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ADB dollars to power reforms

Guwahati, Dec. 10: The Asian Development Bank (ADB) has sanctioned a $250-million package of loans for Dispur’s power reforms programme, which envisages breaking the lumbering Assam State Electricity Board (ASEB) into as many as five companies.

The package cleared by the bank consists of a policy loan, an investment loan, and three technical assistance grants.

The policy loan, amounting to $150 million, is meant to restructure the ASEB by breaking it into small, independent companies and strengthening its policy and regulatory framework. The remainder of the package is to be used to improve the transmission and distribution system, introduce a revenue-management system and increase the reach of electricity.

An ADB study found that only 21 per cent of the 4.5 million households in Assam enjoy the benefits of electricity. Per capita power consumption is only 104 kilowatt-hours, less than one third of the national average.

“The lack of sufficient and reliable power is eroding the state’s competitiveness and preventing it from attracting industrial investment from outside. Improved power supply at a reasonable cost is essential to revive the state’s industry and economy. Equally important is improving the financial sustainability of the power sector so that it is no longer a drain on state finances,” an ASEB official said, quoting the bank.

The Tarun Gogoi cabinet decided to take a loan from the ADB to implement power reforms during a meeting on October 25. The plan to restructure the ASEB received the cabinet’s nod at the same meeting.

An ADB mission to Assam found that the ASEB was operating much below its potential because of technical and financial constraints. The organisation has been making up for the shortage by purchasing power from neighbouring states and other government enterprises, but the financial problems caused by its high-cost structure and poor billing and collection system remain a source of worry.

The finance and power departments of the government are the executing agencies for the policy loan, which has been sanctioned for a 15-year term, including a grace period of three years. The power department and the ASEB are the executing agencies for the investment loan, which comes with a 20-year term, including a five-year grace period. The power reforms programme is to be completed by December 2006.

The ADB had approved a technical grant last year to help the state government plan the restructuring of ASEB. Another such grant was sanctioned in October.

After the ASEB is unbundled, all generating assets of the board will be transferred to a new company, to be called the Assam Power Generation Corporation. It will be responsible for the promotion and execution of new projects. ASEB officials are working on the operational details.

The Northeast Chamber of Commerce and Industry found while conducting a study earlier this year that the ASEB was not giving “value for money”.

The organisation, which conducted the study in 36 tea gardens, said power tariff was above the national average, but the ASEB’s services were not commensurate with the charges. It said the tea industry was not getting regular supply of power despite contributing 70 per cent of the board’s revenue.

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