India: Madhya Pradesh Power Sector Investment Program (Tranche 3)

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Lessons

Various support measures can strengthen project compliance to ADB environmental safeguard requirements.

The April 2010 review of the implementation of the environmental management and monitoring plan prepared during project processing demonstrated varying levels of compliance with the agreed provisions, and in some cases, this was assessed to be less than adequate. The shortcomings and procedural lapse were mainly attributable to (i) lack of deployment of appropriately trained or experienced personnel by the executing agency (EA), the Madhya Pradesh Power Transmission Company (MPTRANSCO) and its contractors to supervise environmental safeguards; and (ii) lack of priority given by the MPTRANSCO to the implementation of safeguards. To improve the environmental performance of loans, ADB can consider implementing the following measures: (i) a systematic and continuous approach in developing awareness and periodic capacity enhancement of the project staff regarding ADB’s environmental policy, procedures, and requirements; (ii) as appropriate, timely mobilization and sustained engagement of environmental experts throughout the project period; (iii) systematic supervision of and monitoring, data mapping, and reporting on safeguards implementation; and (iv) periodic comprehensive reviews by environmental experts to enable timely corrective actions, as needed.

Project Cycle Stage:

Implementation

Ensuring project compliance to ADB social safeguards requires the mobilization of the requisite social and resettlement expertise and the implementation of various other support measures.

Of the total 10 new substations constructed under the project, only 1

involved private land acquisition and the rest were constructed on unencumbered government land that entailed no involuntary resettlement. The short resettlement plan (SRP) prepared for the whole investment program in 2007 was updated to incorporate the impacts on private landowners of the land acquisition undertaken for the substation. While the updated SRP reported insignificant impacts from the construction of the substation and the stringing of the related transmission lines, a review of its implementation revealed some procedural lapses, particularly during the initial stage. These lapses were mainly due to (i) the absence of a resettlement specialist in the EA, (ii) the EA’s not hiring a nongovernment organization for SRP implementation, and (iii) the EA not engaging an independent agency for monitoring and evaluation. The weaknesses resulted in the commencement of civil works without the updated resettlement plan and its approval by ADB. To improve the social safeguards performance of ADB-assisted projects, the following measures are suggested: (i) advance capacity development for project staff on ADB’s social safeguards policy, procedures, and requirements; (ii) engagement of resettlement experts by the EA until loan closure, as appropriate; (iii) engagement of experienced nongovernment organizations to assist in implementing resettlement; (iv) timely supervision, monitoring, evaluation, and reporting on the implementation of the project resettlement plans; (v) periodic social safeguards reviews by ADB experts and the implementation of corrective actions, as required; (vi) addressing issues related to temporary impacts due to use of private land for stringing transmission lines and erecting towers, which are perceived by affected persons to cause permanent impacts by restricting access to the affected land for purposes of cultivation and devaluing land and assets under the corridor of impact; and (vii) ensuring disbursement to affected persons of compensation for damage to crops and trees prior to commencing civil works related to stringing transmission lines.

Project Cycle Stage:

Implementation

Implementation of infrastructure projects, even in vastly spread terrains, can be completed on time if backed by proper planning, effective project monitoring, and the mobilization of capable and motivated personnel.

MPTRANSCO followed integrated project management practices to ensure (i) proper planning, (ii) effective project monitoring, and (iii) the application of skills of motivated and well-trained personnel. As a result, all the project components were constructed and commissioned successfully on time, and with some savings. Overall, the EA demonstrated its capacity and capability to formulate and appraise, arrange counterpart finance, and carry out engineering, procurement, and construction of technically complex projects across different parts of the vast state of Madhya Pradesh while conforming to approved specifications and standards to the satisfaction of ADB. The knowledge and insights MPTRANSCO has gained in successfully implementing infrastructure projects even on vastly spread terrains like that of Madhya Pradesh may be assembled and disseminated to other EAs in appropriate fora. Timely management of rights-of-way despite constraints and optimally utilizing ADB and counterpart fund, offer lessons to other projects.

Project Cycle Stage:

Preparation

Implementation

Advance actions, strong stakeholder partnership, and sound project management facilitate the timely and efficacious execution of projects.

The advance procurement actions undertaken in this project greatly helped in its timely and efficacious implementation and should be adopted for future projects. Moreover, this project’s partnership process of involving stakeholders, and particularly contractors, in addressing complex technical and economic matters can set an example for future ADB projects in India. In general, good project management practices were followed and involved sequencing activities and a well-structured breakdown of the work content. This resulted in enhancing construction management practices to a higher level of efficiency by adopting a more formal project management methodology that is based on global standards.

Project Cycle Stage:

Implementation

The multitranche financing facility (MFF) modality is appropriate for meeting the needs of a large infrastructure project.

MPTRANSCO is of the view that the MFF is most suitable for meeting the financing and technically complex needs of a large infrastructure project. Specifically, it helped the EA to be in an appropriate state of project readiness and enabled it to accumulate savings from commitment fees and interest cost. MPTRANSCO advocates using similar structures elsewhere, and particularly for fledgling new organizations. Depending on the complexity of a given project, it views an MFF with a duration of 7–10 years to be about ideal.

Project Cycle Stage:

Preparation

Implementation

Background

A diagnostic assessment by the Madhya Pradesh state government revealed the need for significant investments to enhance transmission capacity and facilitate the economic growth of this second largest state of India in terms of land area. To help meet this need, the Asian Development Bank (ADB) approved a $620 million multitranche financing facility (MFF) for the Madhya Pradesh Power Sector Investment Program in February 2007. The program aimed to support a time slice of the state government’s roadmap for upgrading and modernizing transmission and distribution systems, building on the successful unbundling of the state electricity board into separate independent entities under an earlier ADB-financed project. It initially consisted of five projects but, at government’s request, was expanded to include a sixth.

This report covers tranche 3 of the MFF, approved by ADB for a loan of $144 million in August 2007. The project aimed to (i) improve the operational efficiency, voltage profile, and delivery capacity of the state’s power transmission system; (ii) meet the various parameters defined in the Grid Code issued by the Madhya Pradesh Electricity Regulatory Commission; and (iii) create new 132 kilovolt (kV) substations and associated transmission lines to reduce overloading on the existing 132 kV and 33 kV systems. These objectives were to be met through improved corporate governance of the Madhya Pradesh Power Transmission Company Ltd. (TRANSCO), human resources development, and improvements in physical infrastructure and equipment.

At completion, the project fully achieved its planned outputs, exceeding some physical targets using cost savings. Institutional targets were met progressively within deadlines, culminating in the result that TRANSCO team could address complex engineering issues quickly. Independent directors were recruited to the board; board level committees were formed, including an audit committee; internal audit functions and internal audit guidelines were strengthened in line with best practices; and internal controllers were appointed. Chartered accountants, information technology specialists, and specialists in commercial areas were recruited. Management training programs in finance, operations, and commercial functions were established. With the strengthening of human resources, the TRANSCO team worked cohesively for timely execution. Institutional and human resources development resulted in a cohesive team that was instrumental in achieving 100 % the physical infrastructure targets.

The project helped increase the transmission capacity in Madhya Pradesh to 10,200 megawatts (MW) with the result that the peak demand of 9,484 MW could be met during 2012–2013. System availability rose to 99.44% in 2013 from 97.5% during 2008–2009 and technical losses diminished to 3.3% in 2013 from 5.2% during 2005–2006. Overall, the project thus helped increase access to electricity in Madhya Pradesh, improving the power system’s operation through reliable and economic dispatches, and facilitated evacuation of power from generation units. As of project completion review, all the physical installations put in place were being operated and maintained at high levels of efficiency.

The project had the Madhya Pradesh TRANSCO as executing agency. The project management unit, established within the TRANSCO, took on the overall responsibility for project implementation.

Project Information

Project Name:

Madhya Pradesh Power Sector Investment Program (Tranche 3)

Report Date:

September, 2014

Main Sector:

Energy

Country:

India

Project Number:

32298-043

Report Type: