ADB approves $190 million loan for upgrade of Bengaluru power distribution system

Asian Development Bank (ADB) has approved a USD 190 million (over Rs 1,400 crore) loan for modernisation and upgradation of power distribution system in Karnataka's capital city of Bengaluru.

"ADB has approved a combined sovereign and non-sovereign loan of USD 190 million to modernize and upgrade the power distribution system in Bengaluru city in the state of Karnataka, India," ADB said in a release on Friday.

The funding for the Bengaluru Smart Energy Efficient Power Distribution Project by ADB includes a USD 100 million sovereign loan and a USD 90 million without sovereign guarantee loan to Bangalore Electricity Supply Company Limited (BESCOM). BESCOM is one of five state-owned distribution utilities and the largest in Karnataka.

"Reliable and sustainable electricity distribution and service is an important aspect of India's growth and development," said ADB Principal Energy Specialist for South Asia Teruhisa Oi. "We believe that this project will improve the efficient distribution and delivery of electricity supply to residents of Bengaluru and support the Government of India's strategy of building an energy-efficient distribution network," the official said. While ADB has supported several power distribution projects in India since 2010, this combination of sovereign and nonsovereign loans is being deployed on a pilot basis for the first time, said the Manila-headquartered multi-lateral funding agency.

"This features an innovative financing arrangement, the first of its kind for ADB, combining public and private sector loans to a state government-owned enterprise. This financing structure reduces BESCOM's sovereign exposure while helping it raise resources for capital expenditure using a market-based approach," said Mayank Choudhary, Principal Investment Specialist at ADB's Private Sector Operations Department. ADB said the project will convert 7,200 kilometers (km) of overhead distribution lines to underground cables with parallel installation of 2,800 km of fiber optic communication cables. Moving the distribution lines underground protects them from natural hazards and interference, reducing technical and commercial losses by about 30 per cent. The fiber optic cables will be used for smart metering systems, distribution automation system (DAS) in the distribution grid, and other communication networks. The project will install 1,700 automated ring main units adapted with a DAS to monitor and control the distribution line switchgears from the control center, it said. "The loan will strengthen the capacity of BESCOM in operation and maintenance, environment and social safeguards, financial management and commercial financing, and corporate gender equality and social inclusion. Improved financial management capability will help BESCOM access the domestic and international commercial financing market," ADB said further.