World Bank’s loan to THDC stuck

New Delhi: The Vishnugad Pipalkoti hydro-electric project on the Alaknanda river in Uttarakhand has hit the skids, with the World Bank yet to disburse a $648 million loan it agreed to give for building the 444-megawatt (MW) project, billed as the most expensive of its kind funded by the multilateral lender.

Tehri Hydro Development Corp. Ltd (THDC), which is to develop the project in Chamoli district., and the World Bank signed the loan agreement in August last year, The World Bank was to provide 70% of the funding for the project, which has been budgeted at $920 million.

Delays in acquisition of forest land for the plant have held up disbursement of the loan and may have an impact on the repayment schedule as well. Many hydro-electric projects have come under scrutiny in recent months because of environmental concerns.

“While the loan agreement is in place, we are unable to start project implementation due to problems with land acquisition.” said R.S.T. Sai, chairman and managing director of THDC. “We require 82 ha (hectares) of forest land. There is a long delay.”

Of the 106 ha required for the Vishnugad-Pipalkoti project, 82 ha is forest land and the rest is private land. The project, earlier scheduled to have been commissioned by 2013, is to be located on the Alaknanda, a tributary of the river Ganga, and is expected to have four units of 111MW each.

he project is the costliest of its kind to be funded by the World Bank, which had earlier earlier lent $400 million to the 412MW Rampur hydroelectric project, being developed by SJVN Ltd on the Sutlej in Himachal Pradesh. In 1994, it was forced to withdraw from its plan to fund the Sardar Sarovar project across the Narmada in the face of protests over social and environmental concerns. The 192MW Allain Duhangan hydro project in Himachal Pradesh faced similar protests, but that didn’t hinder approvals for funding by International Finance Corp., a World Bank affiliate.

“The disbursement from the World Bank for a large infrastructure project like the Vishnugad Pipalkoti Hydro Electric Project (VPHEP) is essentially contingent on the contracting process and construction progress,” a World Bank spokesperson said in an emailed response to questions.

“The VPHEP generating scheme will be constructed primarily through two large EPC (engineering, procurement and construction) contracts, one for civil works and hydro-mechanical equipment works, and the other for electro-mechanical equipment works,” the spokesperson said. “The contract for the civil works and hydro-mechanical equipment works is in an advanced stage of procurement but has yet to be awarded by THDC.”

“The award of the civil works’ package is awaiting the second stage forest clearance from the Ministry of Environment and Forests,” the spokesperson said. “A part of the project area includes forest land for which first stage forest clearance was issued in June 2011. The proposal for second-stage forest clearance, duly endorsed by the government of Uttarakhand, has been submitted to MoEF and is pending with that ministry. Once the second stage forest clearance is awarded, THDC will be able to proceed with the award of the civil works contract.”

The loan became effective in August 2011 and has 29 years’ tenure with repayment scheduled to start in 2017. 

In response to a question about whether the delay may affect the repayment schedule of THDC, the spokesperson said: “Under current conditions, it is expected that the project will be completed before the repayment of the loan begins.”

Hydropower accounts for 39,291.40MW of India’s 205,340.26MW power generating capacity. The massive power transmission failures last week that left around 700 million people without electricity for many hours has raised concerns about the country’s ability to meet rising energy requirements.

“India’s recent blackouts are unprecedented and while they will have a minimal near-term adverse impact on the credit quality of its rated issuers, the long-term implications for the power sector could be negative depending upon the type of government response,” rating company Moody’s Investors Service Inc. said on Thursday. 

Standard and Poor’s said “a power failure of such magnitude underscores the shortage of investment in India’s power sector.”

Funding for the Vishnugad Pipalkoti project was earlier held up in the absence of forest clearance and concerns about its environmental clearance, Mint had reported on 16 July 2010.

The Mint