power plant, and a bridge over the Konar River were underway; competitive bids for the construction of the dam had been received andconsulting engineers to supervise the construction of the work had beenselected.

On the transmission lines and sub-stations, detailed designs andspecifications had been completed for all of the 66 kv and 33 kw lines (120miles) and 205 miles of the 350 miles of the 132 kv line projected and alsofor all of the 66 kv and 7 of the nine 132 kv subv,stations and all of the33 kv switching stations. Orders had been placed for a large part of theequipment required for both the transmission lines and sub-stations. Aserection will be undertaken by DVC forces, organization of erection crewsvras under way.

Contracts Placed.-

Contracts totalling fl5,487,000 had been placed in the dollararea at the end of December 1949. Payments on these contracts as of thesame date amounted to f7,379,000.l/ Contracts placed in the sterling areatotalled on December 31, the equivalent of 10,745,000 rupees or 8t2,256,000on which 2,13h,000 rupees or .h448,000 had been paid, Final payments on allof these contracts, except one to the Kuljian Corporation, are due in 1952.The Kuljian contract extends to 1954, as it-provides for training of Indianoperating personnel after completion of the Bokaro plant.

Phased Requirement of Funds _

The estimated amount of funds required, by currencies, for eachof the years 1950 through 1954 is shown in the following table. Thesef'unds include the cost of Konar Dam allocated to flood control (16.34 millionrupees) but no interest during construction.

1/ For detailed list see Annex.

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Table 4

Phased Requirement of Funds(Figures in millions of currency indicated)

TotalU.S, Canadian Swiss expressed

Year Dollars Dollars Sterling Francs Rupees in rupees-

1950 9.51 .47 .48 3.76 37.09 95.111951 5.54 - .83 3.77 25.30 67.071952 1.26 .46 .40 0.17 16,58 30.0919',3 .50 .45 .11 - 39t80 9.591954 .19 .27 .04 - 3,35 5.95

l'otal 17.00 1.65 1.86 7.70 86.14 207.81

U.S. $ equi-valents 17,00 1.50 5.21 1.80 18.09

These funds do not include any amounts for reimbursement for expendi-tures made prior to 1 Januar7r 1950 or for interest during construction. Sincethe interest and coTimitment charges qn the IBRD loan during construction will bepaid by the Government of India, they are not included in the dollar reqluire-ment. For purposes of computing the financial returns on the project, horwever,interest during construction on all funds is taken into account.

The following table shors the list of goods and services to be pur-chased with the U.S. and Canadian dollars. The amounts.paid to 31 December 1950on contracts are ihdicated.

1/ The rates used in ponversion of the various currencies to rupeeswere:

U,S. 't1 . . . .. . . . 14.76 rupeesCanadian $1 . . , . 4.32 rupeesU.K. UI . . .. . 13.33 1/33 rupeesSwiss Francs 100 . . 1J5,rupeds

Table BOKARO - KONAR PROJECT

Estimate of Dollar Cost--(In thousands)

Total Cost Pd. thru 12/31/49 Balance to be financedCana- Cana- Cana- Total in

U.S.$ dian $ U.S.$ dian $ U.S.$ dian $ U'S.$

Bokaro Thermal PlantIGE contract 13,362 - .6,300 - 7,062 $7,062Spare parts IGE equipment 400 - -- 400 400Erection costs 412 _ _ _ 412 - 412Structural steel 918 - - 918 - 91&Piping valves, etc. 1,000 - - - 1,000 - 1,.000Station wiring conduits,, etc. 1,000 - - - 1,000 - 1,G00Misc. erection equipment 175 _ - - 175 - 175Kuljian.Purchasing Commission 63 - - - 63 - 63Kuljian Engineering Fee 500 - 175 - 325 325-Kuljian Supervision Fee 488 - - - 488 - 488

t_- KOnar Dam-

7 Construction equipment 656 - - - 656 - 656

Transmi8sion Line Equipment,Co~Mctorst,et& 2,407 - 762 - 1,645 1,495Insulators, etc. 624 - 185 - 439 - 439Ground wire 174 - - - 174 - 174Erection appliances 101 - - - 101 - 101Communication system 489 - _ - 489 - 489

Substation EquiPmentuit breakeras 26 - 26 - - - -

Lightning arrestors 80 - - - 80 - 80Isolators 384 - - - 384 - 384Control & protective equipment 314 - - - 314 - 314Misceellaneous fittings 342 6 - - 342 6 347Erection tools 23 _ - - 23 - 23

Esculation Charges (IGE) and9%hexr Contingencies 1,953 - - - 1,953- 1,953Ocean freight 202 - - - 202 - 202

Grand totals 23,686 2,413 6,68k 762 17,000 1,651 18,500

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Availability of Poi.rer from Sindri -

The DVC- has contracted to obtain 30,000 kw of power for 25 years fromthe.fertilizer,plant now under construction by the,Government at Sindri on thePamodar R.iver about 40 miles below Bokaro. The power plant at Sindri, which isa thermal plant, vwill have a total installation of 80,000 krr. It was plannedthat 50,'000 kw of the 80,000 kw would serve the fertilizer plant and 30,000 kwwould b6 allocated to the DVC so that this quantity of power could quickly bemade available to the coal fields. It is estimated that this power will beavailable by 1951 or perhaps sooner. The DVC will pay an annual demand chargeof 60 rupees ($12.60) per continuous kilowatt and an estimated energycharge of .0125 rupees, (2.63 U.S.mills) per kwh. The cost of the energy atthe Sindri bus bars based on a sale of 100 million kwh per year will be about.0260 rupees or (5.46 mills) per kwh. This energy charge is, however, subjectto adjustment to actual costs after the Sindri plant begins operations. Thisenergy will be'distributed through the DVC transmission netyrork and the Sindriplant will become an integral part of the nVC power grid.

Cost of Production and Transmission of Energy -

The cost of electricity production at the bus bars of Bokaro ThermalPlant, including interest during construction, is estimated at 5.19 mills Perkwh based on coal at 9 rupees per ton and the sale of 552 million kwh annually.This volume is expected to be reached the third year after the completion ofthe project. Including energy from Konar and energy purchased from Sindri, theaverage cost of Dower from the Bokaro-Konar project will be 5.35 mills per kwh.

The cost of transmission will be about 2.11 mills per kwh. The costof energy delivered to the large consumers' transformers or to sub-stationswill, therefore, be in the order of 7.46 mills per kwh (0.0355 rupees per kwh).The cost of transmission is relatively high as the capacity of the systeminitially will be larger than required, but this cost will decrease as theamount of energy transmitted increases.

The total cost of the energy delivered to the consumers' transformersof 7.46 mills per kwh includes interest on the total capital investment (whichincludes interest during construction) at 4% on the dollar bo`rt1ion a.nd3-1/2% on the'other'portions, depreciation, maintenance and operation costsand 12%. transmission losses.

A spot check of several power plants in the Valley revealed that thiscost will probably be cheaper than any of the existing plants 'could producepower, as the.followirng examples will indicate:

(a) The.ll0,000 kr thermal plant now under construction in Calcutta.expects to have to pay 23-1/2 rupees per ton for coal delivered (compared with.9 rupees at Bokaro) and the -capital cost of this plant.p'er kw installed willbe about the.same as Bokaro.

(.b). The Loyabad Power Station of the Sijua (Jherriah). ElectricSupply Company, a licensee with an installed capacity of 18,000 km, located inthe coal fields, was paying 18-3/h.rupees per-ton for coal and its costs ofproduction on a 64% annual load factor was over one cent per kwh includingcapital costs.

(c) The termal power plant of the Aluminum Company near Calcuttawith an installed capacity of 16,000 kw required 2.2 popnds of coal per kwh

- 19 -

as compared with 1.33 pounds per kwh for Bokaro and coal from their own mineswas costing 11 rupees per ton at the plant as compared with 9 rupees atBoakro.

Frorm this check it is evident that the Bokaro-Konar project will haveno difficulty in producing power as cheaply or, in most instances, considerablymore cheaply than the existing thermal plants in the Damodar Valley area.

Rates Proposed by iVC for Energy andfor Irrigation Wfater -

The preliminary electricity rates proposed by the DVC for energyconsist of two Tariffs - A and B. Tariff A sets forth a demand and an energycharge for high tension bulk supply for loads below 5,000 kva and Tariff Bthe demand and energy charges for loads of 5,000 kva and above.

The rates in Tariff A are:

Demand charges per month:

For first 1,000 kva . . . . . 5 Rs. 14 As. - (f41.2h) kva" next 1,500 " . . . . . 5 ' 2 " - (sL.o8 "

all over 2,500 kva . . Li " 6 " - ($0.92)

Plus

Energy charges per month:

For first 200,000 kwh . . . . 0.5 anna (6.56 mills) kwh" next 300,000 " . . . . O.15 " (5.91 mills) "

" all over 500,000 kwh . . 0.40 " (5.25 mills) "

The rates in Tariff B are:

Demand charges per month:

For the first 5,000 kva ..4 Rs.l14 As. ($1.03) kva" " next 10,000 " ? . 4 " " ($0.89) ""i "t "t 15,000 " . . 3 " 10 " ($0.76)" all over 30,000 " , 3 " 6 " ($0.71) "

Energy charges per month:

For'the first 500,000 kwh _ .45 anna (5.91 mills) kwh" "i next 1,500,000 4r _ , 40 (5.25 " ) t

" all over 2,000,000 " - .375 " (4.92 " ) "

The above rates are expected to return an average of about 6/10 anna(7.9 mills) per kwh sold. As the DVC is prohibited by law from distributingenergy at less than 30,000 volts, it will serve only large scale consumers ona wholesale or bulk supply basis. The rates appear reasonable and should beattractive to communities, mines, railroads and large scale manufacturers thatare now Durchasers or producers of electrical energy.

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The rate proposed for the sale of irrigation water is 15 rupees($3.15) per acre for perennial irrigation - or about 7-1/2% of the additionalgross income of 200 rupees per acre expected to be obtained by the farmersafter year around irrigation is available. This rate compares favorably withthose prevailing in other parts of India.

Financial Analysis

As the project itself will not earn dollars, the financial analysis setforth herein is made primarily to determine whether or not the project wouldbe self-liquidating under conventional business procedures and would be ableto carry the service charges of the loan contemplated.

As the Bank has been requested to assist in financing only the first stageof the development of the Bokaro-Konar project, stage two of the project Thichis expected to be completed in 1955 or 1956, is not taken into consideration -nor were any other power projects of the DVC - in estimating the financialreturns. Consequently, revenues from the sale of energy from the Bokaro-Konarproject, wrill level off after the third year of operation and not increasethereafter. Sales of irrigation water will also not increase because onlythe sale of water released from Konar Dam is considered.

The total capital investment in the project amounts to 221 miulion rupees.This does not include the portion of the cost of Konar I Dam allocated to floodcontrol, 16.34 million rupees (29.2%) as none of the benefits from flood con-trol are included in the income column. Revenues from the sale of energywere based on the estimated average income of 6/10 anna (7.9 mills) per kwhexpected to be derived from the preliminary tariffs. The income from sale ofirrigation water was based on 15 rupees per acre for perennial irrigation ofabout 40,000 acres, less the amounts now paid to the Provinces for seasonalirrigation, the net being about 13-r1/2 rupees per acre.

The total gross income from the Bokaro-Konar project is expected to reach32.55 million rupees annually three years after construction is completed.About 98 percent or 32.01 million rupees will be derived from the sale ofenergy and 2 percent or .54 million rupees from the sale of water for irrigatioi

Annual operation and maintenance costs of the project (including the costof energy purchased from Sindri) are estimated at 11.79 million rupees. Afterdeducting these costs from the annual income, a net operating income beforeinterest and depreciation of 20.76 million rupees remains. This amount in normapractice would be available for interest and amortization charges on the IBRDloan amounting to 7.68 million rupees annually and interest on the non-dollarcapital investment amounting to 4.65 million rupees. The surplus afterinterest and amortization charges would amount to 8.43 million rupees.

If annual depreciation charges of 4.0o million rupees be deducted from thenet operating income, the surplus remaining will be twice the total annualinterest charges on both the dollar and non-dollar investment. If the non-dollar investment contributed by the participating governments be looked uponas equity capital on which no interest should be payable, then interest chargeson the dollar loan will be earned 4.7 times before taxes.

Depreciation is computed on a 3% sinking fund rate based on a 25 yearlife for the machinery in the therm4l and hydro plants, a 40 year life fortransmission lines and a 75 year life for the Konar Dam and reservoir.

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In the annex a detailed analysis of the financial returns of theproject is presented on a pro-forma basis. The table below shows briefly therevenues and various costs in millions of rupees in the fourth year of opera-tion after both income and expenses have leveled off. Interest on the dollarloan (Rs. 38.06) is computed at h% and on the non-dollar portion of the invest-ment (Rs. 132.9t) at 3-1/2"'.

Millions of Rupees

YIaint. Net I;sEM Charges BalanceGross & opera- operating On On Bal. of afterIncome tion income Loan invest. Total Deprec, Deprec.

32.55 11.79 20.76 3.52 h.65 8.17 4.00 8.59

Comments -

The Project - The Bokaro Thermal Plant, designed by the IGE and theKuljian Corporation, is a modern type steam generating plant of conventionaldesignl writh no particularly unusual features, The boiler pressure, 850 poundsper sl. inch, will be the highest in India. It will also be the first steamplant in India to use pulverized coal. The layout of the plant, its proximityto low priced coal supplies, and cheap transportation of coal by cableway, plusthe gesnerally high rated efficiency of the equipment should result in the pro-duction of power at a cost lower than any plant now operating in the area.

The Konar reservoir will provide an adequate supply of cooling waterfor the Bokaro thermal plant. Only the costs allocated to powrer and irrigationare included in the amount of capital investment for purnoses of estimating fin-anciaL returns. This procedure is considered reasonable and justifiable. Thedesign of the dam, produced by the French firm Societe de Construction des Batig-nolles, as revised by the Consulting s'ngineers retained by the nVC to supervisethe construction of the project (Gruner Brothers, Switzerland) is satisfactory.

The transmission system to be built initially to carry the power fromthe Bokaro-Konar project is somewhat larger in capacity and length and more ex-pensive than would have been necessary for the power to be made available fromthis project alone, but as other generating plants are expected to come on theline in the next 5 to e years to supply about double the initial load, the con-struction of the transmission system as proposed is considered the most econo-mical in the long run and justifiable. The technical details of the systemappear to be adequately engineered.

The Cost-of the Project - The total cost of the project, includingBokaro-Konar and the transmission system, is somewhat high by U.S. standards,but not unreasonably high considering the costs of ocean freight and othercosts which would not be included in a U.S. plant. The dollar cost of theproject includes some items which may be purchasable in the soft currency areasand the DVC has stated it intends to buy these items (chiefly for transmissionsystem) in the soft currency areas if time of delivery is acceptable. Considera-tion wvill also be given to standardization of equipment to avoid the necessity

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of maintaining multiple stockpiles of spare parts. There are other items,however, such as special structural steel, valves, fittings and miscellaneouselectrical equipment and a small amount of construction equipment which DVCwishes to purchase in the dollar area for technical reasons. The DVC also hasincluded in the dollar estimates amounts to cover commissions for the purchasingand preparation for shipment of non-IGE equipment from the U.S. ($63,000), per-sonnel expenses for U.S. erection crews, consultants' fees and the consultants'personnel expenses. All of these items are considered reasonable dollarexpenditures and necessary for the most efficient erection of the plant. Only$202,000 of the total cost of $850,000 for ocean freight is included in thedollar cost.

The DVC Organization - In judging the DVC organization, the fact that itcame into existence on 7th July 1948, only 18 months ago (9 months at the timethe mission was in India) must be kept in mind. At the outset the DVC madepolicy decision against undertaking dam design and construction 'departmentally"i.e., with its own personnel. It decided to appoint consulting engineers tohandle dam design and to supervise construiction, to employ contractors to con-struct its various projects, to appoint a high-caliber chief engineer of broadexperience to coordinate and direct the work of its technical staff and totrain a maximum number of carefully selected Indians, both in design and con-struction by associating them with the consultants and pontractors who -vuldlater be able to assume responsible positions in the organization. As theCentral Technical Power Board of the Central Government had formulated theunified scheme of development of the Damodar River and had started work onplans for the Bokaro steam plant and as its successor, the Central ElectricityCommission had continued the work on the Bokaro plant and related vork, the DVCdid not attempt to set up an organization to take over the work the CEC wasdoing in its behalf, but let the CEC continue handling the project until thebids were accepted and the Kuljian Corporation was appointed as consultants..At present the CEC continues to wrork for the DVC, but the DVC expects soon toappoint its own chief engineer and under him to build up its technical organ-ization and with his advice to appoint consulting engineers. The order inwhich these steps are taken is important. It would have been inadvisable andexpensive for the DVC to have built up a large technical staff and hand itover to a chief engineer who had had no part in its selection. The DVC hasdelayed appointing a chief engineer longer than it should have. This has leftthe technical organization admittedly wieaR, but the DVC is fully aware of thisdeficiency and will provide for technical supervision satisfactory to the Bankbefore the execution of the loan agreement.

As the DVC enjoys a large degree of autonomy, it is only natural thatjealousies and rivalry should arise, between the DVC and the other governmentagencies in thse same field - notably CMINC. / This situation has resulted inthe criticism of the DVC within the government and also criticism from theIndian engineering profession who resent and view with alarm the DVC's policyof attempting to hire foreign engineers and consultants,

By any Western standards, the DVC organization is weighted down with toomuch junior administrative personnel, but since its records must be audited bythe Central Government they must be kept in the manner prescribed by that Gov-ernment and therefore the staff to keep the records corresponds to the Central

g/ Central Watervways, Irrigation & Navigation Commission

Government nattern. It is also in the process of building up an organization-to administer a large volume of future vork. In addition, it is the Indiantradition to carry on its administrative work in a time consuming manner. TheDVC is attempting to introduce some reforms in this direction but progress isslow.

Such technical staff as nVC has at present is reasonably good vith afevw exceptions, but the work of the various divisions lacks coordination anddrive. This reflects the lack of a chief engineer. The absence of a chiefengineer throvws the burden of initiative and coordination either on the Chairmmor the Secretary to the detriment of their other duties.

On the vwhole the TVC has a high morale and all of the executives andengineers are sincere and keenly interested in carrying out the obiectives ofthe organization. The functional organization of the DVC is basically sound andwith an aggressive chief engineer who is also a good organizer and executivethe establishment could be expanded quickly into a smoothly functioning outfitthat could adequately handle its assigned tasks.

Market for Power - A spot check of the Drospective market for thepower to be ptoduced by the Bokaro-Konar oroject revealed that there will bean immediate absorption of all of thee energy made available - mostly to largeconsumers such as the Tata Iron and Steel "orks, coal mines and mutnicipalities.There is little ctestion but that rates at which the DVC expects to sell itsenergy wrill be attractive as most of the existing plants are old and highcost nroducers. However) as the DVC has a monopoly on the generation anddistribution of energy in bulk in the Damodar Valley and. adjacent region, largerusers of povrer will be forced to buy: from the DVC because they cannot expandor build their owm plants. The DVC plans in the second phase of its operationto extend its transmission lines to Calcutta, By this time the market for thepower in Calcutta should be available, because the pent-up demand now willpractically absorb the new block of power shortly to become available from thenew 120,000 khr plant at Cossipore.

Financial Returns - As the Konar dam Will supply cooling wrater forthe Bokaro plant and as the hydro power at this dam will also be integratedwith Boakro power, the capital investment in this dam, exclusive of that allo-cated to flood control, as vrell as the returns from the sale of power and wtaterfor irrigation vwere taken into consideration in estimating the financial returnAlso taken into consideration are the net returns from the sale of power pur-chased from the Sindri Fertilizer Plant which will be distributed over the tranmission net.. This integration is considered entirely justifiable and desirableThe-revenues,estimated to be received under the proposed charges.for energy andirrigation water appear to be adequate to earn inttrest charges %wo times andalso to amortize the loan.

Conclusions-

As the proj6ct will nrovide much needed porer for Indials mostindustrialized region at reasonable rates and also provide a small supply ofwater for industrial use and for irrigation during the dry season and will earnits interest charges twice, it is both financially and economica ly Justified.

A N IT E X

Bokaro-l:onar ProjectStatement of Dollar Contracts and Payments

SL Amount of Payments to datoline Name'of Firm Contract (31.12.49) $

1. Associated Flectrical Industries(India)Ltd.,Cal-cutta(ll/33 kv Conductors & accessories) 13,066.45 12,0820.97

2. A-ssociated Electrical Industries(Tndia)Ltd,OCal-cutta(66 kv Conductors & accessories) 66,h01.80 39,8hl.08

3e Associated Electrical Industries(India)Ltd.pCal-cutta(l32 kv Conductors & accessories) 1,139,326.00 64o,ooo.oo

4, International General Electric Co.(India)Ltd,,B3onbay(66 kv Insulators & accessories) 46,5o8.6 Nil

5. International General Electric Co.(India)Ltd.,Boqmbay(132 kv Insulators & accessories) 2811,641.30 185,ooo.00

6. International General Electric Co.(India) Ltd.,Bombay (Lightning Arresters) 6,807.24 Nil

7. International General Electric Co.(India)Ltd.,Bombay (Oil circuit breakers) 43,900.45 26,340.00

8. Irnternational General Electric Co. (India)Ltd.B3ombay(3 Steam turbine generators and equip-rnent for Bokaro Thermal Power Station) *13,362,320.00 6,300,000.00

9, Kuljian Corporation-fees payable for equip-rment inspection,construction management andinitial operation of the Bokaro Steam PowerStation over a period of 5 years 500,000.00 175,000.00

10, AEI Hlydraulic Compressers 5,000.00 Nil

11. International General Electric Co, (India)Ltd., 132 kv Control MJetering and Relay-ing Equipment 19,000.00 Nil

15t486,971.81a 7,379,002.05

Balance 8,107,969.79X

* This base price is subject to a ceiling of15 percent. The escalation money amountsto an additional sum of I2,004,348. Thefinal price will be as per day of shipmentex-factory.

A N 'i E K

Bokaro-Konar ProjectStatement of Contracts in Foreign Currencies

Other Than Dollars

SL Amount of Payments toNo. PaQne of Firm Etc. Contract date(31.12z49) Remarks

Rs, Rs.

I. Societa Anonima Elettrtficazionej,Milano, Payable inItaly (132 kv Towers) 3,723,920 2,493,000 sterling

2, English Electric Co.,Ltd.,Calcutta(lO,000and 7,500 kva transformers) 859,531 5o6,0oo

3. English Electric Co.Ltd., Calcutta(6,oookva Transformers) 456,614 135,000 tt

i, Associated Electrical Industries Ltd,,India, 132 kv Vibratcrs and dampers 228,000 -

5, Nippon Gaishal Kaisha 33 k.v. PinInsulators 28,50C -

6. S.A.E. -ilatro 33 k.v. Suspension clamps 66,5cc - tl

7. BijjarinaJ Tilaram 132 k,v. Pedastal andStrain Insizlators 155,000 tC

S. Steaej t ,'ining Equipment India, Ltd.,15,300 lnra transformers 2,512,G0O - ti

9. B. I. Cables Ltd., 20,000 kvaTransformers 1,493,000 -

10: A.E.I. Ltd. 20,000 kva tran-sformiers 744,00 -0

11. Reyrolle & Co. Ltd. Potentialtransformers, Isolating Switches,Cables, Control Miotoring equipmentand oil circuit breakers 425,000 -

12. Easun Engineering Co. Isolatingswitches 53,000 -

l0,Y7S,o 65 2,13L,oC0

A ITI N E X

M,Jarch 15, 1950

Dear MTr. Beecroft:

I have examined the attached pro forma estimate ofthe financial returns of the Bokaro-Konar project and considerthat it reflects the net operating income from such a projectif considered entirely apart from other DVC undertakings; Thenet ouerating income would be sufficient to cover interest re-quireiments and income taxes at existing rates.

The DVC will not be required to pay land revenues(local taxes) on such land as it acquires nor is it likely topay any income tax during the life of the requested IBRD loan.Vihile the attached estimate indicates a txable income, thenon-income producing activities of DVC-,as flood control andsoil conservation will, in all probability, absorb the surplasand leave no taxable income.

Sincerely yours,

(Sgd). S. N.l ozumdar

Mr. Eric BeecroftLoan OfficerInternational Bank for Reconstruction

and DevelopmentWashington 25, D. C.

A N N E XBekaro-Konar Pro ject

Pro Forma Estimate of Financial Returns(in millions of rupees}

InteresV-ad LMQrtizat~on Income afterGross Income Operation Net Int.@ 4% & Int. 3: It. & amortizationd

Energy Water and Operating amortizat on on balance ofSales Sales Total ~Maintenance Income on $ IoZ investment Total Annual!/ ~1tv

(Rs.88.06) (Rs.132.94)

1953 1.97 3.11 5.08 - 5.08 - 5.o81951 2 - _ _ 2,87 3.38 6.25 - 6.25 _ 11.331952 3.71 - 3.71 30o4 .67 3r*27 4.11 7.38 - 6.71 _ 18.041953 19.58 .54 20.12 9.19 10.93 3.41 4.47 7.88 A 3.05 - 14.991954 25.93 .54 26.47 10.92 15.55 3.49 4.59 8.08 7.47 - 7.521955 26.03 .54 26.57 11.79 14.78 7.68 4.65 12.33 2.45 - 5.071956 29.03 .54 29e57 11.79 17.78 7.68 4.65 12.33 5.45 f .38

1957 32.01 .54 32.55 .1,79 20.76 7.68 4.65 12.33 8.43 8.811958 32.01 .54 32.55 11.,79 20.76 7.68 4.65 12.33 8,.43 17.241959 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.431 25,671960 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 34.101961 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 42.511962 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 50-.961963 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 59-39;964 32.01 -.54 32.55 11.79 20-76 7.68 4.65 12.33 8.43 67.821965 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 76.251966 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.143 84.681967 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.4-3 93.111968 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 101.541969 32.01 .54 32.55 11.79 20.76 7.68 4.65 12*33 8.43 109.971970 32.01 .54 3-2.55 11.79 20.76 3.84 4.65 8.49 12.27 122.224

Totals 552142 9.72 562.14 211.79 350-35 134.05 94.06 228.11 122.24 122.24

/ Based on a dollar loan of $18,500,000 for 20 years with interest including commission at 4% per annum; amortizationto start with the first interest payment in 1955.

/ Before taxes. The Corporation is subject to Central Government income taxes levied on corporations; as the rate ofsuch is subject to change from time to time and is now before the Legislature for revision, taxes payable wereomitted from the table, but the net income is sufficient to pay taxes at existing rates (the maximum rate is about40%) and cover all carrying charges also.

3/ After 1256 annual depreciation on a 3% siyting fund basis amboupting toRs 4 million will be covered 2.1 imes afterinterest and amortization; on a stralght line depreciatioqi asis, annuaL depreclation amountilig to ts. millionwauld be covered 1.3 times. The DVC proposes to use the sinking fund basis.

f e4,a* KDARMA SL

U ~~~~KONAR I1 ~ \_ 10, 500 KW GOMI

)~~~~~~~~~~OA KON

BIHAR -. BENGAL

~LPAHARI -?w/////llll\\\\\\\l\SEEBPORE i 2 ,! m X

MAITHON "'NSOL / / \

\_\~ ~ ~ ~ ~ ~ ~ UHIOE/ 1 / . .__

ROADKLTKUM U810 DISHERGARH

DHANBAD * RANIGA II

4_ DURGAPUR BARRA

PANCHET HILL '-- A RA

60~000 KWy

pGAMAR~~~IA,

KHARAGPUR

GHATSILLA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

x. .41~~~Af

BHAGIRA,;-~

* DRAINAGE AREA

URDWAN~~~~~~~~~~~~

- *KANCHRAPARA BAY OF =

<; 0 t B *~~~~*'OUEPR N G A L

I~~ I ,.

. 6 1.MULAJORE

COSSIPORE EY N

/, ~CALCUTTA INDIAN OCEAN0

Total Hydra Capacity proposed to b(

Total Thermal Capacity proposed toTotal Arec, proposed to be irrigated

UNIFIED

!AG PUR N 1.B.RD. DRAF

cO5 Reservoirs proposed

Area to be irrigated+I-* | Railways

===c= Roads

-* - Provincial boundary

IllIllll Drainage area

Irrigation with Navigation Canal proposed

A _ Irrigation Canal and Distributaries proposed

132 K V Transmission Line proposed (First staqe)

132 KV Transmission Line (Future)

66 KV Transmission Line proposed

33 KV Transmission Line proposed

Hydro - Power Stations proposed

BOKARO Thermal Power Station (OV.C)

1L111 Thermal Power Stations (Local Licencees Etc.)

E) Sub-Stations proposed

0 Switching Stations proposed

roposed to be installed = 198,950 KWproposed to be installed = 200,000 KWbe irrigated = 900,000 Acres

DAMODAR RIVER

NIFIED SCHEME OF DEVELOPMENT

INITIAL STAGE

MILES0 10 20 30 40

I I ., -. I I I I

SCALE

.R.D. DRAFTING SECTION JANUARY 1950