World Bank to finance $99 million Indo-Nepal cross border transmission project

The World Bank and government signed an agreement here today towards financing the implementation of the Nepal India Electricity Transmission and Trade Project.
Joint secretary and chief of the Foreign Aid Coordination Division at Ministry of Finance Lal Shanker Ghimire and World Bank acting country manager for Nepal Andras Horvai signed the agreement on behalf of their respective institutions here yesterday.
"Removing infrastructure barriers to growth is among the key development challenges facing Nepal today,” said World Bank country director for Nepal and Bangladesh Ellen Goldstein, during the signing ceremony. "The landmark project is one of several joint efforts that Nepal and the World Bank are making to help relieve the chronic shortage of electricity."
The assistance package is part of a $202 million project, which is also supported by the private sector and development partners, as well as the governments of Nepal and India.
The Bank’s contribution comprises $84 million in credit from the International Development Association, the concessionary lending arm of the World Bank Group and an International Development Association grant of $15 million. The credit portion carries a 0.75 per cent service charge, 10 years of grace period and a maturity of 40 years.
In response to the worsening electricity situation, the government declared a 'National energy crisis' in December 2008 and approved an Electricity Crisis Management Action Plan which is currently under implementation, with support from the World Bank.
The Action Plan includes development of the Dhalkebar-Muzaffarpur transmission link, a key component of the Nepal India Electricity Transmission and Trade Project and the first major cross-border transmission line between India and Nepal developed on a commercial basis.
Upon completion, Nepal could significantly reduce load shedding, and with the potential of increased trade, end electricity rationing by 2015. "The project will provide Nepal with at least 100 MW of additional electricity imported from India to meet its power needs,” Goldstein, said, adding that it will also develop key segments of the backbone high voltage system to help expand access to electricity across Nepal.
According to a recent investment climate survey, businesses cite inadequate power as a key constraint to their growth. The 1,000 MW capacity cross border transmission link will help meet a significant part of this deficit in the quickest, economical manner.
Once Nepal develops its hydropower potential and meets all of its domestic needs, the transmission infrastructure could also be used to carry surplus hydropower to India.
The project is a continuation of the World Bank Group’s deepening engagement in Nepal's power sector. The World Bank Group’s assistance spans a wide spectrum: developing Nepal's energy resources and institutions to better serve Nepal's electricity needs, for example, through micro hydro and other renewable energy; rehabilitation of larger existing power plants under the on-going Power Development Project; supporting grid extension under the Kabeli transmission project; developing small hydropower generation with private sector participation like proposed Kabeli ‘A’ hydropower Project; and promoting renewable energy through the future Scaling up Renewable Energy Programme.