India, ADB sign $150m deal for renewable electricity transmission in Rajasthan
Asian Development Bank and India have signed two loans totaling US$150 million to help build transmission lines that will support renewable energy development in the state of Rajasthan
The Asian Development Bank (ADB) and the Government of India on Friday signed two loans totaling US$150 million to help build transmission lines that will support renewable energy development in the state of Rajasthan.
The $150 million in loans form the first tranche of the US$500 million Rajasthan Renewable Energy Transmission Investment Program approved by ADB in 2013. The loans will finance high-voltage transmission lines and sub-stations to be built by the Rajasthan Rajya Vidyut Prasaran Nigam Limited (RRVPNL). Rajasthan has significant potential for wind and solar energy development.
“The transmission investment program will spur the development of renewable energy in the resource-rich areas of Western Rajasthan and help to deliver more environmentally friendly energy to the state and national grids,” said M. Teresa Kho, Country Director of ADB’s India Resident Mission, who signed the loan agreement, on behalf of ADB. “Support for the public sector-owned utility networks is a pre-requisite for private sector-led development of renewable energy in India.”
Tarun Bajaj, Joint Secretary (Multilateral Institutions), Department of Economic Affairs at the Ministry of Finance, signed for the Government of India. The project agreement was signed by officers of Government of Rajasthan and Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (RRVPN).
“The investment program in Rajasthan supported through low-cost financing from ADB will help achieve national goals for renewable energy development and diversification of India’s energy mix. Rajasthan has significant potential for renewable energy development and development of indigenous energy resources would help enhance the country’s energy security,” said Mr. Bajaj.
The US$150 million first tranche is funded from two sources – US$88 million from ADB’s Clean Technology Fund (CTF) and US$62 million from ADB’s ordinary capital resources (OCR). The CTF component, a highly concessional loan, has a 40-year term, with a grace period of ten years, and an annual interest rate of 0.25%. The OCR component has a 25-year term, with a grace period of five years, and annual interest set in accordance with ADB’s LIBOR-based lending facility. The state government will provide counterpart financing of about US$127 million to cover the balance of the costs of activities conducted under the first tranche. Projects under the first loan are due to be completed by December 2016.
In addition, the CTF is providing a US$2 million grant to finance technical studies and capacity building for RRVPNL and the Rajasthan Renewable Energy Corporation (RREC).
The move came in the same week that six of the world's major development banks, including the ADB, European Investment Bank (EIB) and the World Bank, released a joint statement on Thursday reaffirming their commitment to delivering climate finance ahead of a major the United Nations Climate Summit late this month.
The African Development Bank (AfDB), ADB, European Bank for Reconstruction and Development (EBRD) and Inter-American Development Bank (IDB), along with the EIB and World Bank, confirmed their positions on addressing climate change.
The statement highlights how collaboration between the 6 banks and the private sector will be crucial in delivering the finance needed to support developing countries in their adaptation and mitigation measures.
According to the statement, the banks have delivered in excess of US$75 billion (£46 billion) in climate finance for developing and emerging economies since 2011, and an expansion of that support is now needed if these countries resiliency to climate change is to be sufficiently bolstered.
