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Project Number: 47101-004 MFF Number: 0083 December 2020
India: Assam Power Sector Investment Program (Tranche 3)
Distribution of this document is restricted until it has been
approved by Management. Following such approval, ADB will disclose
the document to the public in accordance with ADB's Access to
Information Policy.
Periodic Financing Request Report
http://www.adb.org/Documents/LinkedDocs/?id=47101-004-DraftPFRRhttp://www.adb.org/Documents/LinkedDocs/?id=47101-004-DraftPFRR
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CURRENCY EQUIVALENTS (as of 25 November 2020)
ABBREVIATIONS
ADB – Asian Development Bank AERC – Assam Electricity Regulatory
Commission APGCL – Assam Power Generation Corporation Limited FFA –
framework financing agreement MFF
MW – –
multitranche financing facility megawatt
PAM PMU
– –
project administration manual project management unit
NOTES
(i) The fiscal year (FY) of the Government of India and its
agencies ends on 31 March.
“FY” before a calendar year denotes the year in which the fiscal
year ends, e.g., FY2020 ends on 31 March 2020.
(ii) In this report, "$" refers to United States dollars.
Currency Unit – Indian rupee (₹) ₹1.00 = $ 0.0135 $1.00 = ₹
74.057
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In preparing any country program or strategy, financing any
project, or by making any designation of or reference to a
particular territory or geographic area in this document, the Asian
Development Bank does not intend to make any judgments as to the
legal or other status of any territory or area.
Vice-President Shixin Chen, Operations 1 Director General Deputy
Director General
Kenichi Yokoyama, South Asia Department (SARD) Diwesh Sharan,
SARD
Director Priyantha Wijayatunga, Energy Division (SAEN), SARD
Team Leader Len George, Senior Energy Specialist, SAEN, SARD Team
members Jyotirmoy Banerjee, Senior Project Officer (Energy), India
Resident
Mission (INRM), SARD Maila Cinco, Associate Project Analyst,
SAEN, SARD Natasha Davis, Principal Institution Coordination
Specialist, SARD Michael Gomes, Project Analyst, INRM, SARD
Ko Hamamoto, Infrastructure Specialist, Sustainable
Infrastructure Division, Sustainable Development & Climate
Change Department (SDCC) Yoojung Jang, Social Development
Specialist, SAEN, SARD
Prabhjot Khan, Social Development Officer, INRM, SARD Jennifer
D. Lazatin, Senior Operations Assistant, SAEN, SARD
Zhaojing Mu, Environment Specialist, SAEN, SARD Vankina Sri
Rekha, Principal Counsel, Office of the General Counsel Maria
Angelica Rongavilla, Senior Operations Assistant, SAEN, SARD
Joong-Jae Shim, Senior Procurement Specialist, Procurement
Division, Procurement, Portfolio and Financial Management
Department Jongmi Son, Finance Specialist (Energy), SAEN, SARD
Takayuki Sugimoto, Energy Specialist, SAEN, SARD Rajesh Yadav,
Senior Project Officer (Natural Resources and Agriculture), INRM,
SARD
Peer reviewer Zhang Lei, Senior Energy Specialist, Energy
Division, Central West Regional Department
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CONTENTS Page
TRANCHE AT A GLANCE I. BACKGROUND 1 II. ASSESSMENT OF
MULTITRANCHE FINANCING FACILITY IMPLEMENTATION 2 III. PERIODIC
FINANCING REQUEST 3
A. Impact and Outcome 3 B. Outputs 4 C. Summary Cost Estimates
and Financing Plan 4 D. Implementation Arrangements 5 E. Project
Readiness 6
IV. DUE DILIGENCE 6 A. Technical 6 B. Economic and Financial 7
C. Governance 7 D. Poverty, Social, and Gender 8 E. Safeguards 8 F.
Summary of Risk Assessment and Risk Management Plan 10
V. ASSURANCES 10 VI. THE PRESIDENT’S DECISION 10
APPENDIXES 1. Design and Monitoring Framework for Project 3 2.
Loan Agreement 3. Grant Agreement 4. Project Agreement 5. Project
Administration Manual for Project 3 6. Contribution to Strategy
2030 Operational Priorities 7. Economic Analysis 8. Financial
Analysis 9. Updated Summary of Poverty Reduction and Social
Strategy 10. Procurement Plan 11. Environment Impact Assessment 12.
Resettlement and Indigenous Peoples Plan 13. Gender Action Plan 14.
Updated Risk Assessment and Risk Management Plan 15. Climate Change
Assessment SUPPLEMENTARY APPENDIX (to be disclosed on request) 16.
Financial Management Assessment Report 17. Stakeholder
Communication Strategy 18. Grant Fund Report
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I. BACKGROUND
1. Multitranche financing facility. The Asian Development Bank
(ADB) and India signed a framework financing agreement (FFA) on 13
May 2014 for the Assam Power Sector Investment Program. On 3 July
2014, ADB’s Board of Directors approved the provision of a
multitranche financing facility (MFF) to India for an aggregate
facility amount of $300 million.1 2. Prior interventions by the
Government of Assam, including those with ADB support,2 resulted in
an increase in the number of electricity connections from 1.1
million in fiscal year (FY) 2004 to nearly 1.7 million in FY2008,
while the generation capacity of the state government-owned Assam
Power Generation Corporation Limited (APGCL) increased from 120
megawatt (MW) to about 400 MW over the same period. There was also
a reduction in electricity distribution losses of the state
government-owned Assam Power Distribution Company Limited (APDCL)
from about 40% in FY2001 to about 24% in FY2012. Prior sector
reforms include unbundling of the state utility as well as setting
up of an independent Assam Electricity Regulatory Commission
(AERC). However, in 2012, the state’s power sector continued to
face challenges including (i) only about 37% of households had
access to grid-supplied electricity with power cuts of about 5
hours a day; (ii) the peak demand–supply gap was as high as 23%
with about 25% of demand met by in-state generation; (iii)
distribution losses were high at about 24% compared to national
targets of 15%; and (iv) the financial performance of power sector
companies, particularly APDCL, remained poor. 3. The Government of
Assam is taking various steps to address problems in the power
sector with the objective of (i) achieving universal access to
electricity by FY2022; (ii) improving the quality and reliability
of power supply; and (iii) addressing power sector constraints to
improve the state’s economy. Demand for power is expected to double
from 1,250 MW in FY2012 to about 2,600 MW in FY2022. The focus in
the generation subsector includes bridging the demand– supply gap
through building new and efficient power projects in the state and
purchasing power effectively from out-of-state sources. The
transmission utility would seek to improve reliability and improve
efficiency through investments. The focus in distribution is to
improve efficiency through investments and operational
improvements, strengthen financial sustainability, and deliver good
quality power supply to end-users. The utilities also plan to build
the capacity of staff for efficient service delivery and support
the functioning of enterprise resource planning systems. 4. The
Government of Assam has a power sector master plan with a road map
that identifies $3.5 billion of investments for FY2012–FY2022. 3
This includes the ongoing ADB-supported Assam Power Sector
Investment Program (APSIP) and other ADB interventions.4 The master
plan targets an increase of the state-owned generation capacity to
1,410 MW by FY2022. Transmission investments include about 88
substations and 4,800 circuit kilometers of lines, while
distribution investments cover 265 substations and 63,500 circuit
kilometers of lines to service about 7.1 million new customers and
reduce distribution losses to 15% by FY2022.
1 ADB. 2014. Report and Recommendation of the President to the
Board of Directors: Proposed Multitranche
Financing Facility to India for the Assam Power Sector
Investment Program. Manila. The MFF closes in June 2024. 2 ADB has
been supporting Assam’s energy sector since 2003. The first loan
was approved to carry out power sector
institutional reforms as well as physical infrastructure
investments. ADB. 2003. Report and Recommendation of the President
to the Board of Directors: Proposed Loans and Technical Assistance
Grants to India for the Assam Power Sector Development Program.
Manila (Loan 2036-IND).
3 Government of Assam. 2014. Assam Power System Master Plan.
Assam. It was supported under ADB. 2013. Technical Assistance for
Updating Load Forecast and Power System Master Plan for Assam.
Manila (TA 8129-IND).
4 On 18 November 2009, ADB’s Board of Directors approved an MFF
to India for an aggregate facility amount of $200 million for
transmission and distribution investments. Four loans were approved
under the MFF. ADB. 2009. Report and Recommendation of the
President to the Board of Directors: Proposed Multitranche
Financing Facility and Technical Assistance Grant to India for the
Assam Power Sector Enhancement Investment Program. Manila.
https://www.adb.org/sites/default/files/project-document/81373/47101-001-rrp.pdfhttps://www.adb.org/sites/default/files/project-document/81373/47101-001-rrp.pdfhttps://www.adb.org/sites/default/files/project-document/70283/rrp-ind-36318.pdfhttps://www.adb.org/sites/default/files/project-document/70283/rrp-ind-36318.pdfhttps://www.adb.org/sites/default/files/project-document/70283/rrp-ind-36318.pdfhttps://www.adb.org/projects/43166-209/mainhttps://www.adb.org/sites/default/files/project-document/64694/41614-01-ind-rrp.pdfhttps://www.adb.org/sites/default/files/project-document/64694/41614-01-ind-rrp.pdfhttps://www.adb.org/sites/default/files/project-document/64694/41614-01-ind-rrp.pdf
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5. The expected impact of the APSIP is increased availability of
electricity in Assam. The expected outcome is increased capacity
and efficiency of energy generation and distribution systems in
Assam. The investment program is financing (i) augmentation of
in-state generation capacity through retrofitting of the
inefficient gas-fired generating plant at Lakwa (project 1); (ii)
distribution loss reduction and efficiency improvement through
upgrading and expansion of the distribution system (project 2); and
(iii) construction of a new hydropower plant at Lower Kopili
(project 3). The investment program will also finance nonphysical
components to achieve long-term institutional and financial
sustainability of the power utilities in Assam, and to improve
customer services. In addition, the investment program includes
resources for the preparation of project 3, and implementation
support for all projects under the MFF.5 6. The proposed 120 MW
project at Lower Kopili will add to Assam’s power generation
capacity from a clean energy source and will double APGCL’s
generation capacity from hydroelectric sources (footnote 9). The
project will support lower electricity costs in the state,
particularly during peak evening periods through reduced dependence
on expensive fossil fuel sources. Support for hydroelectric power
generation is relevant to complement India’s target of 175,000 MW
of power, largely from intermittent wind and solar energy sources
by FY2022, and to achieve 40% of installed capacity from non-fossil
fuel-based energy sources by 2030.6 7. Tranches. The report and
recommendation of the President indicated there would be three
tranches (footnote 1). The first tranche was approved on 11 July
2014 to finance the retrofitting of the Lakwa gas plant to improve
efficiency in power generation, while the second tranche was
approved on 23 November 2015 to support downstream electricity
distribution investments.7 ADB received from the Government of
India a periodic financing request (PFR) for the third tranche in
September 2018 for the Lower Kopili hydroelectric project. The PFR
was resubmitted on 25 April 2020 reflecting the increased funding
requirement for project 3, and following prior tranche
cancellations under project 2.8 The investments under project 3
cover a part of the Government of Assam’s power sector road map to
enhance clean power generation capacity and improve electricity
availability for customers. The scope of project 3 is within the
original scope of the MFF and in compliance with the FFA.
II. ASSESSMENT OF MULTITRANCHE FINANCING FACILITY
IMPLEMENTATION
8. Progress on road map. The Government of Assam is implementing
its road map for the Assam power sector, and has made significant
progress. Household access to electricity has increased from 37% in
FY2011 to 61% in FY2016, and the pace of electrification has
accelerated towards 100% with funding from the Government of India.
Consequently, peak demand in Assam increased from 1,250 MW in
FY2012 to nearly 2,193 MW in FY2019, while the installed power
generation capacity increased from 960 MW to 1,729 MW over the same
period.9 Distribution losses have reduced to about 19% in FY2019
and investments are under implementation to meet efficiency
targets. The state is investing in in-state generation projects,
including from clean
5 To ensure coordinated development, the Assam Electricity Grid
Corporation Limited improved transmission
connectivity through support under the Assam Power Sector
Enhancement Investment Program (footnote 4). 6 Government of India.
2015. India‘s Intended Nationally Determined Contribution. New
Delhi. 7 ADB. 2014. Periodic Financing Request Report: Assam Power
Sector Investment Program (Tranche 1). Manila; and
ADB. 2015. Periodic Financing Request Report: Assam Power Sector
Investment Program (Tranche 2). Manila. 8 Project 3 is included in
ADB. 2020. Country Operations Business Plan: India, 2021–2023.
Manila.
9 This includes 433 MW of state-owned generation through
Assam Power Generation Corporation Limited (APGCL)
including 113 MW from hydroelectric sources, 1,226 MW of central
government-owned power projects, and about 70 MW of private
projects as of October 2019.
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energy sources, to meet demand and better utilize its natural
resources. Implementation has been delayed resulting in dependence
on alternate power sources. 9. Improvements in policy framework.
The policy framework maintains continuity through the Power for All
Program that outlines the Government of Assam’s power sector
priorities.10 A multi-year tariff mechanism was developed by AERC
to improve performance. For FY2019–FY2022, targets for generation
availability, generation efficiency, and distribution losses are to
be achieved through investments, capacity building, and increased
commercial orientation. 10. Progress of investment program. The
investment program is under implementation and there have been no
substantive or material changes in the type of investments. Project
1, with a regular loan of $50.0 million, was approved in July 2014,
and made effective in May 2015. The major package was the
replacement of inefficient, old open-cycle turbines with a more
efficient gas engine for the 70 MW Lakwa gas plant, while
nonphysical subcomponents included preparation for project 3,
implementation support for project 1, enterprise resource planning
support, capacity building and training. Contracts worth $39.1
million were awarded and fully disbursed. APGCL has completed the
Lakwa project and commercial operation started in April 2018. The
tranche was closed in September 2019, and uncommitted funds of
$10.9 million were returned to the facility. Two consultancy
contracts and enterprise resource planning (ERP) tenders originally
planned under project 1 are proposed under project 3. 11. Project
2, with a regular loan of $48.0 million, was approved in November
2015. The loan was made effective in December 2016 to support
distribution efficiency improvement through APDCL. Contracts worth
$29.8 million were awarded and $25.0 million was disbursed. The
tranche was closed in August 2020. Based on a review of contracts
awarded, $18.2 million was canceled and returned to the facility
which would be used to augment the financing requirement of project
3. The MFF performance rating as of October 2020 is on track.
12. Compliance with undertakings and loan covenants. The
executing agencies for projects 1 and 2 are compliant with most of
the FFA undertakings and the loan covenants in the loan agreements.
However, fulfillment of five undertakings related to financial
management has been delayed. APGCL was expected to address the
issues identified by its auditor by December 2014. It was also
expected to implement an ERP, complete asset valuation, improve its
financial sustainability, and implement identified institutional
measures by 2018. These are works in progress. A revised financial
management action plan for these covenants has been prepared with
implementation progress to be reported to ADB on a monthly basis.
Environmental and social monitoring reports were submitted to ADB
for both projects with some delays. Compliance with unfulfilled
undertakings and covenants identified above will be closely
monitored.
III. PERIODIC FINANCING REQUEST
A. Impact and Outcome
13. Project 3 is aligned with the following impact: increased
availability of electricity in Assam.11 Project 3 will have the
following outcome: increased electricity supply from clean energy
in Assam.12
10 Government of Assam. 2015. Power for All – Assam. Guwahati.
11 Government of India. 2017. Three Year Action Agenda. New Delhi,
and footnote 10. 12 The design and monitoring framework is in
Appendix 1.
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B. Outputs
14. Output 1: Lower Kopili hydropower plant installed. This
output will include the construction of the 120 MW Lower Kopili
hydroelectric project and its connection to the transmission grid
by December 2023. The project comprises 2 units of 55 MW main
powerhouse, and 2 units of 2.5 MW and 1 unit of 5 MW auxiliary
powerhouses. By June 2025, the hydropower plant is expected to
increase electricity supply from clean energy in the state by 469
gigawatt-hour (GWh),and reduce greenhouse gas emissions by 360,000
tons of carbon dioxide annually. 15. Output 2: Institutional
capacity of Assam Power Generation Corporation Limited
strengthened. Project 3 will build the capacity of at least 30
APGCL staff (including six women) in construction, operations and
maintenance, and safeguards. It also includes the establishment of
an enterprise resource planning system and completion of asset
verification studies. 16. Output 3: Resource management and
community resilience initiatives implemented. This output includes
(i) installation of sensors and monitoring equipment, and
development of dashboards for state and local government for
resource management; and (ii) development of plans and training of
at least 500 people (including 40% women) along the Kopili River
basin for increased capacity in managing disasters. C. Summary Cost
Estimates and Financing Plan
17. Project 3 is estimated to cost $297.0 million (Table 1).
Detailed cost estimates by expenditure category and by financier
are included in the project administration manual (PAM) (Appendix
5). The project team reviewed the impact of COVID-19 on the project
and has factored in measures to mitigate the impact on
implementation costs and timelines (para. 24, Table 4).
Table 1: Summary Cost Estimates ($ million)
Item Amounta A. Base Costb 1. Lower Kopili hydropower plant
installed 250.6 2. Institutional capacity of APGCL strengthened
18.6 3. Resource management and community resilience initiatives
implemented Subtotal (A)
1.8
271.0 B. Contingenciesc 19.6 C. Financial Charges During
Implementationd 6.4 Total (A+B+C) 297.0
APGCL = Assam Power Generation Corporation Limited. a Includes
goods and service taxes of $2.4 million to be financed by the
Government of Assam, and $32.7 million to
be financed by ADB loan resources. The taxes and duties to be
financed by ADB (i) are within the reasonable threshold identified
during the country partnership strategy preparation process, (ii)
are not excessive and represent a nominal percentage (14.2% of the
loan), (iii) apply only to ADB-financed expenditures, (iv) are
intended to simplify and expedite disbursement arrangements, and
(v) are considered material and relevant to the success of the
project. In addition, taxes and duties pertaining to output 3
(supported under the Trust Fund) will be financed by the Japan Fund
for Poverty Reduction.
b In 2020 prices. c Physical contingencies computed at 1.0% of
base costs. Price contingencies computed at average of 1.6% for
foreign
exchange costs and 4.0% on local currency costs; includes
provision for potential exchange rate fluctuation under the
assumption of a purchasing power parity exchange rate.
d Includes interest and commitment fee. Interest during
construction is computed at the on-lending rate to APGCL and does
not include $8.0 million of interest serviced by India.
Sources: Asian Development Bank and Assam Power Generation
Corporation Limited.
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18. The Government of India has requested a regular loan of $231
million from ADB’s ordinary capital resources to help finance the
project. The loan will have a 20-year term, including a grace
period of 5 years; an annual interest rate determined in accordance
with ADB’s London interbank offered rate based lending facility; a
commitment charge of 0.15% per year and such other terms and
conditions set forth in the draft loan and project agreements.
Based on the straight-line repayment method, the average loan
maturity is 12.75 years, and the maturity premium payable to ADB is
nil. The Japan Fund for Poverty Reduction (JFPR) will provide a
grant not exceeding the equivalent of $2 million to be administered
by ADB. 19. The summary financing plan is in Table 2. ADB will
finance the expenditures in relation to the turnkey contracts
(including goods and service taxes), consulting services, capacity
development, enterprise resource planning, and contingencies. The
JFPR grant will finance equipment, consulting services and capacity
development for resource management, and community resilience
improvement under output 3. The Government of Assam will finance
establishment costs, recurrent costs, interest during
implementation, land transfer, environmental and social mitigation,
project management, remuneration of counterpart staff, and taxes
and duties for one consulting package. The government has assured
ADB that it will cover any shortfall in financing required to meet
the agreed outputs.
Table 2: Summary Financing Plan
Source Amount
($ million) Share of Total (%)
Asian Development Bank Ordinary capital resources (regular loan)
231.0 77.8
Japan Fund for Poverty Reductiona 2.0 0.7 Government of Assam
64.0 21.5
Total 297.0 100.0 a Administered by the Asian Development Bank.
Source: Asian Development Bank estimates.
20. Climate mitigation is estimated to cost $229.3 million to
support clean energy development and climate adaptation is
estimated to cost $1.7 million to address risks of changes in
rainfall and emergencies. ADB will finance 100% of mitigation costs
and 100% of adaptation costs. Details are in the Climate Change
Assessment (Appendix 15). D. Implementation Arrangements
21. The implementation arrangements are summarized in Table 3
and described in detail in the PAM (Appendix 5). A project
management unit (PMU) under the Managing Directors of APDCL, APGCL,
and Assam Electricity Grid Corporation Limited has been functioning
since 2014 for overall MFF coordination. APGCL has established a
project PMU, headed by a project director, for day-to-day project
coordination. A project supervision consultant (PSC) with
significant hydropower development experience was recruited in 2017
to support the PMU. The Government of Assam and APGCL were advised
that ADB’s approval of advance contracting and retroactive
financing does not commit ADB to finance any part of the project.
APGCL and the Government of Assam have confirmed the intent to
complete the project within the MFF availability period.
22. Goods, equipment, and civil works to be financed under the
project will be procured following ADB’s Procurement Guidelines
(2015, as amended from time to time). International competitive
bidding is used for turnkey packages. The PSC was recruited in
accordance with ADB’s Guidelines on the Use of Consultants (2013,
as amended from time to time) with a two-stage contract. The first
stage to support tendering was funded under project 1 while the
second stage for project implementation would be under project 3.
The JFPR grant will be administered
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by ADB and guided by a steering committee comprising APGCL and
key stakeholders in the Government of Assam including autonomous
district councils.
Table 3: Implementation Arrangements for Project 3 Aspects
Arrangements Implementation period November 2020–December 2023
Estimated completion date 31 December 2023 (loan) and 30 June 2023
(grant) Estimated loan and grant closing date 30 June 2024 (loan)
and 31 December 2023 (grant) Management
(i) Oversight body Steering Committee – Principal Secretary,
Power Department, GOA (chair), Managing Director APGCL and AEGCL
(members).
(ii) Executing agency Government of Assam through APGCL (iii)
Project Implementation PMU with 11 staff including at project
site.
Procurement ICB 8 contracts $212.6 million Consulting services
QCBS, ICS 6 contracts $13.6 million Retroactive financing and
advance contracting
Advance contracting in place. Retroactive financing of up to 20%
of the loan amount for expenditures incurred 12 months before loan
signing.
Disbursement The loan and/or grant proceeds will be disbursed
following ADB’s Loan Disbursement Handbook (2017, as amended from
time to time) and detailed arrangements agreed between GOI, GOA,
and ADB.
ADB = Asian Development Bank, AEGCL = Assam Electricity Grid
Corporation Limited, APGCL = Assam Power Generation Corporation
Limited, GOA = government of Assam, GOI = Government of India, ICB
= international competitive bidding, ICS = individual consultant
selection, PMU = project management unit, QCBS = quality- and
cost-based selection. Source: Asian Development Bank.
E. Project Readiness
23. Technical and commercial clearances were received from the
Central Electricity Authority (CEA) under the Ministry of Power in
May 2016. APGCL prepared the environment impact assessment (EIA)
(Appendix 11), and a public hearing was conducted in January 2017
by the State Pollution Control Board. A no-objection to the
environmental clearance was provided in December 2017 by a
committee under the Ministry of Environment Forest and Climate
Change (MOEFCC), and forest clearance was received in February
2019. The land allotment letter has been received for both Dima
Hasao and Karbi Anglong.
24. The PSC scope of work includes detailing tender designs and
preparing bidding documents, review of costs, assistance to APGCL
in the bid evaluation process, supervision of the engineering,
procurement and construction contracts during implementation and
related training of APGCL staff. The civil and hydromechanical
package was re-tendered in 2019 and the contract was awarded in
August 2020. The remaining packages will be awarded subsequently.
The packages for asset valuation and ERP were awarded and have
commenced implementation. The labor required for the civil works
would be locally available and construction materials would be
locally sourced. The PSC and APGCL are coordinating with
contractors for timely delivery of equipment and material to
project site.
IV. DUE DILIGENCE
A. Technical
25. APGCL engaged a hydropower consulting firm to prepare a
detailed project report (DPR) that includes the project scope and
conceptual design, demonstrating the project’s technical,
financial, and economic viability. 13 This was reviewed under the
MFF and technical and
13 APGCL. 2015. Detailed Project Report: 120 MW Lower Kopili
Hydro Electric Project. Guwahati.
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commercial clearances were subsequently received from the CEA.
An independent expert would be recruited to monitor dam safety. In
addition, a detailed climate risk and vulnerability assessment was
conducted to ensure that project design considers projected climate
impacts and would be climate and disaster resilient in the long
term. A capacity building program to strengthen APGCL’s operations
and maintenance for hydroelectric projects is included. The project
adopts protection measures to address water acidity in the Kopili
River. B. Economic and Financial
26. Economic viability. An economic analysis was conducted in
accordance with ADB’s Guidelines for the Economic Analysis of
Projects.14 The non-incremental benefit of avoided fuel costs and
the environmental benefit of avoided carbon dioxide emissions were
calculated based on displaced diesel generation. Incremental
outputs were valued using the willingness-to-pay methodology, while
non-incremental outputs were valued at resource cost savings. The
economic analysis indicates an economic internal rate of return of
14.8%. Given a hurdle rate of 9%, the project is deemed
economically viable based on risk and sensitivity analysis. 27.
Financial viability. A financial cost-benefit analysis was
conducted in accordance with ADB’s technical guidance note on
financial analysis and evaluation.15 The electricity produced by
the project will be priced in accordance with the tariff
regulations set by the AERC, which allows cost recovery through a
tariff.16 The grant portion was excluded from the computation of
revenue as well as capital expenditure following AERC’s decision
that any grant that does not carry any liability of repayment is
not permitted for cost recovery. The financial internal rate of
return for the project was calculated in real terms on an after-tax
basis. Results indicate a financial internal rate of return of 8.3%
that is above the weighted average cost of capital of 2.4%; based
on this and the results of the sensitivity analysis, the project is
deemed financially viable. C. Governance
28. Since 2014, APGCL has progressively demonstrated improved
financial management including through an improvement in the
quality and timeliness of regulatory submissions to the AERC, and
through the development of manuals for accounting, budgeting,
internal audit, inventory management, fund management, and
investment policy. A long-term human resource plan was prepared
under project 1 and adopted by APGCL. The tariff for APGCL is set
by the AERC based on a review of costs and public scrutiny and
feedback. However, despite these improvements, the financial
management risk continues to be rated high because of delays in
recruitment of key staff, implementation of enterprise resource
planning, and asset valuation. These packages are now being
financed under project 3. A time-bound action plan to address
residual risks is in place and is under implementation with
periodic reviews by ADB. ADB’s Anticorruption Policy (1998, as
amended to date) was explained to and discussed with the government
and APGCL. The specific policy requirements and supplementary
measures are described in the PAM (Appendix 5). ADB reserves the
right to examine and review directly any alleged corrupt,
fraudulent, collusive, or coercive practices relating to the
project.
14 ADB. 2017. Guidelines for the Economic Analysis of Projects.
Manila. 15 ADB. 2019. Financial Analysis and Evaluation – Technical
Guidance. Manila. 16 AERC. 2018. Terms and Conditions for
Determination of Multi Year Tariff Regulations. Guwahati. Grants
are
excluded from revenue computation and capital expenditure
following AERC tariff principles.
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D. Poverty, Social, and Gender
29. The project will contribute to an increased supply of
affordable and clean electricity to Assam with development
activities focused on the districts of Dima Hasao and Karbi
Anglong. Reliable and affordable electricity supply improves living
conditions, promotes business expansion, increases employment
opportunities, and reduces poverty. Electricity supply contributes
to meeting basic human needs, including health and education. The
project is expected to generate jobs for skilled and unskilled
laborers, including vulnerable groups and women, during the
construction period; and to increase economic activities and
livelihood opportunities. It would also support rural development
expenditure in the two districts from the royalties on power sale.
These measures would contribute to Assam’s post COVID-19 recovery.
In addition to the Government of Assam’s resettlement and
rehabilitation plan to support skills development in the project
areas for affected people, measures to improve resource management
and community resilience to disasters will be supported under the
proposed JFPR grant. The summary poverty reduction and social
strategy was updated and is included in Appendix 9. 30. The project
will contribute to improving gender equity by enhancing the gender
capacity of APGCL, and improving women’s participation in and
contribution to training and community-led interventions. Project 3
is classified as effective gender mainstreaming. A gender action
plan (GAP) has been prepared to ensure gender equality activities
are effectively implemented (Appendix 13). Gender capacity building
of PMU staff and contractors will create improved gender
responsiveness in planning and implementation. Orientation
workshops focusing on enhancing female workforce participation,
skills, wage equality, health, safety, and hygiene will be planned
for contractors and laborers. The GAP will promote women’s
participation in project-related community awareness campaigns,
consultations, and development of disaster resilience action plans.
Disaster warning systems and mitigation plans will integrate an
inclusive approach to planning and execution. Local area
development planning activities will promote gender responsive
infrastructure, education, health facilities and services.
Gender-focused awareness campaigns in nutrition, health and
menstrual hygiene will be planned and targeted towards female
students. Special measures will be taken to enhance women’s
participation in resettlement, rehabilitation, and income
restoration initiatives. Monitoring and evaluation mechanisms will
track beneficiary data across interventions in a sex disaggregated
manner. Impact evaluations and the social audit methodology will
include gender parameters. Consultations have been held
continuously during project design and preparation and will be
continued during the project cycle. A stakeholder communication
strategy is included in the PAM (Appendix 5). E. Safeguards
31. Environment (category A). The EIA (Appendix 11) was
undertaken based on ADB’s Safeguard Policy Statement (2009), the
Environment Assessment and Review Framework, and national
regulatory requirements. 17 Mitigation measures are proposed in the
EIA and the environment management plan (EMP) including a
compensatory afforestation plan and a biodiversity and water
quality restoration plan to minimize and monitor environmental,
health and safety impacts because of changes in the hydrological
regime and loss of forest land. The EIA was disclosed on the ADB
website on 16 October 2018. Any updates to the EIA from a change in
project scope will be similarly disclosed. 32. The project area is
not a notified environmentally sensitive area. The project area is
not a
17 Footnote 1 (Environmental Assessment and Review Framework
accessible from the list of linked documents in
Appendix 2 of RRP).
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critical habitat for any species and a comprehensive program of
mitigation, management, and biodiversity offsets is planned. Key
environmental impacts are associated with the submergence of 552
hectares (ha) of land under the reservoir, loss of biodiversity and
habitat because of the diversion of 523 ha of forest land, and
disruption of hydrological balance through the disruption of river
flow for reservoir creation. Special attention will be given to two
threatened species, the Asian elephant and the Chinese pangolin,
including monitoring and protection of their habitat and support
for a species recovery program.
33. APGCL’s institutional capacity and commitment to manage its
environmental risks are deemed adequate. However, trainings and
capacity building are included in the EMP. Information disclosure
and consultations with affected people were conducted in accordance
with ADB’s requirements. The PMU at APGCL is responsible for EMP
implementation. APGCL has allocated sufficient budget to implement
the EMP. External experts will be recruited under the loan to
monitor the project’s environmental impacts and provide
environmental monitoring reports to ADB on a regular basis. The
monitoring reports will be posted on ADB’s website and disclosed
locally by APGCL. In the event of any unanticipated environmental
impacts during implementation, or if monitoring identifies a breach
of performance standards to be complied with by APGCL and/or its
contractors, APGCL will submit a time-bound corrective action plan
or update the EIA and EMP. 34. Involuntary resettlement (category
A) and indigenous peoples (category A). The hydroelectric project
affects 16 villages with 1,831 tribal households in Dima Hasao and
Karbi Anglong districts. It physically displaces 18 households. The
project will acquire 1,577 ha of land of which 1,054 ha are
leaseholds lands; and 523 ha are state forests. The affected
persons (APs) include indigenous people; after consultations, APGCL
and the district councils signed agreements indicating broad
community support. 18 The transmission line could impact 350
households because of tower erection and right-of-way.19 The area
under the right-of-way is estimated as 182 ha of which the
transmission tower bases totally require 4.2 ha of land. The
impacts for the transmission line are mainly temporary with no
physical displacement expected. However, tall trees under the
right-of-way and crops on tower footings are permanently
affected.
35. Following the resettlement framework and indigenous peoples
framework, an assessment was done in consultation with concerned
stakeholders.20 A resettlement and indigenous peoples plan (RIPP)
(Appendix 12) was prepared to record social, economic, and cultural
aspects of the project area and affected communities, and present a
comprehensive mitigation plan to address adverse social impacts.21
As all the APs affected by land acquisition are scheduled tribes, a
combined plan is considered sufficient to address indigenous
peoples and resettlement aspects. The entitlements in the RIPP
provide all the APs compensation commensurate to the impacts, and
enable the APs to restore and improve their livelihoods and sources
of income. 36. The RIPP is prepared in compliance with the state
and national laws, regulations and ADB’s Safeguard Policy
Statement. APGCL has allocated adequate budget for land
acquisition, resettlement and rehabilitation of APs. The document
outlines the institutional arrangements to deliver entitlements and
project benefits to the project APs and other stakeholders, a
mechanism to resolve grievances, and a monitoring framework. APGCL
has established a safeguards cell and is supported by the PSC and
experienced safeguards specialists. A nongovernment organization is
supporting implementation.
18 Discussions also included the Lower Kopili Hydroelectric
Project Affected Persons Association. 19 Of the 350 households, 178
are affected by transmission tower bases and 172 by the
transmission line corridor. 20 Footnote 1 (Resettlement Framework
and Indigenous Peoples Framework accessible from the list of
linked
documents in Appendix 2 of RRP). 21 This comprises two volumes:
one for the hydroelectric project and the other for the
transmission line.
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10
37. APGCL will provide social monitoring reports to ADB on a
semiannual basis. The reports will describe the implementation
progress of resettlement and indigenous people activities,
compliance issues and quantitative monitoring data in accordance
with the RIPP. The monitoring reports will be posted on ADB’s
website and disclosed locally by APGCL. An external expert will be
recruited to monitor the project’s resettlement and indigenous
people impacts. In the event of any unanticipated resettlement
impacts during implementation, or if monitoring identifies a breach
of performance standards that should be complied with by APGCL
and/or its contractors, APGCL will submit to ADB a time-bound
corrective action plan or update the combined resettlement and
tribal development plan and combined resettlement and indigenous
peoples plan. F. Summary of Risk Assessment and Risk Management
Plan
38. Significant risks and mitigating measures are summarized in
Table 4 and described in detail in the risk assessment and risk
management plan. 22
Table 4: Summary of Risks and Mitigating Measures
Risks Mitigation Measures Limited project management
capacity
The project management unit is adequately staffed. A hydropower
consultant supports procurement, design reviews, and implementation
monitoring.
Cost and time overruns due to geological risks and COVID-19
Contingency is available to cover cost overruns. Labor and
materials for civil works will be locally sourced. Additional
investigations along the tunnel are completed. COVID-19 awareness
and management plans to be tracked. Incentive payments for timely
completion are included in turnkey contracts.
Environmental and social factors impact implementation
Environmental clearance is in place. DCs support the project.
Multi-tiered safeguard teams including a nongovernment
organization, PSC, and external monitors are proposed.
Weak financial management systems
APGCL to address audit qualifications, complete asset
verification, implement ERP, and recruit key staff under project
3.
Acidic water reduces power generation
Design features of turbines and associated infrastructure are
suitably modified to ensure longevity of the project.
APGCL = Assam Power Generation Corporation Limited, COVID-19 =
coronavirus disease, DC = district councils; ERP = enterprise
resource planning, PSC = project supervision consultant. Source:
Asian Development Bank.
V. ASSURANCES 39. The Government of India, Government of Assam,
and APGCL have assured ADB that implementation of the project shall
conform to all applicable ADB policies including those concerning
anticorruption measures, safeguards, gender, procurement,
consulting services, and disbursement as described in detail in the
PAM and loan documents. The Government of India, Government of
Assam and APGCL have agreed with ADB on certain covenants for the
project, which are set forth in the loan agreement and project
agreement.
VI. THE PRESIDENT’S DECISION 40. On the basis of the approval by
ADB's Board of Directors for the provision of loans under the
multitranche financing facility in an aggregate principal amount
not exceeding $300,000,000 to India for the Assam Power Sector
Investment Program, the President has approved the proposed tranche
as described in para. 18 and such other terms and conditions as are
substantially in accordance with those set forth in the draft loan
and project agreements. The President has also approved the
administration by ADB of the grant not exceeding the equivalent of
$2,000,000 to India, as described in para. 18, for the proposed
tranche of the Assam Power Sector Investment Program, to be
provided by the Japan Fund for Poverty Reduction.
22 The updated risk assessment and risk management plan is in
Appendix 14.
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Appendix 11
Design and Monitoring Framework for the Investment Program under
Project 3 Impact the Project is aligned with: Increased
availability of electricity in Assam (Power for All, and Government
of India’s Three Year Action Agenda)a
Results Chain Performance Indicators with
Targets and Baselines Data Sources and Reporting
Risks
Outcome Increased electricity supply from clean energy in
Assam.
By June 2025: a. 469 GWh/year of hydroelectricity generated from
Lower Kopili Hydro Electric Project (2019 baseline: 0 GWh/year) (OP
3.1.3) b. GHG emissions reduced by about 360,000 tCO2/year (2019
baseline: 0) (OP 3.1)
a. APGCL annual reports b. APGCL annual report, CEA report on
grid emission factors in India
Changes in rainfall patterns and catchment management beyond
projection reduce energy output. Increased costs of generation may
require curtailment of purchases.
Outputs 1. Lower Kopili
hydropower plant installed
By December 2023: 1a. 120 MW Lower Kopili hydropower plant
constructed (FY2019 baseline: 0) (OP 3.1.3, 3.2.5)
1a. APGCL annual report
COVID-19 impact on supply chains delays access to site, and
geological uncertainties result in construction delays and cost
overruns.
2. Institutional capacity of APGCL strengthened
3. Resource management and community resilience
By December 2023: 2a. At least 30 relevant APGCL staff
(including at least 6 eligible women) reported increased knowledge
on construction, operations, maintenance, and safeguards for
hydropower development (2019 baseline: 0) (OP 6.1) 2b. Enterprise
Resource Planning system established and operational (2019
baseline: not established) (OP 6.2.3) 2c. Fixed asset verification
and valuation completed (2019 baseline: not established) (OP 6.2.3)
Financed under JFPR grant By June 2023: 3a. Dashboard for the state
and 5 local governments established and
2a. Pre-and post-training assessment. 2b-c. APGCL annual report.
3a. Grant report
Changes in key staff positions delay development of
institutional capacity and knowledge transfer.
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Results Chain Performance Indicators with Targets and
Baselines
Data Sources and Reporting
Risks
initiatives implemented
generate reports for decision making on resource management and
disaster management (2019 baseline: not established) (OP 6.1) 3b.
At least 500 residents along the Kopili river basin (40% women)
reported increased knowledge on community-based disaster management
(2019 baseline: 0) (OPs 2.3.2, 2.5, 3.2, 3.2.2)
3b. Pre-and post-training assessment
APGCL = Assam Power Generation Corporation Limited, CEA =
Central Electricity Authority, COVID-19 = coronavirus disease, GHG
= greenhouse gases, GWh = gigawatt hour, JFPR = Japan Fund for
Poverty Reduction, MW = megawatt, OCR = ordinary capital resources,
OP = operational priority, Q = quarter. a Government of Assam.
2015. Power for All-Assam. Guwahati; and Government of India. 2017.
Three Year Action
Agenda. New Delhi. Contribution to Strategy 2030 Operational
Priorities Expected values and methodological details for all OP
indicators to which this operation will contribute results are
detailed in Contribution to Strategy 2030 Operational Priorities
(Appendix 6). In addition to the OP indicators tagged in the DMF,
this operation will contribute results for:
OP 1.2 Jobs generated (number). Expected: At least 400 low
skilled workers employed during construction.
Source: Asian Development Bank Estimates.
Key Activities with Milestones 1. Lower Kopili hydropower plant
installed 1.1 Issue package 2 bid documents by Q2 2019 and award in
Q3 2020 1.2 Issue other bid documents by Q2 2020 and award in Q1
2021 1.3 Completion of construction in Q4 2023 1.4 Power plant
commercial operation by Q2 2024 2. Institutional capacity of APGCL
strengthened 2.1 Issue bid documents by Q3 2020 and award in Q4
2020 2.2 Staff trained in various aspects of hydroelectric power
plant construction, operation and maintenance;
ERP established; and staffing improved by Q4 2023 3. Resource
management and community resilience initiatives implemented 3.1
Issue bid documents by Q4 2020 and award by Q1 2021 3.2 Resource
management and community initiatives implemented by Q2 2023 Inputs
ADB (loan): $231.0 million (OCR) ADB (JFPR Grant): $2.0 million
(Grant) Government: $64.0 million Assumptions for Partner Financing
Not applicable
I. BACKGROUNDII. ASSESSMENT OF MULTITRANCHE FINANCING FACILITY
IMPLEMENTATIONIII. PERIODIC FINANCING REQUESTA. Impact and
OutcomeB. OutputsC. Summary Cost Estimates and Financing Plan18.
The Government of India has requested a regular loan of $231
million from ADB’s ordinary capital resources to help finance the
project. The loan will have a 20-year term, including a grace
period of 5 years; an annual interest rate determined in a...D.
Implementation ArrangementsE. Project Readiness
IV. Due diligenceA. TechnicalB. Economic and FinancialC.
GovernanceD. Poverty, Social, and GenderE. SafeguardsF. Summary of
Risk Assessment and Risk Management Plan
V. ASSURANCESVI. THE PRESIDENT’S DECISIONSource: Asian
Development Bank Estimates.