India: Assam Power Sector Enhancement Investment Program (Tranche 2)

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Lessons

A realistic implementation plan carefully considers all the potential risks and adopts appropriate measures and sufficient time to mitigate the risks.

Subproject implementation delays comprised the main issue for this project. The delays were caused by several factors, including (i) the need to realign and change the location of transmission lines and associated facilities because of right-of-way issues; (ii) enormous underestimation of the number of affected people in the right-of-way of transmission routes and the time required for compensation negotiations; (iii) technical complexities associated with erection works on slopes; (iv) inclusion of disputed land and the subsequent need for a scope change; and (v) high staff turnover and weak capacity in the project management unit. These factors reflects inadequate due diligence during the design stage, especially with regard to environmental, social, and institutional capacity assessments; technical design; and safeguards. Had adequate due diligence been undertaken, the risks would have been identified along with the necessary mitigation measures. Providing sufficient time to mitigate the risks would have made the implementation plan more realistic.

Project Cycle Stage:

Preparation

Putting in place the proper safeguard implementation arrangements at inception will help minimize project delays.

Many of the issues that delayed the implementation of this project were rooted in insufficient safeguard implementation arrangements. Moreover, because of the executing agency’s unfamiliarity with ADB safeguard requirements and its weak capacity, there were inordinate delays in updating the environmental and social safeguard documents, which affected the entire project schedule. The project could have benefited from more thorough safeguards planning and implementation arrangements. Putting in place the proper safeguards implementation arrangements right at inception would have sped up the resolution of safeguard issues that hindered timely project progress. (Implementation: safeguards)

Project Cycle Stage:

Implementation

Adequate in-house capacity is fundamental to successful project implementation.

Provisions were made under tranche 1 of this investment program for the engagement of consultants to assist in project design, construction supervision, and project management, as well as the preparation and implementation of the resettlement plans and initial environmental examination reports and environmental management plans. But only safeguard consultants were engaged by the EA. While the safeguard consultants overall helped mitigate the safeguards risks during their contract period, submission of the update safeguard documents was delayed, and safeguard monitoring and reporting continued to be weak because of inadequate EA staff capacity and the absence of dedicated personnel. The absence of project management consultants exacerbated problems related to the insufficient financial management capacity of the EA, resulting in poor quality audited project and entity financial statements. Greater effort should have been made to develop the safeguard and financial management capacity of the EA, which is fundamental to successful project implementation. Trainings should have been conducted and firm knowledge transfer arrangements should have been worked out to enable the EA staff to learn from the consultants and their common experiences under the project.

Project Cycle Stage:

Preparation

Implementation

The processing of succeeding tranche projects in a multitranche financing facility (MFF) needs to be based on an adequate assessment of progress and lessons from earlier and still ongoing tranche projects.

This project was implemented in parallel with other previous and subsequent tranche projects. But building on the flexibility of the MFF modality, efforts were made to ensure synergy in the design and implementation of the series of tranche projects. Specifically, the preparation of this and other subsequent tranche projects was informed by a careful assessment and consideration of the status and performance of project 1 and the lessons from that and other projects. This ensured the avoidance of overlaps or duplications between the tranche projects as well as enabled the borrower government to take advantage of economies of scale.

Project Cycle Stage:

Preparation

Implementation

Background

Assam, known for its large tea and petroleum industries, has the largest economy in the northeastern region of India. But it has lagged behind the rest of India in terms of growth and investment climate. Its economic activities have been significantly constrained by inadequate power supply and limited access to electricity. One of the bottlenecks in Assam’s power sector was the limited capacity of its transmission and distribution (T&D) systems, which made it difficult to provide reliable power to consumers.

To help address the situation, the Asian Development Bank (ADB) approved a $200 million multitranche financing facility (MFF) for the Assam Power Sector Enhancement Investment Program in November 2009. The MFF was designed to support the government’s T&D investment program, which aimed to (i) strengthen power transmission capacity to deliver reliable and affordable electricity, (ii) improve access to electricity, (iii) enhance efficiency and quality of power supply, (iv) fully operationalize unbundled utilities of the Assam State Electricity Board (ASEB), and (v) promote private sector participation through innovative distribution franchising models. It planned to establish a solid foundation for a sustainable state power sector with increased transmission and distribution capacity to support inclusive economic growth.

At the impact level, this project, the second of four MFF tranches, sought to contribute to a sustainable state power transmission subsector to support inclusive and low carbon economic growth. Its expected outcome was enhanced quality and expanded service delivery of electricity in Assam through improved technical, commercial, and financial performance and capability of power utilities. Its impact and outcome were to be achieved through two outputs: (i) access to power (transmission) that involved constructing new transmission lines and substations and other transmission system improvements; and (ii) energy efficiency enhancement (transmission loss reduction) through extended, augmented, and refurbished transmission substations and reactive compensation.

At completion, the project largely achieved its output targets. Under output 1, 8 new substations were constructed, transmission lines were extended, and ground wire was upgraded to optical pilot ground wire (OPGW). Due to inadequate land, a change was made in the design of a substation, but this did not affect the project scope and outcome. A reduction in the length of transmission lines resulted from the optimized route alignment after detailed design. To use tranche 1 loan savings, upgrading to OPGW was completed under the previous tranche.

Under output 2, 19 existing substations were augmented, and 12 others were refurbished. This increased the capacity of existing transmission substations as planned, and consequently improved the energy efficiency and reliability of supply in selected high load centers.

Because of successful output deliveries, the project fully achieved its intended outcome, in some cases, exceeding targets albeit with delay. It helped increase the state transmission system capacity from 766 megawatts in 2008 to 1,960 megawatts in 2018, alleviate the transmission loading level from 95% in 2008 to the 75%–80% range in 2018, and reduce transmission loss from 6% to 3.55% during the same period. Given the expected synergistic effect of investments in the sector, the increase in the total transmitted electricity and transmission loss reduction in Assam are the collective results of all the related investments, including tranche 1 and other government projects that were simultaneously implemented with this project.

Corrective actions were facilitated by ADB to address initial difficulties in implementing safeguards measures that resulted in local protests over land compensation. All compensation, complaints, and requests were settled prior to project completion.

At appraisal, the government of Assam and the Assam Electricity Board (ASEB) were designated as executing agencies (EAs). But under the state power sector reform process, the government of Assam formally dissolved and reorganized the ASEB, and in March 2013, transferred ASEB’s functions to three entities: the Assam Power Distribution Corporation Limited, the Assam Electricity Grid Corporation Limited (AEGCL), and the Assam Power Generation Corporation Limited. Since then, the AEGCL had served as the EA. The project management unit under the erstwhile ASEB continued to function as the coordinating agency.

Project Information

Project Name:

Assam Power Sector Enhancement Investment Program (Tranche 2)

Report Date:

October, 2020

Main Sector:

Energy

Country:

India

Project Number:

41614-033

Report Type: