The Asian Development Bank (ADB) has approved US $346m loan to improve power connection in rural Maharashtra, India. The loan will support the state government’s high voltage distribution system (HVDS) program for new grid-connected rural agricultural customers across the state.
Maharashtra is the second-most populous state in India, and about half of the state’s labour force is engaged in agriculture and related activities in the rural areas, ADB said in a release. Agriculture output, however, has been impacted by lack of irrigation, less-than-efficient use of electricity and water, as well as inadequate storage and connectivity to markets.
According to ADB Senior Energy Specialist Len George, providing efficient, reliable, and good quality power to rural agriculture customers in Maharashtra will improve agricultural productivity and efficiency in the electricity value chain. “Wider adoption of HVDS with metering and usage-based tariffs sets the stage for investments in energy efficient pumps, drip irrigation and could support improvements in subsidy management,” he added.
The first ADB-financed RBL program in South Asia’s energy sector
This first ADB-financed RBL program in South Asia’s energy sector will help in the early construction and installation of metered HVDS through the installation of about 46,800 kilometers of 11 kilovolt (kV) grid extension lines, construction and upgrading of 121 33/11 kV distribution substations. The programme will also build institutional capacity in the Maharashtra State Electricity Distribution Company Limited (MSEDCL) on HVDS.
The loan will be under ADB’s results-based lending (RBL) modality, where fund disbursements are linked to the achievement of agreed programme results rather than to upfront expenditures, as is the case with traditional investment lending.