A $135m loan from World Bank could improve the efficiency and reliability of electricity supply in selected areas of West Bengal.

West Bengal is located along the corridor to the northeast of India and to southeast Asia and plays an important role in facilitating and promoting regional power trade. The state is already facilitating electricity trade with Bangladesh.

Rapid economic growth in West Bengal has resulted in a growing electricity demand at a rate of 4.5 per cent in the past five years. The number of consumers served by the West Bengal State Electricity Distribution Company Limited (WBSEDCL) has more than doubled in the past six years to almost 20 million consumers.

The main increase has been in rural areas as the state has reached close to universal electricity access. However, this growth has also put a strain on the finances of electricity distribution companies. The Covid-19 crisis has added to this strain, as electricity demand from commercial and industrial sectors – proportionally the largest sources of revenue for electric utilities – has plummeted.

The loan is part of an agreement between the Indian government, the government of West Bengal and World Bank.

“Providing efficient and reliable electricity supply is a priority for the government of India,” said a statement from the Ministry of Finance. “The project will help improve the electricity distribution network in the state of West Bengal to ensure uninterrupted, affordable and quality supply of electricity to all homes, industries and commercial establishments in the state.”

The agreement was signed by: Rajat Kumar Mishra, additional secretary at the Ministry of Finance; Suresh Kumar for the government of West Bengal; and Junaid Ahmad on behalf of World Bank.

“The financial stability of electricity companies is critical to providing efficient and reliable electricity to people,” said Ahmad. “The pandemic has adversely affected the financial health of electricity distribution companies in India and in turn the financial health of the electricity generation companies. The West Bengal electricity distribution and grid modernisation project will strengthen distribution networks, invest in smart-grid technologies, and ensure financial sustainability of WBSEDCL. This could serve as an example for other public distribution utilities across India.”

In May 2020, the super cyclone Amphan caused significant damage to the electricity infrastructure in West Bengal. Support through the project aims to strengthen WBSEDCL’s information and communications systems and provide immediate response to similar crises and emergencies.

The project aims to reduce distribution system losses, increase the capacity of the distribution network to meet the growing load demand, improve the overall reliability of the system, make the network resilient to climate disasters, and improve the institutional capacity of WBSEDCL.

“The project will support network investments to improve operational efficiency and reduce losses,” said Rohit Mittal, World Bank task team leader for the project. “It will also invest in smart-grid technologies for better load management as well as integration of distributed energy resource.”

The Indian government of India, through its major programmes such as Deendayal Upadhyaya Gram Jyoti Yojana and Sahaj Bijli Har Ghar Yojana, has been able to expand electricity access to nearly every household in the country. The project will support the implementation of the government’s 24×7 Power For All programme in the state and support WBSEDCL in transitioning towards a leading public sector utility in India.

The project will be financed by the government of West Bengal and loans from the Asian Infrastructure Investment Bank (AIIB) and World Bank.

The $135m loan is a variable spread loan that has a maturity of 17 years, including a grace period of seven years.