World Bank to provide $2 billion for improving power supply in rural India
Sharad Matade 18 February 2011

The multilateral lending agency says unexploited renewable energy sources can generate cost-effective power for rural people, increase total supply and minimise losses. Commits $2 billion in funding over three years

A new World Bank report says that generating power locally and distributing it through existing facilities can help to bring electricity to more rural households in India that yet do not have access to power.

The report says that this model should be actively encouraged and implemented in areas where electricity supply is poor and people have to depend on diesel and kerosene. About 56% of rural households, or 400 billion people in the country, do not have access to electricity today.

"Though these kinds of projects are on a small basis, financial institutions and other private players should come forward to support it," said Ashish Khanna, senior energy specialist, South Asia Sustainable Development, World Bank.

The report, titled 'Empowering Rural India: Expanding Electricity Access by Mobilising Local Resources', is based on studies conducted in Maharashtra's Kolhapur district, where the state's unexploited renewable energy sources could harness substantial economic gains, not just for the rural people, but for the state, it said.

For instance, the report explains, an average rural household spends Rs11 per kilowatt hour to meet its lighting needs, which is higher than about Rs4.60/kWh for small hydro, Rs5.70/kWh for biomass and Rs6.10/kWh for wind power. It found that this model would also increase the supply of electricity per day from an average of 8-10 hours to day-long supply.

This decentralised system, which it calls distributed generation and supply (DG&S) franchises, is a cost-effective and feasible way to generate cost-effective energy in rural areas. It can not only increase supply and reduce costs for the consumer, but also reduce losses for the utility company and meet the goal of improving availability of electricity in rural areas.

Explaining the DG&S model, the report said that the DG&S operator invests in a small-scale (typically 1MW to 10MW peak capacity) local generation plant and also becomes a distribution franchisee of the utility for the designated area. Today, small hydro and biomass projects are more feasible in rural areas, whereas solar projects are feasible in urban areas as they contain complicated technologies, Mr Khanna said.

The rural franchisee in addition to distributing power and collecting revenues, also generates power locally and supplies to the franchised area. The local community benefits because certain minimum percentage of the generated power goes to the designated area and the balance is fed into the grid.

Mr Khanna said that the World Bank and the International Finance Corporation (IFC) has decided to provide about $2 billion through loans for renewable energy projects over the next three years. While the World Bank will fund government projects, IFC will finance private efforts.

The 1,500MW Nathpa-Jhakri hydro project in Himachal Pradesh was among the first renewable energy projects in the country that was funded by the Bank. It was developed by Satluj Jal Vidyut Nigam (SJVN), a joint venture of the state and central governments. SJVN is supplying power to nine northern states and aims to commission a second mega hydro project in 2013.

Mr Khanna said the World Bank's loans outstanding to the overall power sector in the country are at $3.4 billion and the IFC's at about $1 billion.

"In the South Asia, many people don't have access to electricity and most of them are in India," said Inger Andersen, vice-president at the World Bank's Sustainable Development Network unit. "Such initiatives drawing on the involvement of the local community leads to socio-economic development in the area, thereby promoting inclusive growth."

Shadi Katyal
1 decade ago
Does World Bank aware that these funds will not be used for rural electrification as the Minister of Environment doesn't feel that opening coals mines and building new power plants will create more pollution problems.He will not allow such projects and let the nation go to stone age.
Has World Bank taken any guarantee of accountability of these funds. It is India and such funds will disappear without any help for the poor. Look at all the proejcts so far to help the poor
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