ZA/S C VV- / Document of The WorldBank

FOR OFFICIAL USE ONLY

MICRTuETCHE CO-)FXY Public Disclosure Authorized l.pcirt. No. :11240-TN TType: (SAR) Report?No. 11240-IIN ' i tle: RENEWABLERESOtUPCES DEVELOPMEN Author: MAGWDA,ENAMANZO Ext. :81466 r Oom:G-2051 Dept.: AS2EG

STAFF APPRAISAL REPORT Public Disclosure Authorized INDIA

RENEWBLERESOURCES DEVELOPMENT PROJECT

NOVIER 30, 1992 Public Disclosure Authorized

Energy Operations Division India Country Department Public Disclosure Authorized South Asia Region

This document has a reicted distribuon and may be used by redpients only in the perfonnanceof their offic:id duties. Its contents may ot otherwise be disclosed without World Bsnk adhorization. CURRENCYEQUIVALENTS (as of July, 1992)

Currency Unit - Rupees (Rs) Rs 1.00 = Paise 100 Rs 1,000,000 = US$38,462 US$1.00 = Rs 26

MEASURES AND EQUIVALENTS

1 Meter tm) = 39.37 inches (in) 1 Cubic Meter (m8 ) = 1.31 cubic yard (cu yd) = 35.35 cu. ft. 1 Ton (t) = 1,000 kilograms (kg) = 2,200 lbs 1 Kilovolt (kV) = 1,000 volts (V) 1 Kilovolt-ampere(kVA) = 1,000 volts-amperes(VA) 1 Megawatt (MW) = 1,000 kilowatts (kW) = l million watts 1 Kilowatt-hour (kWh) = 1,000 watt-hours 1 Megawatt-hour (MWh) = 1,000 kilowatts-hours 1 Gigawatt-hour(GWh) = 1,000,000kilowatt-hours

ABBREVIATIONSAND ACRONYMS

DANIDA Danish InternationalDevelopment Agency DEA Departmentof Economic Affairs SIA EnvironmentalImpact Assessment EIRR Economic Internal Rate of Return EMP EnvironmentalManagement Plan ESMAP Energy Sector Management Assistance Program GEF Global EnvironmentFacility GET Global EnvironmentTrust Fund GOI Government of India GOTN Government of Tamil Nadu IBRD InternationalBank for Reconstructionand Development IDA InternationalDevelopment Association IDBI IndustrialDevelopment Bank of India ICB InternationalCompetitive Bidding IREDA Indian Renewable Energy DevelopmentAgency Limited LCB Local CompetitiveBidding LICB Limited InternationalCompetitive Bidding MNES Ministry of Non-ConventionalEnergy Sources MIS Management InformationSystem NCE Non-conventionalenergy NGOs Non-governmentalorganizations OPS OperationalPolicy Statement SEB State ElectricitvBoard SCF Standard Conversion Factor SDC Swiss DevelopmentCooperation SGC State GeneratingCorporation SPV Solar Photovoltaic The Act ElectricitySupply Act of 1948 TNPL Tamil Nadu Newsprint and Papers Limited

FISCAL YEAR

April 1 - March 31 FOR OFCIA USEONLY

RENEWABLE RESOURCES DEVELOPMENTPROJEcT

STAFF APPRAISAL REPORT

Table of Contents

Pase No.

CreditlLoan and Project Sunmary...... ,iv I. SECTORAL CONTEXT......

Introduction...... India's Primary EnergyResources ...... 1 Organizationof the Mon-ConventionalEnergy Sub-Sector..3 GOS's Sub-sector Strategy...... 3 Key SectoralIssues ...... 4 Efforts at Reform...... 4 India's Newsprint and Paper Industry...... 6 Role of the Bank...... 7 Past Bank Group-Support ...... a Global EnvironmentalFacility (GEP) Funding...... 8 11 L ENEPI ARIES...... 8

Indian RenewableEnergy DevelopmentAgency (IREDA). 8 Tamil Nadu Newsprint and Papers Limited (TNPL)...... 12

tIII. THE PROJECT...... 13

Project Objectives ... 13 ProjectDescription ...... 13 Status of Project Engineeringand Project Pipeline..... 16 ProjectImplementation Arrangemets ...... 17 implementationof the TNPL PapermillExpansion . ....18 ImplementationSchedule ...... 0 ...... 19 Environmentalantd Resettlement Aspects ...... I1 Project Costs ...... 20 ProjectFinancing ...... 1...... On-LendingArrangements ...... 22 Procurementunder the Line of Credit...... 23 Procurementby TNPL ...... 24 SecurityArrangements ...... 24 Disbursement...... 25 Monitoringand Evaluation...... 26

This report vas prepared by Mrs. Magdalena Manzo (Energy Specialist), Messrs. Alfonso Mejia (Principal Pinancial Analyst), Raymond Chalk (Sr. Pulp and Paper Engineer), John Irving (Power Engineer), Anll Cabraal (Consultant, Alternate Energy). The report has been reviewed by Messrs. Ernest Terrado (Principal Energy Planner, ESMOD), Karl Jechoutek (Principal Economist, EMSIE), and Jamil Sopher (Sr. Financial Analyst, EAlIE). The report has been endorsed by Mr. eiipz Vergin, Director (India Country Department) and Mr. Jean-Francois Bauer, Chief (Energy Operations Division, India Country Department).

This document has a restricteddistribution and mya be used by recipientsonly in the perorman-e of their officialduties Its contents may not otherwisebe disclosd wthout WorldBank au horizai on. - ii.-

Pase No.

IV* FINANCE...... 27 IndianRenewable Energy Development Agency ...... 27 Tamil Nadu Newsprintand PapersLimited ...... 31

V. BENEFITS AND RISK8...... 34

RenewableEnergy Investments...... #*...... #...... 34 TNPL PapermillProject ...... 36 ProjectRlk Riks...... 36

IVI* AG9tMkNS ADRCMMED2083

Agreements Reached .3...... 3 Conditionsof Effectiveness 39 Receomendation 39...... *...... 9 - iii -

ANNEXES

1.1 All-IndiaBlectricity Deand and Supply 1.2 Proposed Power Generation from New and Renewable Sources of Energy (NILE) 1.3 hxamplesof StatePolicies Governing Private Investmaent In Irrigation-based Small Hydra aud Windfarm Schemes 1 4 Previous Loans and Credits to Indian Power Sector 2.1 IREDA- Current/Proposed Organizational Charts 2.2 Operational Policy Statement (OPS) 2.3 IMEDA- Cumulative Lending PY87 to FY92 2.4 TNPL - Organizational Chart 2.5 TNPLs Product Mix and Estimate of Sales Revenue

3 1 Pre-Identified Irrigation-Based Small Hydro Scheme In the Southern Region 3.2 Historical Performance of Sample Wind Farms 3.3 Potential Domestic and Comuerical Market for mall PV Systms 3.4 Solar PV Applications 3.5 IREDAsPlan for Implementing the Institutional Development Program 3.6A Terms of Reference for Management Service Consultants 3.6B Quality Assurance ConsultingServices to IUaA - Terms of Reference 3.6C General Terms of Reference for Consultants to assist IRSDA In Preparationof a Pipelineof Nw Minihydel Projects for further Developement 3.7 PreliminaryList of Proposalsfor Small-Hydroand VindfarmProjects 3.8 Small HydroComponent 3.9 PV Market Development Component: Project Implemeatation 3.10 Solar PV Market Development Components Sub-Project Eligibility Criteria 3.11 TNPL: Arrangement for Project Supervision and Management 3.1.2 IREDA:Environmental Assessment Summary 3.13 ItEDA'sEnvironmental Assessment Functions Proposed Scope of Work 3.1* TNPL2 EnvironmentalAssessment Sumnary 3.15 TNPL: Schedulefor ResettlementPlan 3.16 IuDAs ProjectCost Summary 3.17 IRSDAtEligible Procurement Items for CreditLine 3.18 TNPL PapermillExpansions Procurement Status 3.19 Scheduleof EstimatedDisbursemants 3.20 SupervisionPlan 4.1 IRUDAsHistorical and ProjectedFinancial Statements 4.2 TNPLsHistorical and ProjectedIncome Statements 4.3 Highlightsof TNPL's FutureOperating Performance 5.1 SmallHydro SchemessEconomic Analysis 5.2 GenericCriteria for GEM ProjectEligibility 5.3 IR3DAviudfarms Developmest Components BEconomicAnalysis 5.4 TNPLs FinancialRate of Return Analysis

6.1 Documentsin ProjectFile

MAP IBRD 24281 - iv -

INDIA RENEWABLERESOURCES DEVELOPMENT PROJECT CreditlLoan and Project Summary

Borrower: India,acting by its President; Tamil Nadu Newsprint and PapersLimited (TNPL) Beneficiary: Indian Renewable Energy Development Agency (IREDA) Guarantor: IBRD Loans India, acting by its President. The Government of India (GOI) would charge TNPL a guarantee fee of 1? per annum on the principal amount of the IBRD loan withdrawn and outstanding. CreditAmount: SDR 81.6million (US$115 million equivalent) Loan Amount: US$75 million

Termss The IBRD loan wouldhave a repayment period of twenty years, including five years' grace, at the Bank'sstandard variable interest rate. The IDA credit would be on standard terms with a 35 year maturity. Onlending Termss GOI will onlend the proceeds of the credit to IREDAat an interestcurrently set at 12.51per anum, with a repayment period of 12 years, including a grace period of 3 years. The Government would bear the foreign exchange risk. IRRDA will relend to its clientsinterest rates which now range from 102 to 15? and with repayment terms ranging from 5 to 10 years. according to the types of assets financed. The lending rates will be adjusted from time to time to reflect variationsin IREDA'scost of funds.

Proiect Description: The proposed project comprises:(a) the financingthrough IREDAof private sector investments in renewable energy sub- projects,namely, irrigation-based aall hydros,wind farms, and solarphotovolataic systems; (b) expansionof TNPL's bagasse-basedpaper mill; and (c) technicalassistance for institutionaldevelopment of IREDAand promotion of renewableenergy technologies.

Benefits: The main benefitsof the projectare: (a) demonstrationon a commercialscale of renewableresource systems that could lead to their replicationIn otherparts of India and the world; (b)mobilization of privateinvestments into the energysector and newsprintIndustry; (c) reducedreliance on fossilfuels and forestresources and thus help improve the environment;(d) increasedavailability and improved reliabiityof power supply to help meet the industrialand decentralizedrural energy needs; and (e) Increaseddomestic neweprint supply in India. v

Riskst Thereare severalareas of projectrisks. First,there are the risksassociated with monitoringnumerous work sites; theseare being counteredby involvingthe privatesector as Investors and by settingup a monit*ringand evaluationteam at IREDAwith back-up consultancy support to monitor progress of the works. Second. there are risks that the institutional and energy-pricing environment may prevent the solar PV systems from becoming affordable. These risks will be managedby requiring that adequate commercial arrangements for the supplyand after sales service are in place prior to loan approval by IREDAand by firmly establishing, thru maket surveys, the viability of product dmand and acceptabiitywithiu the context of the users' environment.Third, operation of the new energysystems may not be sustainableif the deployed systems perform poorly and capital and operating costs are higher than expected. These risks will be minimized by limiting financing to those technologies for which performance reliability and costs have been sufficiently established throughactual operating experience in India and in other countries. estimated Cost: Local Foreign Total …------…Us$ million)------

A. Small jydro Schemes 16 51 67 B. Non-conventional Enerny System Component 77 63 140 Wind Farm 50 52 102 Solar PV Systems 27 12 39

C. TEPL Bagasse-based Pa ermillEMpansion 66 66 132 Plant Cost 64 66 130 Pre-operating Costs 2 0 2

D. Technical Assistance 1 3 4 TOTALBASELINE COSTS 160 184 344 PhysicalContingencies 16 18 34 Price Contingencies 29 15 44 TOTAL PROJECTCOSTS 205 217 422

TNPL WorkingCapital 2 0 2 InterestDuring Construction(IDC) 19 7 26 TOTAL P$NANCINGREQURlED 226 224 450 - vi -

FinaacIng Plea: Local Foreign Total X Source

ITBD 7S 75 16.6 TNPL 07 67 14.9 IDBI 28 28 6.2 IDA 25 90 115 25.6 GEF 21 5 26 5.8 SDC 4 4 0.9 DANID 50 50 11.1 IREDA 17 17 3.8 Developers 68 68 15.1

Total 226 224 450 100.0

Estimated Loan and Credit Disbursements:

(US$ million) Bank Group Fiscal Year 1993 1994 1995 1996 1997 1998 1999

Annual 23 55 51 47 24 10 6 Cumulative 23 78 129 176 200 210 216

Cumulative2 11 36 60 81 93 97 100

Econamic Rates of Returs

8ma11 Iydrost above 122

TNPL Expansions 28.8? .iDIA

RENEWABLE RESOURCESDEVELOPMENT PROJECT

STAP? APPRAISALREPORT

I. 8ECTORALCONTEXT

Introduction

1.01 Over the post decade, consumptionof commercialenergy in India increasedat an average annual rate cf about 6S, and that of electricityat 91 per annum. Despite significant progress in expanding supply, the country continues to rely on oil Imports and to experience acute power shortages. The total installedpower systems capacity in end-FY92 was over 69,000 MV (Annex 1.1) and generation at 283,500 GWh which translated into a supply shortfall equivalentto 9Z of total energy and 222 of peak capacity requirementsin FY92. The demand-supplygap can be reduced through more efficientuse of ezisting facilities and through energy conservation. Nevertheless,even with improvedefficiencies, because the per capita energy consumptionlevels in India remain among the lowest in the world, demand for commercial energy and electricityis estimatedto continue to grow at 62 and 81 per year, respectively.

1.02 Part of 601's strategy for expanding energy supply is to promote the developmentof renewablesources and to encourage private investments in this sub-sector. The Government's renewable energy program is one of the largest among developing countries with the aim of supplementing conventional energy supplies and meeting decentralized energy needs of the rural sector. Tn more recent years, G0I has stepped up its efforts through public as well as private channels to comercialize the deployment and use of the more mature renewable energy systems such as those based on small hydros, wind and solar. The proposed project would support G01's strategy by strengthening the technical and financial institutions tasked with promoting renewable energy and facilitate the transition of the technologies from novelty to mainstream status. The project would tap financial and managerial resources from the private sector and help promote environmentallysound iuvestments.

India's PrimarY Enersy Resources

1.03 Commercial Enerav Resources. India has a wide range of energy resources includingcoal, oil, natural gas, hydropowerpotential, and uranium. 'Totalreserves of commercial energy resources in 1990 are estimated at 83,574 millions of tons of oil equivalent (mtoe). Annual production Is estimated at 157 mtoo compared to commercial energy consumption of 114 mtoe. Commercial sources of energy account for over 602 of India's total energy supply and are expected to rise to 801 in the next 15 years. The country'smost important commercialenergy resource is coal of which India has an abundant, though relatively low-quality supply. Of the commercial sources. coal and lignite contribute about 562, oil and natural gas 401, hydroelectricpower 31 and nuclear 12. Industry is the largest consumer of electricityand coal, while the transport sector is the largest consumer of oil products.

1.04 Non-Commercial Enetan Sources. Traditionalsources of energy are still predominant fuel sources although their share has declined sharply over the years, from 85X of total energy consumption in the early fifties to a presentsbare of 4OZ. The steepdecline is due to a numberof factors. Industrialexpansion, urbanization, rural electrificationas well as price subsidies for electricity and kerosene have led to a generalshift towards the more convenient and commercial forms of energy. Currentproduction of fuelvood is estimatedat 140 million tons (mt) per annum,while national demand is estimated to reach200 mnt per annum by year 2000. It Le estimated that unless replenished, the standing stock of fuelvood will be exhausted in the next 10 to 15 years. Another 80 mtoe is estimated to be availablefrom agriculturalresidues of which less than 201 is presentlyutilized. 1.05 AlternstiveEnergy Sources. Yon-conventionalenergy (NCE) sources have been the subjectof a wide rangeof researchand demonstrationactivities in India. In 1988,a jointUNDP/World Bank EnergySector Management AssistanceProgram (ESMAP) review of GOI'sprogram on non-conventionalenergy sourcesconcluded that near-termopportunities for commercializationexist, amongothers, in the areas of grid-interfaced power generation from irrigation-based small hydros, windfarms systems, and in selected solar photovoltaic (SPV) decentralized applications 1 . Follow-up pra-investment studies in 1991 and 1992 further concluded that irrigation-based small hydros are economically attractive when co-pared with power generated from central stations, wind farms can also be competitive if the environmental costs of the fossil-basedgeneration they displaceare duly considered,and SPV lightingin non-electrifiedareas is economicallyviable. 1.06 SmallNydro. Indiahas an extensivenetwork of irrigation infrastructure which provides low-cost opportunities for small hydro development.Surveys conducted by the RuralElectrification Corporation (REC), Central Electricity Authority (CEA),and Ministryof Non-Conventional Enrgy Sources (NWES)indicated that over 1,000 sites associated with irrigationdams, diversionweirs and canaldrops are prospectivesites for nearly800 MW of smll hydre;wer development,largely concentrated in the SouthernRegion. Smallhydro schemesin suitableirrigation works involvea well-developedtechnology and can be implementedin less than 3 years at a cost of less than $900 per kW (conventionalhydro costsbetween $1,000 to $2,000per kW) and withoutneed for major transmissionlines sincethe sites are near potentialload centers. 1.07 Wind. An estimatedpotential of 20,000MW for developmentof windfarmsexist in India.Sites with goodwind resourcesare availablein a numberof States,namely, Gujarat, (which has 5,000MW potential), Tamll Nadu, Maharashtra,Orissa, Andhra Prade.h, and Karnataka.Under GOI's wind energy program,more than 2750wind pumps,7 MWof stand-alonewind generators,and over 38 MW of grid-interfacedwind farm projectshave been commissionedin sew states. The 10 MW installationat Lambain Gujaratis the largest windfanmIn Asia. Since1986, over 106 millionkWh of electricityhave been fed Into the grid from thesewindfarms.

1.08 SolarPhotovoltaics. In most parts of India,sunshine is available250 to 300 days a year. The annual globalradiation varies from 1600-2200kWhl/a which comparesfavorably vith other countriesin the tropical and sub-tropicalregions where the averageradiation is about1800 kWhl'.

1 2India:Opportunities for the Commercializationof Son-Conventional EnergySystems*, ESMAP Sector report, November 1988. - 3 -

The equivalent energy potential is about 6,000 million GWu energy per year. Solar photovoltaic(SPV) power has been used for a variety of applicationsin India. To date, SPY street lighting systems have been provided to about 8,000 villages; 1181 SPV water pumps and 5050 domestic lighting units installed; about 500 kilowatt-peak(kWp) capacity invclvingover 50 village power systems has been set up, and nearly 1,000 communityTV systems are in operation. Domestic productioncapacity for solar modules is about 3 MW; in 1991 over 1 MW solar modules were produced. At pr6sent, there are 16 companies involved in the productionof siliconwafers, solar cells, modules and systems.

1.09 Power systemsbased on these alternateenergy sources can be deployed in relatively short periods of tine and are suitable candidatesfor alleviatingpower shortages. They can reduce reliance on costly back-up diesel generatingcapacity which consumershave had to operate as a result of poor quality and unreliabilityof public supplies. The decentralized locationsof the small hydro and windfarm systemswill improve supply and voltage reliability in the peripheralareas of the grid and avoid the high transmissionand distributionlosses (about 222 of net generation)associated with grid supply.

Organizationof the Non-ConventionalEnergy Sub-Sector

1.10 The principal agency responsiblefor the developmentof new and renewableenergy sector is the Ministry of Non-ConventionalEnergy Sources (MNES). MNES is in charge of formulatingpolicies and programs and coordinatingresearch and development (R&D) activities in the sector. MNES administersa variety of programs includingthose on biogas development, improved chulas (wood stove), solar thermal, solar photovoltaics,wind energy, small hydro. The programs are financed through GOI and State grant subsidies and involve demonstration and field trials of new systems, technology development and manufacturing support, distributionand installationof proven systems and extension of maiftenance services. MNES's programs are implementedthrough state energy developmentboards, rural credit institutions,state power utilities, technicalinstitutes, non-governmental organizations(NG0s) and through public and private enterprises. In 1987, GOI created the Indian Renewable Energy Development Agency Limited (IRtDA) as an affiliate technology promotions and financing arm of MNESwith the objective of encouraging private entrepreneurs to undertake investments in the sector. Since its inception,IREDA has managed a novel loan portfolio of about 200 small-scalealternative energy projects. Demand for IREDA financingnow exceeds IREDA's limited resources and the recent thrust given to commercialization of renewable energy requires strengthening of the Agency.

GOI's Sub-Sector Strategy

1.11 Initial efforts in the promotion of NCEs focused on the deployment of small-scalebiomass-based rural energy systems (e.g.,biogas digestorsand biomass gasifiers)and some R&D activitieson larger scale energy systems (waste co-generation,wind power, and solar thermal power). The programswere largely technology-driven with insufficient attention given to consumer feedback on product quality and service. In order to sake a more significant contribution to the country's energy supply, the program for NCEs is uow taking on a demand-driven orientation involving greater participation of beneficiaries. Increased emphasis is now being placed on commercializing larger scale NCR sources for power generation and for the promotion, through IRDA, of privateInitiatives and Investmentsin the sector. Under the Eighth Plan, MNE$has programed the Installationof over 1,000MW of power generation capacity based on NCE technologies. of the total additional capacity, 400 MWwould be basedon wind energy, 256 KWfrom small hydros,and 12 MW from solar PV (Annex 1.2). Due to serious governmnt budgetary constraints, the program faces substantial curtailment (from Re 30 billion to Rs 8.5 billion) and VIES is redirecting its financing strategy from one of outrightBrant for government-sponsored system installation/production to provis'on of concessiwaa loans to consumers and producers partly through IREDA. In addition,larger equity investment from the usersand higher cost- recovery levels are now required. This shift in fundingstrategy would widen application of limited Gol funds, redirect VIES's programs to the more mature technologies and put NCE projects on a more comuercial footing. Ke' Sectoral Issues 1.12 Although the potential supply of non-conventional energy in India Is significant, the pace and magnitude of their commercialization has been below expectations. In general, NCE technologies require significant up-front capital investment in exchange for very low or no fuel costs, low operational and maintenancecosts. The lack of accessby NCE users to appropriate financingmechanisms has been a constraint to their adoption. Because of the perceived risks, the financial sector is unlikely to finance investments In the emerglng MCEtechnologies. IREDA's role is to support such new ventures in order to create perforsance track records for the technologies, facilitate their transition from novelty to mainstream status so as to attract camercial funding in the future. ICE options also tend to be relatively small and dispersed in nature and highly dependent on localized conditions. They require greaterend-user participation and, at leastat the early stages, significantly greater organizational and technical effort than conventional options. These features require innovative promotions, delivery and financing mechanisms to render NCEs acceptable and affordable to target end-users. The present practiceof subsidizedenergy prices (e.g., kerosene and electricity), especially to the rural and agricultural sectors where NCE options are most often targeted, makes it difficult for NCE technologies to compete on a financial basis with conventional options. The lack of a commercial market base has preventeda fasterbuild-up of the necessaryinfrastructure support and inhibitedthe opportunitiesfor realizingthe economies of scale in tha production of these systems. Past barriersto the import of new technologies, e.g., high import tariffs, have also resulted In a delay In the adaptation of new and cost-effective developments in man7 advancedNCE options. The proposed project is designed to stimulate creation of a wider market base for NCEs among both business and domestic users by providing a consumeroriented financing mechanism with technical service support. The resulting market base is expected to help bring down the cost of NCEs production in India in the medium tera. Efforts at Reform 1.13 In its efforts at achieving greater efficiencies in the energy sector a number of policy measures have been recently adopted by CO that significantly reduce the barriers to the development of NCEs. Principal among these are reform measures towards. (a) a pricing policy that attempts to reflect more closely the economic costs of energy supply; (b) trade and Industrialpolicy reforms; (c) the entry of the privatesector to augment -5-

power generation capacity. 1.14 Energy Pricing Reforms. 0OIhas initiated tariff reforms in the pOwer sector that is intended to bring electricity prices closer to their economiccosts (in 1990, tariffs were only 502 of the long-run marginal cost). SinceApril 1990, 14 StateElectricity Boards (SEBs)out of 18 have increased theirpower ratesand the statepower ministries agreed to have a minimum agriculturaltariff of Re. 0.50 per kWh. At the moment,four SEBs (Assam, Orissa, Haryana and Rajasthan) comply with the new minimumagricultural tariff for their metered agricultural consumers. Central utilities are poised to introducenew tariffstructures within the year. 001 is also reviewingprices of oil and coal productswith the end in view of movingtowards efficiency pricing. These tariff reforms would significantly increase the competitivenessof NCE optionsin the ruralareas of the grid. 1.15 TechnologyTransfer and IndustrialDevelopment. The recent economicliberalization measures announced by 00Ithrough the revised IndustrialPolicy Resolution (IPR) issued last July 1991 are intendedto stimulatedomestic and foreignprivate sector participation in a wide range of industriesand sectors,including energy. Based on the IPR, 001 extendedthe policyof automaticapproval of technologyagreements and of allowing512 foreignequity for investmentsin alternateenergy systems. The recent reductionof customsduties will fosterthe entry of high standardNCE technologies.To furtherclear the way fov technologytransfer, NIES continues to reviewthe streamliningof variousarrangements for foreign collaborationand the packageof fiscalincentives. 1.16 PrivateSector Participation in Nn-ConventionalPower Schemes. In September 1991, the ElectricityAct was ameandedt' liftmany of the regulatory disincentives to private investment in the power sector. In particular, it provides for 100? ownershipof power companiesby the private sector,an extendedperiod of licenseto 30 yearswith 20-yearrenewals and increasedfinancial returns. Provisionis made for privategenerating companies and captive plants to sell power to the SEBs. NCE technologies offer the privatesector investment opportunities in small-scalepower development for which funding requirements are affordable, fuel arrangements minimal and power transfer agreements more tractable. NCRprojects readily provide alternate sources of energy for the many power-intensive industries which cannotbe fullysupplied by the grid and which have had to maintain expensivecaptive diesel generators. A numberof fiscalincentives are offeredby GOI and statesfor NCE developersiusers.They includeexemptions from exciseand salestaxes and full depreciationof capitalinvestments in selectedtechnologies (e.g., wind generation)during the firstyear of operation. 1.17 Presently,a numberof stateshave issuedpolicies for attractilg privatedevelopment and operationof smallhydros and windfarmsystems. Among the Statesthat have publiclyannounced and are activelypromoting such policies are TamilNadu, Karnataka, Andhra Pradeshand Kerala(Annex 1.3). Severalon-going projects show that the present arrangements between the Statesand developersprovide a workableframework for such investments. Current operating arrangements allow developers to "wheel and bank" power through the grid enabling the developers to operate the scbemes on a "captive plant' basis (i.e., when billing the participatingindustry for power supplied from the grid, the SEB adjuststhe registeredconsumption by the equivalent energy generated from the industry's power plants after deducting an agreed percentage of the generation as wheeling charge). Surplus power generated can also be banked for a limited period of time and can be drawnupon by the developersin times of power supply shortfall on an *as available' basis. Occasionally,banked power is 'pooled'and tradedamong user industries.Some SEBs are also willing to purchase surplus power generated from the schemes. However, given the acute shortage of power supply, most developers currently preferto avail of the wheeling and banking arrangement. This also avoids protractednegotiations on purchasetariffs and freesdeveloper from relying on an SEE'scapacity to meet paymentsfor the powerpurchases. Over time,the entry of more privately-operatedpower facilitiesinto the networkis expected to result in the formulationof more sophisticatedpower transfer/purchase arrangements based an avoided cost and time-of-use pricing principles. India's Newsprint and Paper IndustrZ 1.18 Demand and Supply. The consumptionof all types of paper and paperboard in India is less than 3 kg per capita, compared with a world average of about 50 kg per capita. Consumption of newsprint is 0.65 kg per capitacompared to 5.6 kg in developedcountries and continuesto grow at an annual rate of 7Z due to wider readership and higher literacy rate in the country. At present, with the exception of newsprint, India is essentially self-sufficient in the supply of paper. The domestic supply gap for newsprint is currently over 360,000 tons per year, and is met through Imports. The expansion of the country's production capacity is severely limited by the shortageof fibrousraw material. Bamboo supply is fast depleting and mixed hardwoodsis tow virtuallyunavailable for new paper mills. 60I's searchfor alternativeraw materialfor paperproduction has establishedthat sugar cane bagassereleased from sugarmills througha combinationof fuel replacement and energyefficiency measuras is the singlebest sourceof fiber to support the developmentof the paper industryin India. 1.19 Domesticproduction of Bne rlat has risenfrom 45,000tons per annum ttpa)in FY81 to 316,000tons in FY89. There are presentlyfour papermillsmanufacturing newsprint, and exceptfor TNPL,all are dependenton forest-basedraw materialssuch as bambooand hardwood. The fast depletionof these traditionalraw materialshave ruledout substantialcapacity expansion in the near futurewhich will resultin a wider gap in dezmndand supply. It is estimated that newsprint demand would increase from the current 685,000 tpa to 850,000tpa by FY96 comparedto an annuallocal production capacity of 370,000tons, includingTNPL's expansion.

1.20 Domestic supply and demand for printing and writing paper is more closelyin balance. Although, the existing installed capacity for paper productionis over 3 milliontons ner annum,actual production level has only reached2.1 millionin 1991 due to closvreof smallmills. Of the existing 300-plus mills,about 902 have a capacitybelow 20,000tpa and collectively accountfor half of the country's requirements. Absence of chemical recovery systems,shortage of fibrousraw materialsfor which the millswere designed and diseconomyof scalehave led to closureof severalmills. Even among largermills, around 222 of capacityhas been lying idle,with severalof the mills operatingat a loss and facing imminentclosure due to the critical shortageof raw materials. 1.21 Bagasse-basedProduction. The use of bagassein the productionof printingand writingpapers is a well establishedprocedure, although its use in newsprintproduction is relativelynew with many failedexperiences recordedaround the world. The bagasse-basedprocess used by TNPL for newsprintproduction was pioneeredby TNPL and the supplierof its main equipment under TNPL's fnitialproject financed by the Bank (Loan2050-IN) in 1981. The processis stillundergoing technical enhancement. Despite mechanical and product quality problems encountered during the initial years, TNPLhas successfully demonstrated its abilityto produce,on a comvercial basis,good qualitynewsprint using a high proportionof bagasse pulp. The proposedexpansion will incorporateseveral major improvementsin paper machinedesign which will alloweven higherproportions of bagassepulp to be used in newsprintproduction on a sustainedbasis, i.e., from a currentlevel of 701 to 100l.

1.22 Pricingand Distributionof Newsprint. Until 1988, newsprint supplyand pricinghad been controlledand regulatedby GOI. Sincethen, GOI has activelymoved towardsthe decanalisationand decontrolof the newsprint industry. Supplycontracts and pricesfor domesticnewsprint are now directly negotiatedby the buyerswith the papermillsof theirchoice. EffectiveApril 1992,except for the largenewspaper establishments, newsprint consumers are allowedto freelyimport newsprint supply. The largerestablishments are allowedto importone ton of newsprintfor everytwo tons of domesticsupply. Importscontinue to be virtuallytariff-free. Discussions are underway between001 and producersiusersof newsprintsfor the full liberalizationof imports subject to Imposition of normal tariffs.

Role of the Bank

1.23 The Bank supports the major policy reforms recently undertaken in India's power sector including the increased role for the private sector. The Bank's evolving lending strategy continues to support investments through efficientpublic utilities and the privatesector. It seeks and supports actionsby G00 to addressthe longer-termissues in the power sectorsuch as problemsin the currentallocation process (not only in the power sectorbut also in coal and naturalgas), the planningprocess, the operational efficiencyof the powersyptems, the institutionalset up both at the Central and State levels and financing needs of the power sector. In addition,issues affecting energy conservation and demand-side management of power development are being taken up. 1.24 The proposed projectfits into this strategybecause (a) it is directed towards encouraging private sector participation, (b) promotes environmentally sound investments, (c) fosterssound commercialpractices in SnBs and encouragesefficient grid operationssince private investments would situate themselves only in those states where grid supply is stable and where contractual arrangements are based on sound business considerations, and (d) by virtue of their decentralized locations, the project investments would boost power supply,reduce energy losses and providemuch-needed voltage support to the distribution systems. 1.25 The Bank's lendingstrategy towards the Industrialsector is to support a program to rationalize public enterprises, particularly through privatization. In addition, the Bank encourages investments in energy efficient and environmentally sound productionprocesses. The papermill expansion project promotes efficient use of bagasse, a waste product, as - 8 - industrialraw material. By enhancingthe commercialviability of the bagasse-newsprinttechnology, the projectwould attractprivate sector investmentsand enablethe StateGovernment of Tamil Nadu to progressively divestits sharesof stock in TNPL. Past Bank Group Support 1.26 The Bank has made 34 IBRD loans (US$6.7billion) and 18 IDA credits(US$2.3 billion) for powerprojects in India (Annex1.4) involving generation,transmission and distribution,and rural electrification.The most recentloan was to the MaharashtraState Electricity Board (MSEB) in June 1992. The physical implementationof most Bank power projectsin Indiahas proceededslowly but has broadlymet expectations.Difficulties were experiencedin effectinginstitutional improvements in the power sectordue to lack of financialautonomy and poor financialdiscipline of the publiclyowned utilities,as well as the absenceof agreedmechanisms for projectcost recovery. The lessonslearned from these projectshave had an important bearingon the preparationof the proposedproject, particularly as regardsto privatesector participation. The proposedproject would be the firstBank operationin India in the non-conventionalenergy sector. 1.27 In the pulp and paper industry,the Bank extended,In 1981, a loan of US$100million to GOI to help financethe TamilNadu NewsprintProject. The projectexplored and successfullyintroduced new bagasse-basedtechnology to India. The ProjectCompletion Report (No.6517, dated December1986) underscoredthe efficientimplementation of the projectby TNPL and its good operationalresults. GlobalEnvironmental Facility (GE?) Funding 1.28 The non-conventionalenergy component of the projecthas been selectedas the GE? demonstrationproject for grid-interfacedwindfarms and for solarPV rurallighting and othervillage applications in the Asia region. 'Theproject supports GEF's objectiveson net reductionof globalwarming emissionsand has been selectedbased on the project'sdemonstration value, and potential for replicability and sustainability. The windfarmcomponent is estimated to yield a relatively low cost of displacing carbon estimated at $30 per ton of carbon displaced. The SPV component would initLally involve a carbon displacement cost of $84 but which is expected to decline to $29 per ton as the program expands. It is envisaged that GEF funding would be able to leverage investments on a scale which will establish widespread credibility for solar PV and wind power technologies, attracting private capital and acceleratingmarket development.

II. BENEFICIARIES

IndianRenewable Ener8y Development Agency Ltd. (IREDA)

2.01 The IndianRenewable Energy Development Agency Ltd. (IREDA)was established by GOI in 1987 under the Companies Act to promote the development of emerging ICE technologies. IREDApursues two broad activities, namely: (a) a promotional program that includes the organization and financing of entrepreneurial development training, workshops and information campaigns - 9 - promotingNCE technologiesfor prospectiveand existingclientsI and (b) operationof a revolvingfund to providefinancing to producers,manufacturers and users of NCE systems. This financingsupport is considereda firststep towards full coimercialization of NCE technologies and vould pave the way for regular financial intermediaries to support NCEs. 2.02 . Organization. TREDA'scurrent organizational structure is shown in Annex 2.1. IREDA's operation is headed by a Managing Director and its Board is chaired by the Secretary of MNES. There are five ex-officio members (the Expenditure Secretary of the Ministry of Finan ce, the Secretary of the Planning Commission, the Chairman of CIA, the Chairman of the Rural Electrification Corporation, and the Chairman of IDBI) and three appointed directors. IREDA's organization has evolved into a verticalstructure with virtually all the operations requiring the direct supervision of the Chief (Finance and Personnel). INDA is currently introducing a new organizational structure establishing four key departments, namely, Management Services, Projects and Technical Consultancy, Finance and Planning. During negotiations agreements were reached on a timetable for implementing a satisfactory organizational structure. 2.03 Staffing. IREDAhas kept its permanent staffing lean and relies oanspecialized consultants. The presentstaffing consists of 10 managerial and technicalstaff and 10 supportstaff. The staffinghas provedadequate for 1INDA's past and current operations; however, in view of the expected growthin operations,IREDA's manpower would have to be strengthened and expanded. Under its ongoingre-organization, IREDA will graduallyincrease its staff complement to about 40, according to a timetable agreed during negotiations.Training of IRDA'asexisting and new staffwould be supported under the TA component of the project to ensure effective performance of IRNDA's expanded activities. During negotiations IREDAagreed to hire consultants to assist in project management. 2.04 Operational Policy Statement COPS). IREDAhas prepared an OPS which describesthe Agency'srationale, operating philosophy, objectives, programs and procedures. A sumary is presented in Annex 2.2. The purposeof the OPS is to establish the policies that will guide IREDAin its relations with its clientsand in its own operationaland financialactivities. The OPS embodiesIRZDA's key financialpolicies which are describedin para. 4.04. The OPS will be supplementedby IREDA's operationalmanuals and procedures coveringvarious aspects of its lendingfunction. The OPS will be the Instrumentthat will reflectthe major agreementsbetween IREDA and the Bank on how the Agencywill conductits business. Duringnegotiations agreement was reachedon a satisfactoryOPS, and IREDA agreedto operateaccording to the standardsprescribed by said OPS, and not to ameV4 it in a substantial mannerwithout prior concurrencefrom the Bank. 2.05 Processingof Requestsfor FinancialAssistance. Applications for financialassistance are appraisedby INEDAin termsof the project's technical,economLc and financialfeasibility and the need for legal guarantees.Loan approvalsare made by the ManagingDirector for loansup to Ri. 2.0 million,by the Sub-Comitteeof the Board for loansup to Rs. 6.0 million,and by the full Board for loansIn excessof Rs. 6.0 million. Qualifiedfinancing proposals are sanctionedby INEDAnormally within 3 months from receiptof applicationbut loan signingand effectivenesswhich is subjectto arrangementby the borrowerof appropriatebank guaranteesoften - 10 -

take several months to complete. ItEDA is currently updating its manuals for processing of financial assistanceincluding desipning forms specific to the requirementsof the proposed project. Their adoptionwould help ensure that processing time is maintained at a minimum.

2.06 Financing Criteria. Under its Revolving Fund, IREDA provides financial assistancefor projects in the followingareas: solar thermal systems, solar photovoltaicsystems, wind energy systems,bio-energy systems, high efficiencywood burning stoves,methane recovery systems from industrial effluents, solid fuel manufacturing from municipal and agricultural waste, battery powered vehicles, small-hydrogeneration, co-generation, and energy conservationsystems. To be eligible for IREDA financingthe projects are subject to the following criteria: (a) the project must be technically feasible and, when applicable, compatiblewith existing expansion plans; the technicalsolutions must representthe least cost option; (b) the project must be economicallyjustified; its social cost-benefitin terms of generationand conservationof energy must be highly satisfactory;(c) the project must be financiallyjustified with a financialinternal rate of return of normally not less than 12X: (d) the project must meet GOI & state environmentaland social impact standards; (e) the schemesmust have obtained all clearances required by state and federal agencies; (f) the selected raw materialsmust be naturally emanated and renewableor involves use of waste, such as industrial effluents,agri-residues; and (g) the project must aim at the developmentof employment potential and balanced economic growth among geographical areas. In addition, IREDA evaluates the borrower's capability to undertake the project in terms of their performance track record, sound financial operations,and adequate organizationaland technicalcapabilities.

2.07 FinancingTerms. IREDA financesup to 75s of the total project cost although this limit may be exceeded in some cases. Based on its portfolio to date, due to fund limitations,co-financing by ItREDAaveraged about 30S of project costs. Repayments range from 6 to 10 years depending upon the nature of the project. The grace period is generally between 2 to 3 years. IREDA's financingterms are shown in Table 2.1. An interest rate rebate of 0.5s is availableto all borrowers for punctual repaymentsof principal and interest. Interest tax ranging from 0.3? to 0.52 is passed on to borrowers. All operationsare guaranteedby either an English Mortgage or a Bank Guarantee; the cost associatedwith the guarantees is equivalent to about 1.52 of the loan depending on the borrowers credit standing. Interest is adjustable both on the undisbursedportion as well as on the amounts already disbursed.

Table 2.1: IREDA's FinancingTerms

Total Grace Interest Category Maturity Period Rate p-a.

Small Rydro 10 years 3 years 15.02 Wind 6 years 1 year 15.0? Effluent Treatment 7 years 2 years 14.0? SPV users 8 years 2 years 10.02 Other NCE sectors 8-10 years 2-3 years 10.02-15?O - 11 -

2.08 IREDA's Financing Portfolio. Up to March 31, 1992, IREDAhad disbursed loans totalling Rs. 229 million and approved 177 loans totalling Rs. 668 millionfor projectssituated In 16 states and costingRs. 2,093 mllilon. IREDA'sfinancing operations grew from 36 loans for a total of Rs 56 million in PYS8, its first year of operations, to 52 projects for a total of Rs. 248 millionin FY92. Sixty-fiveper cent of IREDA'sloans have been for private sectorprojects, 311 for publicsector and the remaining42 for cooperatives. A slummryprofile of IREDA'slending operations as of March 31, 1992 is given in Table 2.2; detailsare providedin Annex 2.3. As of that date, as many as 43 projectshave alreadybeen successfullycommissioned. It is estimatedthat projectssupported by IREDA to date have resulte.1 in aggregateenergy savings of about Rs 700 millionas of end-FY92.'Under its expandedoperation, IREnA would be able to supportup to 752 of projectfunding for smallhydros, vindfarmsand PV systemsreducing the need for borrowers to arrange for additionalco-financing. As a result,although the value of IREDA'sproject lendingwould increasesignificantly due to thesehigher-value investments, additional projectapplications to be processedwill likelynot exceed20 projectsa year duringthe first 2 years. Table 2.2s Profileof IREDA'sFinancing Operations (as of March 31, 1992) Project Projects Loan Amount Category Approved Agproved (Rs million)

1. Small-hydro 9 195 2. EffluentTreatment- cum-Biogas S0 216 3. Biames Utilization 31 90 4. Solar ThermalEnergy 65 72 5. Wind Energy 16 74 6. R&D and Demnstration 5 11 7. Cogeneration 1 10 Total 177 668 2.09 CollectionPerformance. In its shortoperational experience, IREDA's collection performance has been satisfactory. In July 1992, only 12 of the loans outstanding could be-classified as Sub-standard Assets. The low defaultrate is due to timelynotification of clientsby IREDAof due payments,application of discountsfor promptpayment and surchargefor late payments, and strictguarantees attached to the loans.

2.10 Accounting and MIS. IRDA's accounts are maintained in conformity with the requirements of the Companies Act of 1956. Since IREDAis still a young organization, its existing accounting systems do not include a provision for bad and doubtful loans granted under its Revolving Fund, and lack clear policies on accrual of income. In addition, the systems need to be modernixed to respondto the very rapidgrowth projected for the next five years. During negotiationsIREDA agreed to retain,by June 30, 1993, consultantsto help introduce improvements in REiNA'saccounting systems in line with the future requirements of its operations; and in particular, to formulate policies on income accrual and provisioning for bad debts. INDZ has developed an adequate management information system (MIS). Both the MIS and INEDA's - 12 -

accounting systems are in the process of computerization which should facilitate the management of the fast groaing orgamization. Under the project, TA support would be provided for enhancing IRIDA' accounting and HIS systems. A timetable for these activities was agreed during negotiations (Annex 3.5). 2.11 Auditing. IREDAauditing i. done at three levelss(a) IREDA retainsthe servicesof a reputableaccounting firm to performthe internal audit function and provideadvice on accountingmatters; (b) under the CompaniesAct the Law Board of the Ministryof Industryappoints a firm of chartered accountants as Statutory Auditor and its report is attached to the annualAccounts that are presentedto the Parliament;and (c) the Comptroller and AuditorGeneral of India,at its option,reviews the audit conductedby the Statutory Auditor. This auditing system is considered to have the necessary independence and the ;ality of the auditshas been satisfactory. During negotiations IREDAagreed to submit to the Bank. no later than six months after the end of each fiscalyear, unauditedfinancial statements, and no laterthan nine monthsafter the end of the fiscal year, copies of said financialstatements certified by an independentauditor acceptable to the Bank, as well as the auditor'sreport. 2.12 ProjectMonitoring. Currently IREDA monitors projects through semi-annualproject status reports submitted by clientsbased on standard reporting formats supplemented by periodic site visits by technical personnel to inspectphysical and financialprogress of the projects. IREDA also providestechnical advice to assistpromoters in minimizingproject delays. As part of the proposedproject, IREDA will establish a system for reviewing the contribution of its project portfolio in meeting the objectives of energy supply, environmental improvement, technology development and comercialization(para. 3.08(b)).

Tamil Nadu Newsaprint and PagersLimited (TNPL) 2.13 TNPLwas incorporated on April 16, 1979 by the Governmentof Tamil Nadu (GOTN)for the manufacture of newsprint and printing paper using bagasse as the main raw material. As of March 31, 1992, the total equity of Rs. 982 million was held in equal parts by GOTNand IDBI at 49X each, and the balance of 21 by some sugarcooperatives and other institutions. A public issueof shares equivalent to 25Z of outstanding shares is scheduled in FY93/94 which would dilute the shareholdings of GOTNand IDBI to 39?, respectively. The public issuewould pave the way for listingof TNPL sharesin the stock exchangeand is a conditionof the loan. On October14, 1991,assurance was receivedfrom GOTN that it agreesto reduceits shareholdingsto 26? after threeyears from October1991 or one year aftercompletion of the proposed mill ewpansion, whichever is later. IDBI plans to fully unload its shares. 2.14 Organization. An Organization Chart is presented in Annex 2.4. The company is managed by an 8-man Board and its Chairman is also the Managing Director. Factory operations is managed by a General Manager. The Board enjoys complete autonomy, without interference from GOTN on its day-to-day operations or in its conmmercial orientation. TNPL currently has a 1,454 manpower complementand plans to recruit 600 more staff for its expanded facility. 2.15 Accounting and Auditing. TNPL's accounting system is satisfactory - 13 -

and follows accounting norms and regulations established by the Companies Act. A firm of chartered accountants is appointed each year by the Company Law Board. The auditors are considered to have the necessary independence and the quality and timing of past reports is satisfactory. During negotiations TNPL agreed to submit to the Bank, not later than six months after the end of the fiscal year. financial statementscertified by an independentauditor acceptable to the Bank, as well as the auditor'sreport.

2.16 tNPL'sMarket. THPL currently accounts for 15? of domestic newsprint supply and serves 7? of newsprint demand in India. the company caters to a select group of customers,i.e., publishers of newspaperswith high circulation base such as The Hindu, The Hindustan Times, The Times of India, and The Economic Times. The high quality of TNPL's newsprint is found to be well suited to the high speed and modern printing machines installed by these clients. Despite the recent liberalizationof newsprint imports and increases in TNPL's prices, newsprint sales by the company have expanded. Standard newsprint currentlysells at Rs 18,570 per ton while pink newsprint fetches a higher price of Rs 19,970. TNPL's newsprint is able to command the highest prices (61 to 202 more than competition)due to the quality of its product, prompt delivery and aggressivemarketing policies pursued through its regional marketing network. TWPL currentlyproduces more than six varieties of printing and writing papers for various uses e.g., off-set and special printing, photocopy, computer,etc. Their average selling price is Rs 23,030 per ton (Annex 2.5).

2.17 Supply of Raw Material. Bagasse supply is sourced from sugarmills in the State of Tamil Nadu producing surplusbagasse. In addition,TNPL maintains long-term supply contractswith five sugarmillsthat have agreed to shift from using bagasse as boiler fuel and allowing TNPL to operate the boilers based on coal/ligniteadmixture. Under this arrangement,TNPL provides reliable steam supply to the sugarmills in exchange for bagasse supply for use as raw material in TNPL's paper manufacturing. Some of the boilers have also been retrofit to permit use of bagasse pith as fuel. To meet the requirementsof the expanded papermill, two more sugarmillswill be included in TNPL's bagasse supply network which will involve installationof two boilers with depithingand bagasse compactionequipment. During negotiations TNPL agreed to enter lito additional bagasse supply agreements with sugarmills on or before December 31, 1993.

1In. THE PROJECT

Project Obiectives

3.01 The main objectivesof the project are to: (a) promote commercializationof renewableresources technologies byt (i) strengthening IREDA's capacity to promote and financeentrepreneurial investments in alternate energy, and lil) expanding bagasse-newsprintoperation to more couzercial levels of production; (b) create marketing and financing mechanisms for the sale and delivery of alternateenergy systems based on cost-recovery principles; (c) help set up an institutionalframework for encouragingentry of private sector investmentsin small-scalepower generation;and (d) promote environmentallysound investmentsto prevent depletion of India's limited forest resources and to reduce the energy sector's dependenceon fossil fuels. - 14 - Pro3ectDescription

3.02 The proposedproject inc udest (a) a line of creditwith the IndianRenewable Energy Development Agency (ItREA) to finance private sector developmentof small-hydros,windfarms, and solarPV systems; (b) the expansionof TNPL'sbagasse-based papermill; and (c) technicalassistance. Line of Creditfor RenewableEnergy Investments 3.O3 Small-HydroSchemes. The projectwould finance,through IREDA, the developmentof grid-interconnectedsmall hydro scbemesin existing irrigationcanals and dams. Some 40 potentialsites, in the Statesof Karnataka,Tamil Nadu, Kerala, and AndhraPradesh have been identified under an ESMAP pre-investmentstudy in 1991 (Annex3.1). These Stateshave put in place operationalpolicies for the entryof privatesector investments in the developmentand operationof irrigation-basedsmall hydro schemes. Some 40 to 50 smallhydros with an aggregatecapacity of about 100 MV would be financed under the project. The schemesinvolve the installationof turbo-generators with capacitiesranging from 350 kW up to 5 MW for a maximumstation capacity of 15 MV per scheme. Alternativedevelop-ent schemes designed to produce energyat or below the marginalenergy costs of generationin the grid have been recomuended under the ESMAP study. They were designed to maximize energy production from the existing pattern of irrigation discharges and to minimize costs by simplifying the electro-mechanical design and by reducing civil works. 3.04 VindfarmDeveloment. The projectwould finance loans by ItEDA for development of grid-interfaced windfarm schemes in States where there are proven good wind resources and established policy framework for private sector participation. A site investigation study by ESNAPin 1991 evaluated 28 sites in Andhra Pradesh, Gujarat, Karnataka, and Tamil Nadu. Up to an aggregate capacity of 85 MVof wind generators are expected to be financed under the project. The windfarm sizes and locations would be based on the proposals submitted by the developers who vould own and operate the machines. The developerwould be responsiblefor conductingthe necessaryfeasibility studies which should confirm that the grid to which vindpower will be fed is adequate for safe and reliable operation of the wind farm. The type of machines to be used would be decided by the private developer. 3 05 Solar Photovoltaic (SPV)Market Development Progra. The project would finance the establisbment on a demonstration basis of a marketing and financing program that would support delivery of SPV systems. A preliminary market assessment2 and field surveysconducted in four states (Orissa, Rajastuan,Uttar Pradesh,and Andhra Pradesh) estimated the market for small PV systemsfor householdand commercialestablishments to be around80 MWlpin said statesand up to 136 MVp in the whole of India (Annex3.3). Several types of organizations were also identified, for example,leasing fimss, NGOs. financing firms, development boards, trading firms, which could serve as Intermediaries for IREDAfinancing. To validate these findings, a more comprehensive market assessment is being commissioned under a Japanese Grant Facilitythe resultsof whichwill be availableby June 1993. The specific

Indias Solar Photovoltaices Market Development Component - Pre-investmentStudy, June 1992. - 15 - marketsegments (the States, customer class, product applications) to be targetedby IRDA under the projectwould be based on the recommendationsof the marketstudy. 3.06 Installationof an aggregatecapacity of 2.5 to 3.0 MWp of PV systemsvould be supportedby the projectover a periodof five years. These PV systemswill mainlysupply power for lighting,and for equipmentrequiring smallamounts of powerapplications in areaswith deficientmainline electricityservice. Among the proposedapplications aret (i) PV lanterns; (11)PV systemsfor lightingand for operatingsmall appliances in households and commercial establishments; (iii) village and community service applications,i.e., for schools.health clinics, community centers, village electrification;and (iv) PV water pumping systems. Annex 3.4 gives examples of PV applicationsthat vould be eligiblefor financing. TNPL lagasse-basedPavermill Ixpanslon

3.07 The projectwould financethe expansionof TNPL's papermillat Pugalur,Tamil Hada. The expansion involves the installation of a new paper machine and associated equipment which will double the existing production capacity of TNPL's mill to 100,000 tons per year (tpy) of newsprint and 80,000 tpy of printing and writing paper. The proposed expansion units would be located within the existing mill complex. Ancillary installations will include, additional bagasse receiving, storage and reclaiming stations, additional water intake pumps and waste water facilities, a 200 ton per day bagasse pulping line and renovation of the mechanical pulp line. Technical Assistance (TA) 3.08 The TA component of the proposedproject would consistof three categories (Annex 3.5)s (a) Institutional development of IREDA. The TA would finance consultancy, training, equipment and services needed by IREDA,in parallel with its proposed organizational restructuring, to (i) enhance its project lending capacity (e.g., project appraisal, environmental assessment, procurement review),and (ii) upgrading of its financial and management systems. The TA would also f4iance promotional and awareness campaigns by IRDA, including technical advise to its clients, on solar PV, small hydro and wind technologies. (Annex 3.6) (b) Program evaluation. The TA would support the establishment of a comprehensive program evaluation system in IREDA. The system would assess the overall impact of lIBMA's portfolio in bringing down the cost of the technologies, its contribution to energy supply and to the environment, and its commercial sustainability and replicability. A major activity would be the mandatory mid-term review during the last quarter of FY95 of the Bank/GEF- financed program. The TA would also support studies directed at improving the qualityof IBEDA's investment pipeline and in replicatingseccessful ventures In other States(Annex 3.6).

(c) Policy Support. The TA would financeconsultants, workshops and trainings on the formulation and adoption of best practicesin power purchase arrangements and transfer pricing, and other cost-effective mechanismsfor promoting sustainable interchange of power supply between the state grid and - 16 -

small independentpower producers/cogenerators.

Status of Proiect Engineering and Project Pipeline

3.09 The states of Karnataka, Tamil Nadu, Kerala. and Andhra Pradesh have promulga.ed policies and guidelines encouraging private sector participationin irrigation-basedsmall hydros. Invitationsto the private sector to develop and operate small hydro schemes for several sites have been advertisedand about 25 sites involvingabout 80 MW have already been allotted to developers. Additionalsites are being advertisedby the states. A list of the project pipeline is provided in Annex 3.7. Detailed project reports (DPR) and environmentalclearances are availablefor about 502 of potential small hydro schemes to be financed under the project. Schemes that have been posed for IREDA funding have secured all necessary governmentclearances and operational agreements. IREDA has sanctioned two projects involving 13 MV capacity and is currently evaluating seven others involving 8.5 MW. The balance of the schemes have been the subjectof hydrologicalinvestigations and pre-feasibilitystudies but for which detailed project reports have still to be prepared. Technical drawing and specificationsfor six Otype designs recommendedunder the ESMAP study are being completedby IREDA (Annex 3.8). The designs,which reflect standardized specifications for turbine-generators based on availableheads and discharges.would be given to developersfor their ready referenceand use In their preparationof technical bid specifications. To facilitateaccess of developersto equipment suppliers, IREDA will float Inquiriesto local and internationalsuppliers to arrive at a list of firms capable of supplyingequipment that meet the appropriate performancestandards.

3.10 Private sector participationin windfarm projects have been advertisedin the States of Gujarat, Tamil Nadu, and Andhra Pradesh. Responses from Interestedparties have been receivedmostly for wind sites in Tasil Nadu. IREDA is currently reviewing8 applicationsinvolving 25 MV of wind generator capacity. Proposalsby 20 industrialfirms involvinga total capacity of 15 MW have secured preliminaryclearance from the SEBs. The sub- projects are under various stages of technicalpreparation and have yet to be submitted to IRNDA for financing.

3.11 Applicationsfor funding of SPV proposals from the proposed CreditlGEPgrant would be consideredby IREDA only after the completionof the market assessment and promotionscampaign study. The market study will identify the characteristicsand segments of the market suitable for each PY application and the appropriate intermediary organizations to be tapped by IREDA. It will also come up with a design of the PV awareness campaign to be pursued by IREDA. Loan documentationrequirements for PV applicationsare now being designed by IREDA and would be completedby December 31, 1992. Technicalbid specificationsfor various types of PV applica_ons are currently under preparationfor referenceand use of purchasersof PV systems.

3.12 Basic engineeringwork for TNPL's expansioncommenced in January 1992 and technical specificationsfor the major plant equipment finalized. Since March 1992, supply tenders for the various equipmenthave been issued. Detailed engiueeringactivities commenced in mid-Septemberand civil works constructionis scheduled to start by January 1993. To facilitateproject iMplementationand arrive at firmer project costs, TNPL has undertaken advanced procurementaction. Because of the technicalcomplexity of the paper - 17 -

machineand its ancillaryequipment, TNPL is followinga two-stagebidding procedurebased on Bank-approvedguidelines. ProtectImelementation Arrangements Implementationof Energy-relatedProlect Components

3.13 IREDAwill be the agencyprimarily responsible for the overall managementof the energycomponents of the project. The Agencywill be reorganized(para.* 2.02) to ensurethat the tasksof appraising,supervising and monitoringall the energysub-projects earmarked for funding under the projectare effectivelymanaged. In additionto administeringthe linesof creditfor the smallhydro, windfarm and solarPV loanwindows, IRUDA will managethe technicalassistance activities. Following its currentpractice, IREDAwould continue to retain the consultancy services of technical experts to assist in the technical evaluation of the sub-projects and conduct of support studies. Moreover, IREDAwill hire a management consultancy firm to help managethe projecton a day-to-daybasis. 3.14 Privatedevelopers would implementthe energyprojects. They would be responsiblefor projectidentification, feasibility assessment, obtainingthe necessarylicensing and power transfer/pricingarrangements, provision of necessary equity capital, and for applyingfor a loan from IREM. The developer through his own design engineer will ultimately be responsible for incorporating least-cost solutions In the plant design and for ensuring the integrity and safety of the schemes. Construction, managemeat, operation and liability associated with each schemewould restwith the developer. MUEDAwould performquality assurance work with the assistanceof its technicalconsultants (Annex 3.6)

3.15 The SEBes/stategenerating companies in the participatingStates (para.3.18) will be the nodal governmentinstitutions in their respective Statesfor promotingthe project. As such,SEBs are to advertisethe small hydro and wind farm schemes and issue the guidelines and procedures for processing of proposals at the state level. The SEBs would assistdevelopers in securingall the necessary state clearances for qualifiedinvestment proposals.These includesecuring of: (a) a lease/licensefrom the State to developthe scheme;(b) no-objectionclearance from irrigationdepartment on small hydro plant design/construction; (c) the technical and comercLal agreement with the SEB for grid interconnection and supply; and (d) environmental clearance. 3.16 The institutional and organizational framework for the solar PV component is defined in detail in Annex 3.9. In additionto IRED and the end-users, the key participants would be leasing entities, bulk-buyers, financial intenmediaries and supply and service dealers. TERDAwould lend to privatecompanies, NGOs, cooperatives,and publicsector companies if the financial transactions meet IREDA's minimum lending level (currently Rs 250,000) and guaranteerequirements. Solar PV sub-projectsinvolving less than the minimum transaction level would be financed only through intermediary financing agencies or leasing companies.

Sub-Proiect Eligibility Criteria

3.17 Only those projects which would be able to demonstratetechnical - 18 -

soundness, least-cost design, and a flnancial internal rate of return of at least 12Z would be financed. Moreover, only those projects that have secured the appropriate operating license and/or lease arrangements, satisfactory power transfer agreements, and environmental clearance from the state government would be considered. In addition, for an SPV sub-project to be eligible for IREDAfunding, essential comercial arrangements have to be definedand established for product supply, delivery, after-sales service, customerpayment and collections.IRNDA would financenot more than 752 of the totalcost of any sub-projectand the capitalstructure of the sub-project should be such that the debt-equityratio would not exceed75:25. 3.18 There vill be no pre-allocationof fundsto specificprojects exceptthat (i) at least 70Z of the proceedsfrom IDAIGEFshould be directed at privatesector development; the balancecan be on-lentto publicsector enterprisesexcept SEBs and governmentdepartments; and (ii) the Statesin whicb the projectswould be consideredshould have a workingregulatory frameworkallowing private sector development and operationof small-scale renewable energy systems. States in which small hydro and windfarmschemes are currently eligible for financing are Karnataka, Tamil Nadu, Andhra Pradesh and Kerala. Other States would also be able to participate in the sa11 hydro and windfarm components, provided adequate policies on private power generation are in place and grid stability requirements are met. States in whieh promoters would be eligible for participation in the solar PW program would be determined after the completion of the market survey. In addition to the specificguidelines on projecteligibility developed by IREDA and agreed with the Bank for each projecttype (Annex3.10), IREDA's financial lending criteria in evaluating the financial and institutionalcapacity of the developerto undertakethe projectwould also apply (para.2.06). 3.19 In order to avail of IDAIGEFfinancing, IREDA's sub-loan appraisal for the first two schemesfor smallhydro, windfarm and solarPV, respectively,shall be subjectto prior reviewand approvalby the Bank. Thereafter,sub-loans involving a totalproject cost equivalentto US$5 mllion or above shallbe subjectto prior reviewand approvalby the Bank. 'hen presentinga Sub-loanto the Bank for approval, IRnDAshall furnish to the Bank an application,in form satisfactoryto the Bank, togetherwith: (i) a descriptionof the privateenterprise developing the energyschem and an appraisal of the investment project, including a description of the expenditures proposed to be financed out of the proceeds of IDA/GEP funds; (Li) the proposed terms and conditions of the sub-loan, Including the schedule of amortization of the sub-loan; and (iii) such other information as the Bank shall reasonably request. Implementation of the TNPLPapermill Expansion 3.20 The implementation of the papermill expansion program would be under the full responsibility of TMPL. TNPLhas created a Project Management Division (PND) headed by a Director for Projects. The PMDwill be manned by approximately 20 full-time professionals plus support staff. To assist the PM, TNPL has retained the services of a local engineering firm, SPB-PC, which served as consultant to the original TNPLplant. The consultants are tasked with the preparation of detailed project engineering and costing, providing procurement services including preparation of tender documents, and supervision of plant construction and erection. The Bank has reviewed and found satisfactory the contract and Terms of Reference of the Consultants. - 19 - Annex 3.11 presentsthe constructionsupervision plan for TSPL'sproject.

IXmlementation Schedule 3.21 The project Is comprised of several sub-projects, Involving 1 to 3-yearconstruction schedule. The creditline for small hydros is expected to be fully committed within three years, that for windfarms in three-and-a-half years, and for PV in five and a half yeare. The energy component of the project is estimated to be completed by June 30, 1999, with credit closing by December 31, 1999. Expansion of TNPL's papermill is expected to be completed witt.in 40 months or by April 1995 and loan closing set for December 1995. 3.22 The technical assistance activities are expected to commence prior to and during sub-project appraisal work by IREDA. They will be phased in with IREDA'a proposed reorganiLation and with the monitoring and performance evaluation requirements of the project. Environmental and Resettlement Asyects 3.23 The project'senergy components do not presentany significant adverseeffects on the environmentand are insteadexpected to resultin improved air quality by displacing fossil-based energy system, particularly, diesel enginesand kerosenelamps (Annex3.12). Replacementof dieselfor power generationwould lead to reductionin suspended and gaseousemissions that may affectsoils; reduction in emissionsof S0, N0X,Cp 2 and particulate emissionsthat affectair; and reductionin acidificationof surfacewaters. The small hydro schemeswould be on existing irrigation works and are expected to cause minimal changes to the existing environment. Many of the areas with ambient wind conditions suitable for windfarm development are uncultivated or barren. Moreover. land areas used for windfarms need not be withdrawn from their existing productive use, if any. SPV systems are relatively small and would be dispersed.Solar panelscould be placedon rooftopsand the systems safelyinstalled in residential and coamercial establishments. 3.24 Under existingprocedures, IRDA requiresthat all projectsin its portfoliohave securedthe necessaryenvironmental clearances from the government and the state. IREDA's technical staff would review environmental issues related to the projects to be financed by IDAIGEP and advise borrowers on the preparation of the requisite environmental assessments. The scope of work required of this function is given in Annex 3.13. Technical assistance will be provided under the project to strengthen IREDA's capabilities to performenvironmental assessment and monitoring. 3.25 With respectto the proposedexpansion of TUPL'sbagasse-based papermill, an environmental impact assessment (EZI) study was conducted by the National Environmental and Engineering Research Institute (Mliii). A copy of the EIA report is in the project file and the main conclusions of the report are presented in Annex 3.14. The overall project impact is estimated to be positive with the implementation by TNPLof the agreed mitigation measures under its Environmental Management Plan (tEM). 3.26 The production of pulp and paper suffers from a number of potentially adverse environmental Impacts, particularly in the case of chemical pulp productions (a) pulping generates several odorous organic sulphur compounds which can be discharged to the atmosphere and can be smelled - 20 -

even in very low concentrations; (b) particulate material In the form of chemical dust can be discharged from the chemical recovery furnace, and fly- ash from multi-fuel power boilers; (c) pulp bleaching effluent are relatively dark colored and contain organic and inorganic chlorine compounds; and td) suspended solids such a& fiber and inert inorganic materials can be discharged with the liquid effluent. 3.27 All the above and otherpotential environmental impacto have been addressedin the designof the TNPL plant. To the largestextent possible, in-plant design measures have been followed to minimize or eliminate discharges, and an extensive external treatment system will be installedto reducesuspended solids and othermatters to levelsmeeting Indian standards and Bank guidelines for the pulp and paper industry. The In-plant design features and the external treatment systems proposed for TUPL are equal to those in any modern pulp and paper mill in the world. The treataent systems of the existing plant would be updated to match the new plant design within the scope of this project. In addition, severalmanagement studies and mitigatory measures will be undertaken at the existing facility in the areas of noise abatement, odor emissions control, evaluation and smoitoring of effluentirrigation effects on soils, health monitoring and hazardous materialsstorage. The conversionof boilersfrom bagasse-basedto coalllgniteadmixture-based will resultin a slightIncrease in pollutants emission;but since the participatingsagarmills are scattered,emissions estimatesare well withinthe prescribedlimits.

8.28 The expansion of the papermill does not involve any new displacement of population as adequate space is already available In the existing plant site for installation of the new paper machinery and ancillary equipment. However, operation of the existing plant has adversely affected 86 families living in the adjacent village of Kurukkapalayam due to seepage from the plant's effluent lagoon and settling of coal dust from the plant. There are no tribal families involved. Under its action plan, TlPL has undertaken to relocate the families by June 30, 1993 (Annex 3.15). Right hectaresof land, 2 km away and found acceptable to the villagers, have alreadybeen acquired as relocation site. The government approved the proposed site layout In July 1992. Site devlopment such as water supply, electric connections, roads, coaunity facilities would be provided by TNPL at its cost. The plan also covers provision of benefit packages for the affected families as vell as for the host village. Adequate arrangements will be put in place to monitor and report progress on the implementation plan. Proiect Costs 3.29 The totalproject cost is estimatedat Rs 11 billion or US$422 million, including physical and price contingenciesand about US$50 million for taxes and duties,but excludinginterest during construction (IDC). Directand indirectforeign exchange costs of equipmentand servicesamount to $217 millionor slightlymore than half of totalproject costs. The project costs are expressedin July 1992 pricesand are based on feasibilitystudies preparedIn 1991 and 1992. Physicalcontingencies of 101 are providedfor each component.Price contingencies,where applicable,are based on the Bank's estimates for foreign exchange rate levels duringthe projectperiod, international inflation of 3.71 per annum for the period 1992 to 1997, and domesticinflation of 10.51,8.51, 7.52,6.52, 6.0S and 5.01 per annum, respectively,for the same period. Summarydescription of the cost structure - 21 - for each of the project components and their detailed cost breakdows are providedin Annex 3.16. Table 3.1: ProaectCost Summary

Rs million US$ million -- __------m Local Foreign Total Local Foreign Total A. Smallfydro Schemes 417 1337 1754 16.0 51.4 67.5

B Non-conventional Energy SystemsComponent 2009 1639 3648 77.3 63.8 140.3 Wind Farms 1305 1339 2644 50.2 51.5 101.7 Solar PV Systems 704 S00 1004 27.1 11.5 38.6 C. TNPL Bagasse-based Pa ermillExpansion 1715 1706 3421 65.9 65.6 131.5 Plant Cost 1667 1706 3372 64.1 65.6 129.7 Pre-operatingCosts 48 0 48 1.8 0 1.8

D. TechnicalAssistance 90 27 11? 1.0 3.6 4.5 TOTAL BASELINECOSTS 4231 4709 8940 160.2 183.6 343.8 PhysicalContingencies 423 471 894 16.0 18.4 34.4 Price Contingencies 907 449 1357 29.0 14.9 44.0 TOTAL PROJECTCOSTS 5561 5629 11190 205.2 216.9 422.2 TNPL WorkingCapital 58 0 S8 1.9 0 1.9 InterestDuring Construction(IDC) 618 195 813 19.4 6.7 26.1

TOTAL FINANCINGREQUIED 6237 5824 12061 1265 223.6 450.2

ProjectFinancing 3.30 The overallf4nancing required for the project,inclusive of IDC, is estimated at $450 million of which Sank and IDA financing vould represent 422 (or 481 net of taxes and duties). The financing plan is presented in Table 3.2. Table3.2: ProtectFinancing Plan (US$million equivalent) IBRD IDA GM? Bilateral Investor lI9DA IDBI Total Smallhydro 70 24 94 Vindfarms 15 13 50 31 16 125 SolarPV 30 10 2 13 55 Papermill 75 67 28 170 TA 3 2 1 6 ______e______…______Total 75 115 26 54 13S 17 28 450 - 22 -

3.31 An IDA creditof US$115million equivalent would financepart of the requirementsof the smallhydro, windfaum and solarPV components.GEF would contribute $26 million In grant funds towards the wind, solar PV and technical assistance components. The Government of Switzerland would provide a grant of $4 million linked to the GEF contribution for the solar PV and TA activities. DANIDAwould provide an equivalent of $50 million In mlxed credits as parallel co-financing for the windfarm component. Private developers are expected to raiseabout 252 as equityfor the energyprojects equivalent to a total of US$68 million. About US$16 million in proceeds from initial repayment of loans disbursed by IREDAfor windfarms would be used to replenish the credit line for wind projects.

3.32 The Bank would extend an IBRD loan of $75 million for TNPL's papermill expansion. TNPLwill raise the equivalent of US$67 million and the balance of $28 million will be sourced from an Industrial Development Bank of India (IDBI) - syndicatedrupee loan. Of the $67 millionto be mobilizedby TNPL, $29 million would be raisedthrough public issue of shares in FY94, while the remaining $38 million would come from TNPL's internal operations. On-lending Arrantements 3.33 The IDA credit of $115 million would bear the standard terms with a 35 year maturity. The proceedsof the IDA creditwould be passedon by GOI to IREDA at an interestrate currentlyset at 12.52with a repaymentperiod of 12 years,Including three years grace. Gol will bear the foreignexchange risks. The GEF grantof $26 million would be received directly by IREDAwhich IERDAwould in turn manage as revolving funds. 3.34 The Bank loan of $75 million for TNPL's expansionwould bear the Bank's standard variable interest rate to be repaid over a period of 20 years, including five years grace. The loan would be made to TNPLas Borrower and TNPL will assume the foreign exchange and interest risks. GOI will act as Guarantor for which it will charge TNPLa guarantee fee of 11. IREDA'sOn-lending Terms 3.35 DREDAwould on-lend the proceeds of the IDA credit and the 6EF grant, together with funds from co-financiers, to its clients at its standard lendingterms referredto In para.2.07. The terms include an interest rate structure which is revised from time to time to ensure that it reflects IREDA'scost of borrowing and allows IREDAto earn a return on its paid-up capital that is positive in real terms. These on-lending terms are based on several factorss First, in order to encourage private power-users to direct investments toward the renewable technologies, lIRDA's interest rates should be sufficiently attractive compared to other domestic sources of funds. Second, in order to demonstrate the commrcial potential of the technologies, the rates should be maintained high enough to recover the full cost of funds and adminLstration. Third, the Interest rate dLfferential among INDA' s various loan windows reflects the stage of commercial development of the technology as well as the capacity to pay of targetbeneficiaries.

3.36 INZDA's lending terms are designed to escourage the flow of financial resources into the sector without permanent reliance on directed subsidies. Congruent with lIRDA's practice, as the technology gains acceptance among investors, the lending rates charged by IREDAwould - 23 - progressivelyconverge with comercial bankingterms. Duringnegotiations, IREDAagreed that (i) aftercompletion of the PV marketstudy, interestrate for PV loans would be reviewed with the Bank on or before July 1, 1993, and that (ii) interestrates for schemesfinanced by IDAIGEFwould be reviewed with the Bank during the mandatory mid-term review in end-FY95and would be adjusted closer to commercial rates as deemed appropriate. Procurement under the Line of Credit 3.37 Proceedsfrom IDAIGEPvould be used to finance supplyof goodsand servicesassociated with the variousrenewable energy schemes (annes 3.17). The cost of civilworks, taxes and dutiesare to be met by the developer. Under the small hydro and windfarm components, IDA would finance turbines, generators, transformers, transmission towers, cables, and other electricals. In addition, DANImAco-financing would also be made available for imported wind turbine-generators procured under DANIDA'sprocurement procedures. GEF would finance contracts for the balance of goods and services required for grid interface. Purchases of complete solar PV systems including contracts for installation and maintenance services would be financed by IDA/GE?. 3.38 Supplyof goods and servicesto be financedby IDAIGUIwill be procuredon the followingbasis: (a) For projectsby privatedevelopers (i) contractscosting the equivalentof US$3 millionor more will be procured under ICB proceduress(ii) contracts involving less than US$3 millionwould be based on establishedcommercial practices acceptable to the Bank providedthat sub-projectdevelopers solicit three or more competitiveand responsive quotationsof which at leastone shouldbe from an experiencedforeign bidder. IRUDAwould maintain records of the method of procurement, summarizing offers and awards; (b) For projects by public sector enterprises, (i) contracts costingthe equivalentof US$200,000or more will be procuredunder ICB procedures,while (ii) contractsinvolving less thanUS$200,000 would be based on localcompetitive bidding (LCB) procedures acceptable to the Bank. Foreign supplierswill not be precludedfrom participatingin LCB; and (c) Purchases by IREDAwould be subjectto proceduresto be followedby publicsector enterprises,except that for specializedequipment such as officeequipment, computer hardware and software, instruments for monitoring and testing, up to an aggregate of US$2 million, may be procured through international or local shopping procedures acceptable to the Bank. 3.39 All contractsfor the supplyof goods for privatesector schemes financedby the Bank with an estimatedcost exceeding$1,000,000 equivalent will be subjectto prior reviewby the Bank,and the restwill be subjectto ex-post review. About 15 contractpackages for smallhydro equipmentand 5 contracts for windfarm would be subject to prior Bank review representing about 50Z of the total contract value financed by IDAIGEF. For schemes in the publicsector, all contractsinvolving $200,000 or more would be subjectto prior review. It is anticipatedthat all contractsfor smallhydro schemesto be funded under the IDA credit would have to be signed by December 31, 1996 to allow sufficient time for completion of works prior to the closing of the loan. Supply contracts for windfarm and solar PV activities would have to be signed by June 30, 1998 at the latest. - 24 -

Procurement by TNPL

3.40 All equipment and materials financed by the Bank costing the equivalentof $200,000 or more will be procured under ICB procedures. Other supplies involvingcontracts valued at less than US$200,000will be procured under LCB proceduresacceptable to the Bank. All contracts for the supply of goods and services financed by the Bank with an estbiated cost exceeding $200,000 equivalent will be subject to prior review by the Bank. Other contracts will be subject to ez-post review. About 18 contract packages for equipment supply for the TNPL project component would be subject to prior Bank review, representing about 991 of the total contract value financed by the Bank (Annex 3.18).

Security Arrangements

3.41 The proposed IBID loan to TNPL would be secured by first charge on all of TNPL's assets, subject to certain prior charges on current assets In favor of TNPL's bankers for working capital requirements in its ordinary course of business, and shared pari passu with other lenders. During negotiations, TNPL agreed to the following security arrangements for the proposed loans (a) a mortgage over all the immoveable properties of TUPL; and (b) a floating charge hypothecationon all moveable assets of TNPL. The proposed security will be shared pari passu with TNPL's existing senior lien holders, the Indian Financial Institutions, and other leaders for the proposed project. The security will be obtained in the form of an equitable mortgage with an assurance from TNPL that, at the request of IBID, TNPL will convert such security to an English Mortgage and for this purpose will also execute a Power of Attorney in favor of IBID to facilitate conversion of the mortgage. The creation of an equitable mortgage and execution of a Power of Attorney are conditions of effectiveness for the proposed IBRD loan. - 25 -

Tablo 4t 8_rr of Prormt Ar ne */fnt. PMU EilIIon) ProcurementmebUod

LM@ InC MU_CE ,os MORAL

Equip6mt a5 20 28 65

Clt k(25)(20) 3(2) (2 2 2

Sub-total 2t 2Q 40 es (25) (20) (25) (70)

Equipmnt 1s 10 28 sO 103 dl) (8) (10) (s) CivilWorks 10 10 Srvice 4 4 Land 4 4 Sub-totl 15 10 s8 i1 (1) (a) (10) (28)

7 10 52

1__ip1ent 75 as 148 (7;) cm5 Civil ..&. 7 7 rveOttos 4 4 rnolmorg 2 2 2 Sub-total 75 81 3 155 (75) (5 Tnme"l ~.Lesoe 131A 1 2 0 (1) (2) (5) mmL 12i 111 116 72 422 (113) (23) (a8) (7) (210)

/ Conract valus include.o.tlnpnciss, taxm, and dutl. Bracket rf lectZDA, San and OF-finacd portion.

Disbursement

3.42 Disbursements from the proposed IBRD loan, IDA credit and GEF grant would be made against (a) 1002 of foreign exchange expenditures and 100t of local expenditures (ex-factory cost if manufactured in India) for equipment find materials, and 80S of local expenditures for other items procured locally; (b) 1002 of totalexpendltures for supervisory services for erection, testing and commissioning of equipment; and (c) 10O of the consultancy and tralning - 26 -

services for IREDA. No expenditures for goods or services required for energy Investment projects shall be eligible for financing out of the proceeds from the IDAIGRF unless the sub-loan by IRZDA for such investment project shall have been approvedby the Bank, as per para. 3.19,and such expendituresshall have not been made earlierthan ninety days prior to the date on which the Bank shall have receivedthe applicationand informationrequired on the investment. 3.43 Retroactivefinancing, in an aggregateamount not exceedingUS$7.5 million will be provided for under the IBRD loan to TNPL to cover initial payments for the paper machine and ancillary equipment. This is equivalent to 10 of the proposed loan amount and would permit timely project implementation. To facilitate disbursement, Special Accounts from the IDA credit and GEF 8rant equivalent to US$3 mallion and US$1 million, respectively, would be established for IBEDA,and US$5 million from the IBID loan to TNPL. Annex 3.19 showsthe estimateddisbursement schedule. The aggregated disbursement profile for the project is six years;the last paymentsare estimatedto be made by June 30, 1999. Monitoringand Evaluation

3.44 IREDAwould be askedto furnishquarterly reports on the project beginning with the quarterin which the creditis signed. These reportswill cover the statusof physicalwork, costs,disbursement and administrative aspects of the project within 45 days of the end of each quarter. The report shall also contain special sections reporting on (a) the compliance with eligibilitycriteria by IRIDAborrowers, (b) the progressbeing achievedin the implementationof the operationaland environmental aspects of the project, and (c) the implementation of the technical assistance components. 3.45 A maid-term review of all the energy components would be undertaken by IREDAand completed on or before March 31, 1995. The review will evaluate the over-all progress achieved under the project and determine the remedial actions if any that should be taken to improve project performance. As part of the review process, IRNDAwould hire the services of independent consultants to conduct a detailed evaluation of the technical performance of the energysystems financed under the projectand the effectivenessof the projectefforts to coumercialize renewables. The review findings would be submitted by IREDAto the Bank and would serveas basis for futureexpansion or curtailment of the solar PV marketing program. After closing of the loan, IREDAwould submit an overall operational report of the Project's experience and results.

3.46 TNPL would be asked to furnish quarterly reports on the papermill expansion beginning with the quarterin which the Bank loan is signed. These reportswould cover the work of consultants,physical progress, results of environmentalmonitoring, costs, disbursements and administrativeaspects of the project. T$PL vcould also furnish copies of annual updates of the Environmental Manuwement Plan and administrative reports. - 27 -

IV. FINANC

IndianRenewable Energy Development Agency 4.01 IREDA's HistoricalFinancial Performance. IREDA's past, and future financial performance needs to be seen within the framework of the two main objectives of the Agency. On the one hand, it has the mnsdate to promote emerging energy technologies. On the other hand, it should provide financial assistance to its clients as part of its promotional effort. While discharging these functions, IREDAis expected to maintain a solid financial positionto ensureits long-termexistence. The prootional effortrequires considerableinvestment in staff and operatingcosts, without an imediate financial return. Also, because the volumeand value of its financing operations are relatively small, the personnel and administration expeanses represent a relatively heavy burden for the Agency. This in spiteof IRZDA's very lean operation. Nevertheless, IREDAhas done a reasonablejob in discharging its dual mandate. Since the start of operation, rREDAgenerated profits every year and enjoys a healthy portfolio with a satisfactory collection rate. Highlights of IREDA's past financial performance are summarized in Table 4.1; details are given in Annex 4.1. Table 4.12 Highlights of IREDA'sHistorical Performance FY88 to FY92 (Rs.million) 1987-88 1988-89 1989-90 1990-91 1991-92

YearlyDisbursements 15.5 46.5 49.2 82.3 101.9 Net Profit 1.0 3.3 5.4 1.1 16.5 Returnon Capital+ Reserve 2.8X 5.8X 6.01 1.01 13.81 internalCash Generation as Z of Disbursements 13.5 15.8 32.3 48.5 32.0 RevolvingFund as X of TotalAssets a/ 97.2 98.2 98.3 39.1 47.7 a/ RevolvingFund includesPaid-in Capital+Reserves+G6ants 4.02 IREDA'sprofits increased gradually during the first threeyears and levelledoff in FY91 due to a largeprovision for income taxes, including adjustment for previous years. The Income Tax Act was amended in FY92 and IREDAis now exempt from income taxes provided 401 of the taxable income is credited to a Special Reservefor redeploymentin the Agency's operations. In the periodFY88 to FY92, IREDA'soperations were financedas follows*(a) from 60I's equitycontributions Rs. 100 million;(b) from grantsfrom the Governmentof the Netherlandsequivalent to Rs 168 million;(c) from net lnternallygenerated funds, Rs. 98 million;and (d) from borrowingsRs. 314 million. IRZDAdid not incur long-term borrowings until FY91 when it issued 9S tax-free 10-year bonds for a total value of Rs. 250 million. During the period in consideration, IRNDAmaintained a good volume of liquid assets which ensured timely disbursement of its loans and also generated substantals returns which exceeded the interestincome from the loan portfolio.In view - 28 - of the inherent uncertainty on IBNDA'sfunding, the practice of maintalAing an adequatelevel of properlyinvested liquid assets is considereda soundone. 4.03 IR$DA'sSources of Financins.IRNDA has accessto the following sourcesof financings(a) 001 equitycontributions: (b) grants;(c) domestic borrowingsand (d) external borrowings. In FY91, IREDA'sauthorized capital of Re. 100 million was fully paid up. The Eighth Plan provides for an increase In IREDA's capitalization to Rs. 200 million.

4.04 IREDA'sFinancial and Operational Policies. IREDAoperates in a market that has several inherent risks. First, its operations are restricted to ICEs. This is a relativelynew area of activitywith some of the technologiesstill at the developmentlevel. In addition,some of IRNDA's clientsare recentlycreated firms. BecauseIREDA should try to preservethe value of its equityto ensureits long-termsurvival, it is criticalfor the Agencyto operatewithin very conservativefinancial parameters. These parametershave been outlinedin an OperationalPolicy Statement (OPS) presentedin Annex 2.2. Some of its provisionsare summarizedbelow. (a) Profitability:IRIDA's Profitability Target states that an interestrate structurewill be maintainedat all timesto ensurea positivereturn, in real terms,on its paid in capitaland reserves&; (b) Adjustabilityof Interests:to meet its Profitability Target,IREDA's lendingrate, both for new loans as well as for thosealready disbursed. will be adjustedfrom time to time to reflectIRNDA's marginal cost of borrowing. Althoughfor some specificactivities subsidized interests may be temporarilyjustified, these shouldbe gradually broughtin line with marketratess (c) CapitalStructures IREDA should not exceeda debt equity ratioof 4:l; (d) Debt ServiceCoverages should not be lowerthan 1.5;

(e) Risk Exposure:lending and guaranteesto any client should not exceedIREDA's total Paid-inCapital plus Reserves.plus GrantsReceived by the followinglevels: 302 in FY941202 in PY95; and 152 in FY96 and onwards; (f) LiQuidity:due to the uncertaintiesconnected to its differentfunding sources, XRMDA should maintain, as a minimum,liquid assets equivalent to threemonths of projecteddisbursements; and

(f) So Reschedulins:to preservethe qualityof its portfolio,

3 Grantsare excludedbecause donors' intention is that thosefunds be used to help financepromotional activities with long-term return. In other words, at the outset they accept that, In time, certain erosion of those funds is to be expected. - 29 -

with the exceptionof caseswhere somenatural calamities may have affected the client's capacity to service its debt, IREDAwill not rescheduleits loans.

4.05 IREDA'sFuture Financial Performance (FY93 to FY99). IREDA's capacity to finance its lending program will depend, inter-alia, on the amount of funds contributed by GOI as equity or loans, and its access to the domestic market,external lenaders and donors. Under the proposedproject, in addition to the IDA creditof US$115million equivalent, US$26 million and US$4 million equivalentgrants from GEF and the Governmentof Switzerland,respectively and US$ 50 millionequivalent from DANIDAwill be made availableto IRNDAfor re- lendingfor small-hydro,windfarm and SPV activities.It is estimatedthat Rs 8,346million would be disbursedduring the periodFY93 to FY99,a substantial increaseover the Re. 295 milliondisbursed during its firstfive yearsof operations.The proposedproject represqnts about 70S of the projected disbursements.The balancecorresponds to IREDA'snormal operations. 4.06 No additionaldomestic bonds would be floated,under the assumptionthat the tax-freebonds would cease to be available and that IREDA would not be able to afford to pay the market rates. In addition, in view of the uncertainty related to the future domestic inflation, to avoid the distortion resulting from assuming fixed interest rates for lending, rates are assumed to fluctuate with the level of domestic inflation. It is assumed that IRNDA's average lending rate has to be positive in real terms and that it would gradually approach the market level. Specifically, lending rates for FY94 and FY95 for all loans except SPV are projected to be 2? above the domestic inflation, with the margin increasing to 3? in FY96 and to 42 in FY97 onwards. For SPV no margin is assumed. Also it is assumed that GOI would pass IDA funds at a fixed rate equal to the domestic inflation of the year prior to the disbursement, with 12 years repayment period, including 3 years grace. Grants would be received directly by IREDA,as in the past. 4.07 To maintainTRInA's liquidity at the levelsrequired, in addition to the Re 100 million included in the Eighth Plan, IREDAmay need an additional equity increase of about Rs 40 million. As the volume of operationsgrow, the relativeweight of the Personnel & Administrative expenseswould be reduced,allowing the returnsto improve. The returnon Paid-inCapital plus Reserves,adjusted for inflation,would gradually Increaseup to about13? by the end of the projectionperiod. This means that IREDAwould be able to meet its objectiveof preservingits Capitaland Reserves.

4.08 IREDA'sperformance under the aforementionedassumptions is adequate. If additional free funds in the form of equity contributions or grants are available, IENDA's performance would further improve. IREDA's Financing Plan for FY93JFY99and some performance Indicators are presented in Table 4.2. Financial Projections and the assumptions used are given in Annex 4.1. -30 -

Table 4.2 fiRigihts of IREDA's Future Performance,PY93 to FYT9

(a) FinancLng of IRZDA'a O2erations

(Rs Mill) 2 Sources of Funds:

Equity Contributions 140 1 GOI Loans (IDA Funds) 3,619 42 Grants 2,760 32 InternallyGenerated Funds 2.158 25

Total Sourcess 8.677 100

Applications:

Proposed Project 5,930 68 Other Loans & Advances 2,592 30 TechnicalAssistance lSS _2

Total Applications: 8,677 100

(b) PerformanceIndicators

PY93 FY94 FY95 FY96 FY97 FY98 FY99

EARNING PERFORMANCE Net Profit S Av.Assets 2.9 1.3 0.9 0.8 1.2 1.3 1.3 Net Intermediat.Margin 4.3 2.1 0.6 0.9 1.3 1.8 2.2 Net Profit S Cap.+Resv. 13.6 8.2 8.2 10.5 17.9 18.2 16.2 Net Profit Z Cap.+Resv. InflationAdjusted 3.6 -0.1 0.9 4.4 12.9 13.2 11.2 LIQUIDITY Debt Service Coverage 3.3 3.5 3.2 2.9 2.6 2.6 2.7 Liquid Assets/ Disbursements(months) 3.0 3.0 3.0 6.0 6.0 6.0 8.4 CAPITAL ADEQUACY Paid Capital+Resv.as Z of Total Assets 21.9 13.1 9.4 6.4 6.5 7.3 8.3 Revolving Fund as Z of Total Assets* 59.3 63.9 56.4 50.2 46.7 46.5 47.2 Debt:Revol.Fd.Ratio* .6s1 .5sl .7tl .9sl 1:1 1:l 1sl

*RevolvingFund includes Paid Capital+Reserves+Grants.

4.09 To monitor its performance, IREDA agreed to furnish to the Bank the following reports: (a) by December 31 each year, financial statements (income statements, sources and applications of funds, and balance sheets) showing the estimates for the current year and projections for the next - 31 -

following five years, compariag IUDA's projected performance with the parameters set In the OP8 (b) by March 31 each year, evidence of ¢OI's budgetary allocations for any equity contribution expected for that year, in the amounts needed to ensure maintenance of IREDA's required liquidity; and (c) the audited and unaudited reports referred to In par*. 2.11. Tamil Nadu Newsprint and Paners Limited 4.10 TNPL's Uistorical Financial Performance. TNPL is managed efficiently along the lines followed in privately owned firms. W1th the supportof a $100million loan grantedby the Bank (Loan 2050-IN)to TNPL through IDBI, the company completed its plant at Pugalur in October 1985 with a productioncapacity of up to 100,000 tpa of newspriAtor up to 80,000tpa of writing and printingpaper. Plantcapacity utilization has increased from SOX during the first year of operation, rising to as high as 1051 in 1990. During its formative years of operation, TiPL incurred losses. Financial institutions provided a temporary relief program in October 1988, including reduction in interest rate, rescheduling of debt service and conversion of part of GOTNand IDDI loans into equity. As higher production levels for writing and printing papers were achieved, coupled with increases in selling prices, more favorable margins were attained and the interest rates and repayment schedules were restored to those originally contracted. In 1989-90, a net profit of Rs 311 millionwas postedfollowed by Rs. 364 millionin FY91 and 428 in 1991-92(Annex 4.2). This permitted TNPL to issuedividends in FY91 and FY92. Table4.3 below giveshighlights of TNPL'spast performance. Table 4.3s Hiablightsof TIPL'sOperating Performance (Rs million) 1989-90 1990-91 1991-92

Net Bales 1,436 1,559 1,696 Net Profit 311 365 428 Returnon Equity1 39.9 35.9 33.7 CurrentRa:io 1.5 1.5 1.6 Debt serviceCoverage 1.8 2.1 2.4 Debt-EquityRatio 1.4 0.9 0.6

4.11 Considerableimprovement in TNPL's operations has resultedin a comfortableliquidity position. The surplusfunds have been investedin short- term securities and deposits pending investment in the proposed project. In fact, up to oae th* I of TNPL's Net Profit in the last two years came from the returnobtained in 4s liquid investments. 4.12 Future Financial Performance. TNPL has endeavored to improve its process technology to ensure uniformity In the quality and Increased use of mechanical pulp bagasse. These efforts have been beneficial in the light of the rising cost of imported pulp due to the devaluation of the rupee. With the plant designp mprovements envisioned under the proposed project, the entire pulp for newsprint would be bagasse-based, resulting in substantial foreign exchange savings. During the period FY93 to PY96 TNPL will invest Rs 6,070 million In expanding its capacity and building a 12.5 MWwind farm to help meet its power requirements.TNPL's financing plan for this periodunder the Base Case is presented in Table 4.4. - 32 -

Table 4.4s TNPL'8 Financing Plan FY93 to PY96 (Re million) SOURCES I InternalCash Generation 3,825 Less: Debt Sirvice 1,887 Increasein WorkingCapita 746 DividendsPaid 172 Taxes 34 2.838 Net InternalCash Generation 987 16.2 Reductionof Investments 498 8.2 IncreaseIn Equity 750 12.4 Borrowing: ProposedWorld Bank Loan 2,502 41.2 OtherLong Term Loans 1,333 22.0 Total sources 6,070 100.0

APPLICATIONS CapitalExpenditures ProposedProject 5,154 84.9 Ongoinginvestment 475 7.8 Windfarm 441 7.3 TotalApplications 6,070 100.0

4.13 The projectionsfor the Base Case assumethat TNPL'sprices will be adjustedyearly to offsetthe impactof domesticinflation. No dividends are projected to be paid during project implementation to enhance TNPL's liquidity in those years. As shown in Table 4.5 the return on equitydeclines In FY94 as a resultof the 762 increasein TNPL'sequity without immediate Increase in TNPL's earnings. This modest performance is expected to continue until the project is commissioned and capacity utilization builds up; by FY98, return oanequity would rise to 222. However, the returns would dip below 202 once the tax investmentscredits are utilized and the impact of the 51.752 corporate tax is rully felt. The impact of this high level of taxation is evident when the return before taxes is computed. Under the assumptions used, TNPL's liquidity, debt service coverage and capital structure remain satisfactory (Annes 4.2). Table4.5: Highlights of TNPL's FutureOperating Performance Base Case ( Rs Xillion)

9 FY94 FY95 FY96 FY97 FY98 FY99 FY2000 Utilization (2)s Machine 1J 100 100 100 100 100 100 100 100 Machine 2: 80 90 100 100 100 let Profit(Loss)s 281 242 204 272 562 836 648 611 Returnon Equity(2): 18 9 7 9 17 22 16 14 CurrentRatio: 1.9 1.4 1.9 2.5 2.5 2.8 2.7 2.3 Debt ServiceCoverage: 2.0 2.0 2.0 2.0 2.4 2.8 2.4 2.3 Debtt:quityRatios 0.6 0.9 1.4 1.2 1.1 0.8 0.7 0.5 - 33 -

4.14 SensitivityAnalysis. TIPL'sfinancial performance is vulnerable to three factors:(a) volumeof saless(b) pricesof newsprint;and (c) the foreign exchange exposure resulting from the proposed Bank loan. Sensitivity analysis was undertaken for the following three scenarios and compared with the Base Case in Annex 4.3. (i) AlternativeA (LowerSales Volume): It is assumedthat capacity utilizationof Machine1 would drop temporarilyuntil additionalmarkets for writing and printing papers are developed. Similarly. it is assumed that full utilizationof Machine2 is attained only in MY2OOO.This would substantially reduceTNPL's revenues and resultIn lossesin FY96 requiringadditional short-termborrowings. The low levelof profitswould preventthe Company from paying dividends until at least FY98. Return on equity improves after FY98 due to tax saviugs resulting from the application of unutilized depreciation in the previous years. Despite a lower financial performance. TNPL'sability to serviceits debt remains satisfactory under this scenario. (ii) AlternativeB (LowerPrice of Newsprint):To evaluatethe impact of full importliberalization of newsprintat duty-freeprices using lowest importprice postedin FY92, a drop in the domesticprice of newsprintto the equivalent of USS500 per ton in FY94 was assumed. Under this scenarioTNPL would roll back pricesto its 1989 levelresulting in losses in FY95 (Rs 24 million)and in FY96 (Rs 192 million). Additionalshort-term borrowings would be requiredwhich could start to be liquidatedafter FY97. Profitability recoversthereafter yielding modest returns on equity. Notwithstanding this, TNPL would not have difficultyservicing its debt. (iii) AlternativeC (FasterDevaluation of the Rupee):A lOX devaluationof the marketrate of the rupee (in excessof the devaluationused for the Base Case) resultsin a negligibledrop In TNPL'sdebt service coverageratio. 4.15 Conditionality.During negotiations, agreements were reachedwith TUPL on the followingt (i) DividendLimitations Except as the Bank shallotherwise agree after consultations, TNPL will not declareor pay dividendsduring the project construct:'onperiod until the projectis commissioned; (ii) Debt ServiceCoverage: TNPL will not incurany debt unlessa reasonableforecast of its financesshows that, including the debt to be inuarred,the debt servicecoverage ratio is not less than 1.3.

(iii) FinancialReportingt By December31 each year,TNPL will furnish to the Bank financial statements (income statements, funds flow statements and balance sheets) showing the estimates for the current year and projections for the next five following years. - 34 - V. BENFITS AND RISKS

RenewableEnerav Investments 5.01 Benefitsderived from the energyInvestments consist of additional powersupply to the gridsand In remoteareas. The installedsystems would reducereliance on thermalpower stationsand/or standby diesel auto- generationby industrialand commercialestablishments, and on kerosene lightingby ruralhouseholds. Moreover, they vould alleviatelocalized energy deficitsas well as enhancethe qualityof servicein peripheralareas of the grid throughreduced system losses and improvedvoltage reliability. By supporting creation of coanercial markets for the wind energy and PV technologies, the project is expected to help bring about economies of scale In production of these alternate energy systems, and thus help bring down the cost to levelscompetitive with conventionalsources. Economic and financial viabilityof the investmentswere evaluatedin termsof the project'scost competitivenessrelative to energysupply from conventionalpower sourcesand based on the yieldson privatedevelopers' equity, respectively. 5.02 SmallHydro Schemes. The leastcost analysiscompared the economic cost of electricity generated from the small hydro schemes with the avoidedcost of energysupplied from the grid at the 33 kV level. The marginalcost of energy supply is estimatedto be in the order of Rs 0.80 to Rs 0.90 largelyreflecting variable costs associated with thermalstations. Sincethe smallhydro schemesare tied to the grid at the 33111kV sub- stations,sigmificant savings from reducedtransmission and distribution losseswould be derived. In estimatingthe economiccosts associatedwith the schemes,the local cost componentswere subjectto a standardconversion factor(SCF) of 0.8, and taxesand dutieswere removed. Annualoperating and maintenance costs were taken to be equivalent to 22 of capital costs over a 25 year economic life. The economic internal rates of return (KIRR) derived for the small hydro schemes evaluated under the ESMAP study are presented in Annex 5.2 and summarized below. Table 5.1: EconomicEvaluation of SmallNydro Schemes Range of KIRR. Derived States Dam-based Schemes Canal/Drop Weirs Karnataka 192 to 652 122 to 292 Tamil Nadu 202 to 442 AndhraPradesh 412- 142 to 232 Kerala 132 to 412

5.03 The financialreturn to an investor'sequity was estimatedfor typical small hydro schemes based on the conditions stipulated In the operating agreements with the States and at lending rates currently offered by lIRDA. It was assumed that private firms ould contribute at least 252 in the fonz of equity. The estimated financial return before taxes range from 452 to as high as 752.

5.04 Alternate Energy. The proposal to fund wind farms and solar PY activities is based on their beneficial effects to the environment and on the relatively low costs of carbon displacement they offer. Because these - 35 - activities are not least-cost In standard economic toemsand are still in the process of posting performance track records in the commercial market, they are unable to attract commercial funding. GgF financIng is being provided to act as catalystfor attractingother fundingsources. Annex 5.2 presentsthe GEP criteriaapplied in selectingthese activitiesand summaryof the evaluation of alternative investment opportunities for GEP fundingin India. 5.05 Windfarms. Investments In wind farms when compared with coal- based grid supplyis not leastcost, its EIRR is less than 5Z. Even when comparedwith the cost of captivediesel generation by industries,the EIRR is estimatedto be 10.OSwhich is stillbelow the 122 hurdlerate. Nevertheless, wind farm investmentsoffer one of the cheapest opportunities amongenergy alternativesfor displacingcarbon. It is for this reasonthat a US$13 milliongrant from GEOis being provideds this is equivalent to the capital cost reduction needed to render windfarms competitive with conventional energy sourceand to raise its 3IR3 to 12X. It is estimated that a 70 to 85 MV projectsize would have sufficientmarket demonstration effect to causea reductionin capitalcosts in windfarmsystems by about 15? in the medium term. On the financial side, an important consideration in estimatingthe returns earned by a private developer of a windfarm system is the incometax relief enjoyed because of accelerated depreciation allowed for such investment.This tax incentiveis a major attractionfor privateinvestments. As in the small-hydro,it is assumed that developers would put in at least 25? of the projectcost as equityand raisethe balanceof fundsfrom IREDA. If the tax credit is not availed of imediately but is carried forward, the return to the investor's equity would rangefrom 102 to 132. If the investor takes immediate advantage of the tax credits against income from his other ventures he can earn as high as 282 to 412. 5.06 SolarPhotovoltaics. Competitiveness of PV systemswas estimated by comparingthem to currently used technologies on the basis of life cycle costs for providing comparable services. In evaluatingthe economics of PV applications,the PV modulecosts are set at the borderprice of US$5/Ipin 1992 and is assumedto declineto US$3.50/p in 1997 (in 1992 dollars). On the basis of replacement costs, only the two and four-lightsystems and the 100-householdvillage electrification schemes are economicallyviable (Annex 5.3). The ZIR wmouldrange from 1.5 to 3.32.However, most PV systems providea levelof quality of service far superior to the currently used system(e.g., PV lanternvs. kerosenehurricane lamps). However,lack of awarenessamong consumers of these. benefits have limited the willingness of users to pay for these additional services. GEF fundingfor PV promotional campaigns is intended to enhance consumer awareness and thus enhance their willingness to pay. Assuming customers realize and are willing to pay for the additional quality and quantity of service provided by PV systems, most domestic and commercial lighting applications would become viable. The only applications that would remain non-viable are the community vater supply and the 200 householdvillage electrLfication applications. Overall, with the GE? support,the economicIBB for the PV activitywould be raisedto about 14.02

5.07 Financial analyses indicate that if the benefits are limited only to the quantity of fuel displaced, then only the two and four-light systems in the commercial sector and the 100-household village electrification scheme are financially viable. This implies that the initial demand for PV systems will be mainly in the commeraial sector, and that the domestic market will take more time to develop. If the willingness to pay for the additional - 36 - quality of service provided by the PV systems is developed among consumers, then except for the 200-household village lighting schemes and the water pumping systems, all PV applications are close to or are financially viable Overall, the FllR for the solar PV project component is estimated to range from 7.6Z to 13.3SZdepending on whether the product mix financed by IREDAis predominantly for domestic or for commercial applications. The 0EF contribution of US$13 million towards refinancing of PT purchases would permit access by PV users to lower financing costs as well as provide TA support for promotions campaigns. TNPL Papermill Protect 5.07 Benefits from expansion of TNPL's papermill consist of production of additional newsprint supply to meet growing demand and reduced reliance on forest-based resources. Moreover, the current under-utilization of TNPL's assetswill be eliminated.The originalTOPL plant was built as a newsprint mill with a fall-backposition allowing it to produce printinglwriting paper in the event that the innovativenewsprint process failed. The intentionwas that the plantwould run abouthalf the time on each paper grade, which is the currentmode of TNPL's operation. This means that the large investmentin mechanical pulping equipment, which is the heartof the newsprint process, is not used when printing/writing paper is being produced. Similarly, when newspriat is produced, part of the chemical pulping capacity is not used. With the expansion, the original plant line will be able to operate fully on priating/writing paper and the new line exclusively on newsprint. 5.08 In additionto the project'scapital costs, TUPL's production cost under the proposedproject is estimatedat Rs 9,188per ton of newsprintand Rs 9,266per ton of printingand writingpaper. On this basis. the project's financial internal rate of return is estimted to be 23.0Sbefore taxes, or 18.2Z after taxes. The project'seconomic rate of returnis estimatedat 28.8X based on a border price (CIF) of US$533 per ton for newsprint and US$746 per ton for printing and writing paper, and after adjusting local costs by a 0.8 SCF and removing taxes and duties (Annex 5.4). ProiectRisks 5.09 There are severalareas of projectrisk with respectto the energy components. First, there are the risks associated with monitoring numerous work sites. These are being countered by involving the privatesector as investors and developers, by setting up a monitoring and evaluation system at IREDAwith back-up consultancy support to monitor progress of the work and technical performance of the energy systems. Second, the institutional and energy pricing environment may prevent the solar PV systems from becoming affordable. This risk will be managed by requiring that adequate commercial arrangements for supply, financing and after-sales service are in plaeeprior to loan approval by IREDA, and by firmly establishing through market surveys, the viability of product demand and their acceptability within the context of the users' environment. Third, operation of the new energy systems may not be sustainable if the deployed systems perform poorly and capital, operating and maintenance costs are higher than expected. These risks will be minimised by limiting the financing only to those technologies for which reliability and costs have been sufficiently established through operating experience in India and in other countries. - 37 -

S.10 On TNPL's mLIl expansion, no significant techbical risks are anticipated since the basic technology to be used has already been tested and proven during the past six years under SNPL's origlual project. The expansion project will allow continuing optimization of the newsprint process, particularly In the critical area of mechanical bagasse pulping. Furthermore, the recent developments In paper machine design will provide a machine better equipped to the challenging problem of producing newsprint at high speed from an inherentlyweak bagasse fiber. Production flexibilitieswill allow TNPL to vary its product slate to match variations in product demand and prices.

VI. AGREEErDS AND RCONMENDATIONS

Aareements Reached

6.01 The Government agreed tot

(a) Enter into a Subsidiary Loan Agreement with IREDA which would provide that (i) IRNDA would be entitled to draw down from proceeds of the Credit up to US$115 million equivalent for eligible sub-projects;(ii) GO0 would on-lead to RInDA In Rupees, with GOI bearing the foreign exchange risk 9 at an interestrate currently set at 12.5S per annum with a repaymentperiod of 12 years (para 3.33).

(b) Communicateto IREDA, not later than March 31 each year, a firm commitmenton the amount of equity infusion that IRNDA would receive In the followingyear (paras 4.07 and 4.09).

6.02 lR@DA would*

(a) Implement a satisfactory organizational and staffing structure based on an agreed timetable (paras. 2.02 and 2.03);

(b) Conduct their business in accordance with the agreed Operational Policy Statement (OPS) (Annex 2.2) and consult with the Bank before any material modification is Introduced to it (para. 2.04);

(c) Retain consultantsto assist in the management of the project (para 2.03);

(d) Retain consultants,by June 30, 1993, to assist IREDA in reviewing and upgrading its accounting systems and policies (para 2.10);

(e) Finance sub-projects from proceeds from the Credit and Trust Fund based on the agreed criteria (paras 3.17 and 3.18);

(f) Submit to the Bank for prior review and approval the first two sub-projectson small hydro, windfarm and PV schemes, respectively,which are to be financed from the proceeds of the Credlt and Trust Fund, and subsequently,sub-projects - 38 - having a total cost equivalent to US$5 million and above (para3.19);

(g) Review with the Bank (i) on or beforeJuly 1, 1993, the interest rate for its PV loans based on the findings of the PV market survey; and (11)on or before May 1, 1995, the interestrates for smallhydro and windfarmsbased on the findings of the mid-term review of the project and to adjust them closerto commercialrates as appropriate(para 3.36);

(h) Conduct a mid-term review of the project and submitfindings to the Bank on or before March 31, 1995 (para 3.45)t (i) Submit to the Bank, no later than six months after the end of each fiscal year, unaudited financial statements, and not later than nine months after the end of the fiscal year. copies of said financial statements certified by an Independent auditor acceptable to the Bank, as well as the auditor'sreport (para 2.11);

(j) Submit to the Bank the followingreportss (i) by December31 each year, financial statements showing the estimates for the current year and projection for the next five years, comparing IREDA&s projected performance with the parameters set in the OPS; (ii) by March 31 each year, evidence of 001's budgetary allocations for any equity contribution expected for that year in the amounts needed to ensure maintenance of IREDA's requiredliquidity level (para4.09).

6.03 TNPLwould: (a) Implement the Environmental Management Plan (gMP) according to the timetable agreed with the Bank (para 3.25); (b) Completethe relocationand resettlementof the 86 affected familiesfrom the villageof Kurukkapalayamby June 1993, and implementthe benefitpackages designed for these familiesas well as the host community(para 3.28); (c) Finalizethe arrangementsfor additionalbagasse supply (240,000tons per annumof wet-wholebagasse) by December 1993,bringing the totalbagasse supply to TNPL to 700,000 tpa (para.2.17); (d) Not Incurany debt unlessreasonable forecast of its finance showsthat, includingthe debt to be Incurred,the debt servicecoverage ratio is not less than 1.3 (para4.15);

(e) Undertake a review of its financlalperformance with the Bank before declaritg or paying dividends prior to the commissioning of the plant expansion (para 4.15);

(f) Submit to the Bank, not later than six mouths after the end of the fiscal year, financial statements certified by an independent auditor acceptable to the Bank, as well as the , 39 - auditor'sreport (pars 2.15);

(g) Submitto the Bank by December 31 of each year the financial statementsshowing the estimatesfor the currentyear and projectionsfor the followingfive years (para4.15). Conditionsof Effectiveness 6.04 The followingwould be the conditionsof effectiveness. (a) DeveloementCredit Agreements Executionof a Subsidiary Loan Agreement between GOI and IREDAfor relending of the proceeds of the Credit. (b) IBRD Loan to TNPLs (i) Creationof an equitablemortgage in a form satisfactoryto IBRD (para3.41);

(ii) Execution of a Power of Attorney in favor of IBRD to enable IBRtDat its discretion to convert the mortgage to an English form (para 3.41). Recommendation 6.05 On the basis of the agreements outlined in the foregoing, the proposedRenewable Resources Development Project meets all the criteriafor Bank lending,and is suitablefor an IDA Creditof SDR 81.6 million(US$115 millionequivalent) to the Governmentof India,and a Bank loan of US$75 millionto TNPL. The Creditwould be made availableunder standardMDA terms with a 35-yearmaturity, while the loan will be made availableat the lank's standardvariable interest rate, and on standardrepayment terms for India of 20 years includingfive years'grace. _ 40 - Amex 1.1

INDIA RtESEVALEREKSURCES EVELOPNEINT PROJECT ...... ____...... _...... ALL-INDIAELECTRICITY DEIMI ANDSUPLY ......

...... *...... _*_ Actual 4/ Estifmted / AuAI lncrease (M) .,...... F82 FY91 FY92 FY3 f94 Y"5 Y91-95

......

Instatled Caacity - MV 3234T 6066 69805 7635 81155 869? 7.0 PeakAvailtbility - NW 20121 39069 41101 44306 48157 56841 6.8 Peak Load - N 20121 50184 5481 58920 a3611 68435 8.1 Deficit - NW 0 11115 13380 14614 15454 17594 12.2 Deffelt (Mof Peak Lead) 22.1 24.6 24.8 24.3 25.7 Energy Avalability - &A 113827 2589 271270 288672 3148 33 6.9 EneFg R re et of- *Ub 113827 23111 307257 332343 38746 385951 8.1 Daficit di - Sh 0 24421 35987 43617 43876 48656 18.8 Defieit tXof Reptremat) 8.6 11.7 13.1 12.2 12.6

__...... VOTES.: a/ Constrained by suppty cap .y. No estfimtes avafille an the extent of suprsse domnd. i Power supply position is based on santioned schms asni aditiol apacity durfng FY 91-ffof only 23307.7 NW. c/ An estimtion of de_ad, basd on corAption projectionm tincluding ewsution to be metby non-utflities) plus transmisfson and distribution loses. It is to be noted her that wfth the substantial supply constraints it is not possible to ccuroately estimat full uwet demand. This figure merely captures the lowest boundery of demand. d/ The deficit here is undWrestimatedin light of the inability to ascurately estimate munt SawtyC

Sourees Fourteenth Electric Power Survey of India, CEA,March 1991 -41 - Annex 1.2

INDIA

RENEWABLERESOURCES DEVELOPMENT PROJECT

Proposed Power Generation from New and Renewable Sources of Energy (NRSE) Eighth Five-Year Plan (93-97) (in Megawatts)

TOTAL Source FY93 FY94 FY95 FY96 FY97 FY93-97

Wind Energy 25.0 62.5 82.5 112.5 117.5 400

Solar Thermal 30.0 30

Solar PV 1.36 1.84 2.29 2.77 3.74 12

Mini Hydro 15.5 32.0 48.5 69.0 91.0 256

Biomass Gasifiers 0.3 0.4 0.5 0.4 0.4 2

UrbanlAgricultureWastes 50.0 100.0 150.0 300

Magneto Nydro DynamLcs 80.0 80

Total Power Generation 42.16 96.74 213.79 284.67 442.64 1080 -42 - Annex 1.3

India Renewable Resources Development Project

Ezamleg of State PolicLee Goveri@ Private Investment In friruatal-bssed Bmallthv and Windfama S_ems

A. Termsof Lease AcroemetIna K nahtakfor Simll I WNvdr The StateGovernment of Iarnataka hM offered private companlesthe option of obtainiaglong term Ieee todevelop smaI hydro*chen e on Irrgeptioncanals. The basic term and conditionswhich are stipulatedtn recentleaas agreoeentsbetwen the State nd se private ceopentesInclude the fel lowiang 1. The state grant. theprivate developer the license to generate and sell powerfroe the projoct for a period ao rert from datoof commisioning, subject to renewl for another 20 years ata tim. 2. Private I tanes" are permitted to wbheland bankg surplus ener trom captive sourcesfor 0 years. S. A nominal fee of Re. 100 per *anm willbe chargedfor the durationot the leasewhich allowsfor private ownerhip of thes&Ia 1-hydro facl tittes to extend over a 40 year period; 4. A royltyfor waterus willbe chargedt the rateof 10 of tho prevailingelectrietty tartf forhigh tension Industrial con_umrs. The royaltywould be Re. 0.116/kwh at current tariff levels Inthe State. S. gleetricity duties will be levied from time to times,as I requir d by the State government. S. The cost of Installing a trnsnmission line to conect the muaIl-hydro chemeto th state grid will be borneby the private company. 7. The opration andmaintenanc costa of the mI 1-hydroschme wouldbe borneby the private compny. S. A chargeequivelent to lOXof energy hehledthrough the state grldwIll be Imposedby the state ti lity to cover th costa of powertrnsmission freo the smal -hydro sIte to the point of conumoptlonby the prvate company.

B. Terms of Licensefor Private evlo0neento Windfrms In TamtiINadu INE8ha issued printed brochureentitled: 'uide for th EstablIshmentof Windfarms in PrivtO Scor'. Amongthe provisions stipulated ares 1. TNEBwil I permit privat. parties eto t upwinde IIs tonwndy areas;thes windl Is can be cnnected etothe grid. 2. TE ts willing to 'wheel' the power to the location where th poer Is neededby the Industry for which THN will deduct 2Y of th ener generatedby the wind generator as 'whellng charge. S. TIN tisalso willIng to purchas the surplus powr producedby the private wind generatorat Rr 1 per kWh. 4. The entire cost of Interfacing of the windmill with the grid, Including the cost of transfonrer, prOtection, etoeing, MT lines ftom the point of generation to the grid's nearest line, etc. will he born by the windmill devloper. S. Dependingon the capacity of the windmills, necoresry sub-Jtation faclitiets have to be instlled at the cost of the devloper. S. Twos_eprate mebers,one for export of wind powr to the grldand another for Importation from TM grid will thav to be tnatl led on the MTside at te cost of the dweeloper. 7. Technlicl requirementson the starting current of the machine,provision of capacitors, autoat cutaou from the grid, etc. are *se dfined. 43-

INDIA lINUX~~~M1.4 ...... Re l Resourbe Oenelopmt Projct ------...... Pvrviow 1.0ev - Credits to Indian Powe eSter Ca of Augut 31. 1993) (Mmivt InUSSUvillion) ...... 4appoa Closn mtt ...... Sorrowe 133_0Lon Nae Oat ate a) Olbuse Stt

1 IIdia First OWC- karo - Ko6r 33 450 W56 18.5 16.7 Copte t India econd OMMNaitho - Pnothot n Ila 6/8 19.5 10.5 Col_ete 't tate Taeby Pow 106 111% 9/66 16.2 U.9 CqItet 4 Tate Secd troy 164 *nr 966 9.6 9.7 Condet S Indi ThirdOW * t owr 3M06/0 25.0 3.0 Cpleut 6India Koya Powe Of 4/65 35.0 18.7 coplate 7 tnia PwoIr TransmIsesin 416 6/05 lam 70.0 50.0 Copts 6 Tato SecondKothagdm Pam 417 6/65 la7 14.0 13.8 Colte 9 to Third Trey TheimalPowr 1549 4/8 1/84 105.0 105.0 Coplte 10 tndia Ramgmd ThermatPwer (' 146 1/79 4687 50.0 45.6 Coplete 11 India FPrakkaTheml Pow ('3 17 6/60 6/69 25.0 2.5 colete 12 India Seend Rieguma Thema Per () 06 lam 3/92 27.2 3.0 Coplete 13 India Third Rural Ilectrfficatim 2165 612 6/Et 304.5 295.5 C0lat 14 tndla Uppe Indravati Hyro 2278 e 191 0.4 0.4 Complete 15 India Central Powr Tra uisoten) 22am 5/6 3/92 200.7 138.7 Clos 16 India Indira Soar 2416 5/84 6/93 17.4 7.6 1? India Secnd erak Theml POW C442 61 lm92 M.8 m 2.0 18 Tat Fourth T.o Tmt a1m2 6/8 6/V92 135.4 130.9 19 India Chmeepr Telt Powr 354 5/5 129 2 260.0 165.9 20 Indi Rhad PowerT masion C) 55 55 1a92 202.0 193.2 1tIdia Kratla State Powr a82 65 9/92 176.0 45.2 32 India Curbined Cycto C') 2674 46 l2/92 485.0 456.5 3 India Kantaka Pw 2827 6/8 1215 260.0 62.6 24 India Nationa Capita PwS&ywr )28 6/8? 6/95 45.0 245.3 25 India Tather Theml Pwr 3845 6/6 3/96 375.0 90.S 26 India Seeond aataaPoeur t8 5SS 12V6 220.0 31.7 ? India Utr Prade Powr 27 6 *r.o 47.0 471 Cloed 28 India Nthp hakri Pow 3024 39 12/9? 465.0 36.7 39 India Narabstra Powr 306 6/89 12% 354.0 30.0 30 India Ugrhwn R"fen tronmssifn 33 6/9 9/96 485.0 29.1 31 Tto Privt Powr Utilitles CATA) 33 6190 65 98.0 13.3 32 WU Privte PowerUtilftles (3 ) 3344 6/91 1295 300.0 36.0 33 India Poer Utilities 3_ffiy Improwemnt 343 19 1a7 265.0 14.0 34 India Sond "aherashtraPoW 396 6192 6/ 350.0 0.0 ...... Toal 6Z99.4 219.9

IO Crdf to ...... 1 India FourthOWC . ounpr 19 /62 12/69 21.9 19.9 Comltet 2 India Secon Kom Poer 24 8/62 9/70 21.1 21.1 coplete 3 India Kehasd_ POWr 37 5/43 12/48 24.1 24.1 Compet 4 India Doe EuIpment 69 6/66 6/4 26.6 26.3 comet SIndi Seod Plor Treoemiston 242 471 3 75.0 72.9 Copete 6 tndli Third Powr Tr_alnolfn 377 3 9/76 85.0 05.0 Cupete 7 Irda RurWaEectrificatIon 5 TM 1a20 57.0 57.0 omplet tIa Four Powr Tranmlsin 604 1/ 6/83 150.0 149.9 Completo 9 Inda Slingrti Theml Pwr Ct 605 s 6 150.0 150.0 compe 10 India Kor ThenmalPOW M 7 4 3/66 200.0 199.9 Compe 11 India RamagundemThmat PoweC') 87 1/79 6/ 300.0 200.0 Compe 12nam secondRIua Ectwifieation 911 5/19 3/6 175.0 171.7 0olet 13 India Second SntgraulTe tlPowr c) 17 5/60 3/t9 300.0 m2.6 Cope* %14 Ifa FarekkaTml POWr 103 6/10 12108 325.0 325.0 Coplete 15 Inda SecondK orbsThm Powel 1173 711 1V"91 388.? 367.1 Colete 14 Indi UppWInndravti NYo 1356 l812/9 170.0 17.4 IT Inds Itndfra rar am2 568 13. 0.6 1India ndira Saraw 1613 5 693 13.2 0.0 Total 2296.4 235.?

...... c') NMf ProJe (a) let of cacellations -44- ~~~~~Ames2.1 Page 1 of 2

w~~~~~~~~~~~~~~~~~~.ti~~~~~~~~~~~~~~~~~~~~~~~~ NDIA RENEWABLERESOURCES DEVELOPMENT PROJECT PropoeedO0tIon_1 Stbucu of IREDA

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_aP ._1 AIs _ TFID ConsJwft mobmia: T Advft& Iwk" Iaoinnco I . I Legal internal~~ ~ ~ ~ ~~~~~~Evknmr ==I I ''''Ioomm Ted dc

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INDIA RENiVALE RESOURCESDEVELOPMENT PROJECT INDIANRENEVANLE ENERGY DEVELOPMENT AGENCY LTD. (IREDA)

Operational Policy Statement (OP)

(This is a summary of IREDA's Operational Policy Statement) 1

FINANCINGCRITERIA 1. IREDA'sfunds are not allocatedto the states.

2. ClientSelection: IREDA's Revolving Fund can be used to assistthe Industry as well as the ultimate beneficiaries to adopt NCR systemsand devices. Assistancecan be providedto institutions,private firms, public sectorundertakings, cooperatives etc.

IREDAwill lend only to projectsthat meet the followingcriteria: (a) are economically and financialy justified, with a financial rate of returnof not less than 12Z; (b) are technicallyviable;

(c) technical solutions proposed must be cost effectivel

(d) are compatible with existing expansion plans; Ce) solutions proposed should meet 001 and State environmental impact standards; (f) shouldhave all clearancesrequired by State and Central Governmentagencies; (g) the socialcost benefitof the projectin termsof its generation and conservationof energyshould be highlysatisfactory;

(i) the raw materialsselected should be primarilywastes, naturally emanated or industrial wastes.

1 otes I A's OperationalPolicy Statement includes four annexes,as followss Annex 1s Terms and Conditionsof IRNDA's Loans;Annex 2: Disbursement Procedures of INRDA's Loans; Annex 3S Guidelines for Application of Remedies in the Event of Default by its Borrowers; Annex 4s Accounting Policies. The full text of the OPS, togetherwith its annexes,Is includedIn the Project Files. 47 - Annex 2.2 Page 2 of 4

PFIANCMILMAAGEMENT POLICIES Profitability Targets

3. IREDAwill endeavorto earn an its Paid-lnCapital and Reservesa positivereturn In real terns,maintain a healthyportfolio and bulld a strong financialbase to ensurethe long-term exlstence of the Agency. Adiustability of Lending Rates 4. The BoardperiodLcally revises IR DA's lendLng rates keepLig ln vLew factors like cost of funds to IRNDA,market conditions, and acceptability of each technology. Provisions ln lts loan documents allow its lending rates to be adjusted both on the dLsbursed as well as the undlsbursed portions of lts loans. Ion-rescheduliag of Loans 5. ltNDA's loans wlll not be rescheduled. Capital Structure 6. Initially a mazimum debt-to equity ratio of 4:1 will be maintained. As IREDAbecomes betterestablished, this ratlowill be periodicallyrevised. Debt ServiceCoverage Ratio

7. IRNDA's operations will be managed so as to maintain a debt service coverage rationot lowerthan 1.S. Liquidity 8. IXEDAwlll maintain liquld assets equal to not less than the equivalent of the anticipated dlsbursements for the following three months.

ForeiLnExchange and Interest Rate Risks 9. IREDAwill not bear the interestrate and foreLgnexchange risks in its operations. Term Transformation 10. IRNDAwill determlnethe averagerepayment perlods of its loans so as to ensurethat the averagematurity of its assetsdoes not exceedthat of is liabilities. RemaynentGuarantees and ExposureLimits

11. The MaximAnLevel of Exposureper clientis as follows: 1993194:30S of MINDA'sNet Worth 1994195:201 of INEDA's let Worth 1995196 and onwards: 15Z of IREDA'8s et Worth. - 48 - Annex 2.2 Page 3 of 4

12. IREDA's maximum exposure limits are set according to both its clients' credit worthiness and the guaranteesoffered by them. The followingmatrix combines the credit worthiness of the client and the guaranteesoffered by the client, to determine the credit risks weights to be used in calculatingthe maximum levels of exposure per client as a percentage of IREDA's net worth, defined as the total sum of its paid-in capital, its reserves,and the grants received:

Matrix of Risk Exposure and Guarantees

On-Balance Sheet Assets and Off-BalanceSheet Items

Credit Guarantee Risk Level Rating (a) Offered Weight (b)

I A Bank Guarantee .5 2 A Mortgage .7

3 B Bank Guarantee .7 4 B Mortgage .9

5 C Bank Guarantee .9 6 C Mortgage 1.0

7 Backed by GOI 0.0

Definitionss

(a) Credit Rating As Debt Service Coverage in excess of 1.5 Credit Rating B: Debt Service Coverage between 1.3 and 1.5 Credit Rating Cs Debt ServiceCoverage between 1.0 and 1.3 Risk Weight is the factor by which the loans outstandingthat qualify under each level should be multiplied to calculate the exposure 2.

LENDING OPERATIONS

Terms and Conditions

13. Although IREDA mobilizes resourcesfrom different sources, its on- lending terms and conditionswill be uniform irrespectiveof the source of finacing.

Guarantees

14. ITREDAwill be lending only with the backing of commercial banks guarantees or English Mortgages.

2 For example, a Re 100 loan ranked as Level 1 will be computed as equivalent to Rs 50 (Rs 100 x 0.5) for calculatingthe risk exposure. - 49- Annex 2.2

Guarantees provided by IREDA to Third Parties

15. The provisions relating to remedies, foreign exchange and interest rate risks, loan guarantees, exposure limits etc. wlll equally apply to guarantees granted by IREDA to third parties.

Remedies

16. IREDA may suspend or cancel any part of a loan if the borrower fails to perform any obligationunder the legal agreements.IREDA has developeda set of Guidelines for Applicationof Remedies (See Attachment).

Review of Policies

17. The above set of policies and procedureswill be revised from time to time to reflect the changing needs in the operationsof the Agency. 50 - Anne 2.3

India ReweuabteReuoures Deeopmntq Projet

lndin eteAbt* Erg Oeelms Agemy(IREDA)

Ctlatfve LeWng FI to F92

...... ludbr of Prject LoWn Barrower Projects Cost mwunt ...... _. (is Kilt) (R Ktill) A. fPhlic sector CmntralIov't. Coqwtles 1 0.9 0.4 StateGov't. cOmnies 3 41.9 13 Stat Electricity 8ow& 9 M.1 194.8 Fnicipst Corporatiol 1 0.9 04

ub-Totel 14 315.S 206.7

B. PrivateSector P.bic Ltd. Caqmnes 71 1167.1 296.7 PrivateLtd. Compnies 42 399.6 96.8 Partnershipffla 18 52.1 33.5 Pprietorship firm 4.1 3.1 ocieties 9 8.5 3.S T*mt 2 0.6 0.2

SubTotal 1S0 1U2 433.8 ......

C. Cooeatives 13 145.9 25.7

IWTAL 177 a9m.? 666.2 ...... RENEWASLRESOURCES DEVELWPM PROJECT IMDNeu Hp oNPSgM uA MrPL) 0qvil;= Ch0

r l 1-S E m [XXXE81)Q>m BE BE] S ;Ma" ;EO gPam

+II 1._ 1 momig

_cm__ aL 1 - 52- AMex 2.5 Page 1 of 2

India RenewableResources Devntqpmhnt ProJect

TNPLPaperwtll Eipanson

PROuc NIX MADESTIMATE Of SALuShne

NEUSPRINT ...... Setllng Existing operations After Expanslon NEUSPINT Price variety Rs./NY Sales Rs. Lakhs Sales MT Rs. Lakhs ...... Standard UP 49 gm - 81.5 cm 18,570 2S500 5,107 88.000 16,342

Standard VP 49 gm - 84.0 cm 18270 16,500 3,015 ------......

Pink P 49 gsm81.5 c 19,970 6,000 1,198 12,000 2,396 ...... 50,000 9,320 100.000 18,738

Avorage Selling Price 18.639 18,738

DO:NHandllng charges recowered 60 60

LES: MT OAanhST (205) at 2.5X on taxable tur 93 94

...... ~~~~...... Iet Sales rlixtion (CR./MT) 18.406 18.74 ......

......

AST(AddItloal Sales Tax) is apptlcable to sales within Tait Ndu (TET sae) at 2.55 on the ese ffected, Aicb Is arod 2 of the totat sales. This hs to be borne by the comni aNdcan to be passedon to the ctmmrs. Th this elemmetis d*utd frm the setling price f*r arriving the Net Sates Realization. - 53- Annex 2.5 Page 2 of 2

India Rentwabe Resot ces Devtopment Project

tlPL Paperiltl Epansion

PROUCTMIX AID ESTINATEOF SALES EVENE

PRINTtIN ANOURITINIG PAPER ...... Substare Selting Sales Total Value Valety (GCM) PriceT Sty (Lakhs) (Rs) (NT) ......

Cre rmoo 60 22,150 36,600 8,107

Nhptftho 60 24,350 7,000 1,705

Offset 60 22,650 5,000 1,132

Lottery Printfng 60 22,650 7r700 1,744

Photocopir Paper S0 27,335 2,700 73

Speciat Printfng 47 24,700 14,000 3,458

Others 70 21,950 7000 1,537

80,000 18,421 ......

Average selling price for printing ad writing paper t VA./T 23,030

Ls: Trae discount for printing and ritting paper s R ./NT 90

Les AST, Freight Rbte etc a 1." on selltng prfce:ss./lT 368

Net Sates Reli"tfon Rs./NT 21,72 ...... AssJltlon on Selling Priee

The prfce per NT shownhere is the lfst price as on 16.05.92 uAs ing 0S reels and 50S shet productfon.

In the case of photocopier paper, the list price has be redd to the eitent of ft. 1.50 repentifn adidtional cost of packing and extra trade dfscount.

Trad discount. AT. Frefght Rbte etc are based on the ea diture incurred awfrn the pou yea. - 54 - Annex 3.1

P~~~~RE^MD F H_j NA~ ~ ~ MAI

AIWD PIAMOH AdankiDC 1 4.25 22.5 2xO00 3.64 AdankiBC 2 10 22.5 2x1260 6.6 Guntur C I 7 22.5 MM1250 17 ounturDC 2 10 22.5 x1260 19.6 ountur DC 8 4.25 22.6 2x8SD 0.4 Ountur8C 4 7 22.t 2x1260 10.6 Lock-In-Sula 10 22.6 2x1S00 16.46 Lowor smnair 7 22.5 2x1U00 16

KAUITAKA Attebusl 7 7.5 lxSS0 2.8 Anvorl 16 7.5 24x50 5.2 Srin dvon 1S 80 xSS00 02 0v.vor.b.lokere is 12 1x1000 9.07 Iaranti 15 12 Jx1S00 14.52 Kbilnl 10 12 Sx40 6.26 Kllaoe 10 12 2x50 5.6 Maddur 18 7.5 2xl000 8.8 laloprabba 10 12 2WOO0 6.06 ludhol 18 7.5 1xl000 4.86 N4ugu 1S 12 2x10D0 0.15 RaJankollur 1S 7.5 x850 6.88 ShnhpurSC 1 7 7.5 8x45 5.1 ShahpvrKC 2 7 7.56x860 8.0 Shahp.r8C 8 7 7.5 8*xS0 8.65 SbabpurDC 4 7 7.5 8xS0 4.15 Shabpr8CCK5 10 7.5 2450 4.08 SbahpurC ll 7 7.5 18x60 2

Kutt yod PH1 15 12 2xl5OO 17.1 Kuttlad PH 2 7 12 2x40 5.7 ItlytPHS 7 12 2450 5.7 (CDU) 21 10 1x1600 10 PoochtU (RBU) S0 12 2xawo 17.1 gNo to10 C 1x50 1.8 15 22.5 6O2500 67.1

Allyar 80 5 231250 9.82 Aaravathy 21 12 2xlO00 10.60 LowerShovnl 15 80 2xlW00 24.25 P..hblarai 10 12 2450 5.06 Porun¢ont s15 7.5 2450 5.1 Satlinur s0 12 200 21.02 Thirmurthy 18 7.5 8$6 7.78

Sm$ EUAPReport Indias Illnliydro D.v.lopmmton Irriation Daw andCanal Drop. Pre- tnvostamat StudyDeport 1NA/0l - 55 - Annex 3.2

IDA

stor oinal of Sample wind Warms (Janary 1986 to may 1991)

Rated 3nery Outoput Capacity Output capacity Wind Farm (ki) _Fro: Tot kWh/kW Factor Tamil Nadu Kayathar IA 1,350 07-Apr-88 31-May-91 1223 14% Kayathar Xin 400 12-Jun-89 31-Mar-90 1579 18% Xsythal 1,200 31-Mar-90 31My1 1966 22% Rayathar -sy91 9622 Kayatahr II 6,000 25-Jan-90 31-May-91 1603 i8% Tuticarin I 550 18-Jan-86 31-May-91 1271 1S%

Tuticorin SI 55 09-Sep86 20-Nov-86 1045 12% Tuticorln TS 330 21-Nov-86 12-Jan-89 786 9%

Tuticorin -S -50 12-Jan-89 31-May-91 1791 20% Muppandal 4,000 31-Mar-90 31-May-91 2588 30% Maharashtra Deogad X 550 23-May-86 31-May-91 800 9% Decgard 550 15-Oct-88 31-May-91 574 7% Guiarat Lamba (Harshad) 10,000 30-Apr-90 31-May-91 987 11l okha sso 08-Mar-86 31-May-91 1248 14% Okha-Madhi 1.800 18-Feb-89 31-May-91 646 7% MandvL I 1,100 16-Jan-86 31-May-91 1439 16% andvi.YT 500 29-Aug-89 31-May-91 918 10%

Tirumala 550 1S-Jun-89 31-May-91 738 8% Iheda 500 18-Feb-90 31-May-91 1061 12% IDIDA

UZNEWABLERESOURCES D8VELOPMENT PROJECT

Preliminary Estimate of the Potential Domestic and Commercial Market for Small PV Systems (MWP) PV Application Andhra Uttar Four All Pradesh Orissa Rajasthan Pradesh States India 0 Lanterns 2.3 2.4 9.0 38.4 52.1 81.1 2 Light 1.6 1.4 3.6 IS.7 22.3 38.2 2 Light + Other 1.1 0.6 0.7 2.9 5.4 13.5 Small Loads 4 Light + Other 0.3 0.2 0.2 0.7 1.2 3.1 Small Loads

TOTAL (MUp) 5.3 4.6 13.5 57.7 81.1 135.9 Sources India* Solar Photovoltaics Market Development Component Pro- Investment Study, Draft Report, World Bank May 2, 1992. - 57 - Annex 3.4

INDIA RBNEWAILERESOURCES DEVZLOPMENT PROJECT SOLARPV MARKETDEVELOPMENT

SolarPT Applications

RuralElectrification Applications 1. solarlanterns. 2. Lightingand otherlow powerapplications in domesticor commercial establishments. S. Coamunityservice systems (e.g., schools, con=ity centers,health centersetc.). 4. Streetor securitylighting 5. Villagepower systems a. DC systems b. AC systems c. AC PV-dieselhybrid systems Water SupplyApplications 6. Waterpumping applications 7. Waterpurification systems a. Filtrationplants b. Disinfection(WU, ozone) Other Applications S. Batterycharging stations 9. Ventilation systems and evaporative coolers 10. Crop sprayers 11. Blectricfencing 12. Educationalkits 13. Vaccinerefrigeration

Also eligibleare other PV productswhose reliabilityand costs have been sufficientlyestablished through operatingexperiences in India or other countries,and where thereis a demonstrateddemand. UsIA UUENEWUAMWlSC eOOELPIEI PISECT 101#11nW sU lowisiumen giwtun a)

! /IWTTV wteP I SUP a SW 3 SW 4

~~~~~~~~~~~~~~~~~~~~~~~~...... Meleen ...... gliee ...... Action ...... euilma ...... "asn oniee ...... Amten 411"dim......

1. Orgod tlu rp re Sfe, am A m2dS Staff ls w Staffii A per a. sture plaam ti Sard eftr toewoagof d b. Staff la tim epprml Is mob _dh

I.O.U af too cord"* afr to een 3 aft lm "me TW after $-Vr is tobt i somb Tretilrs Is usi trainlAg INOWm affestivb Offestle Pose affdctio hpr is pwAd ...... S. TO_55IOw ri{es a. tPrmiatil e_ig Ppare 2_mndhs Si 4 mSsign 61 s I3rtde 2 waft 6. TedmimI aMet fe sal s" T.01. after tm Cap". after tem. see lfte too cIw" ft wm e. et"remmarial |isv t to aub tatr is awds gmai, to mb dslgp affotlw eeIV efftive 4. ProJectAppraleal & .ervisia, ...... Prepare S assuS. . r...- .- Ustaa Per LOA. I a. tedasicat eemAtwa T.0O aft" tem CuanAatts after teo corwA- sd e t b. Nmut. & pr _saika ish _etwi es _mi tos em ffvetiw , ffestIv ...... S. Flrmici RhlNoemus p__er 3 matS i.t.t mm WP Rtain 9 Action I inca a . AeMuA,tiw$YatM TO. after ioen aeouelao Other aft"r pla after 6. Pra atedinuaaha is mb_e_metuat fb_Ae teowio art of e. Finmasiatplemins effective _mmuttustseffective nh* ...... I...... 6. WAS I Astlan 4 I Plus after "Mt T. Offfee Teditogy *. Of GOi D. P0OL EVmUATION I Idntify m Prepa 8 mre 12 t aprit t S. Estebtlob Evatuation Systm I Rapir-' after tlm T.O.R. after temi cesut- after Review 2. COett mid-term reve I Monts to sub is mabi_ to"ts toan is Id-tem Juneb. S. btep amnproject pipet ia 3 effective ffectiv. effective review IOU

C. PUSlON OF UIALL-SU PRIVATEPOME I 1. CAttancy Actfon 4 meths 2. Worksop for Partlclpatleg States I PlaW) after and investors I ewrshops start of... - 59 - Annex 3.6 A Page 1 of 2

INDXA RenewableResources Derelogment Project IURDA:Institutional Development Component Term.of Reference for ManaRement Service Consultants Background

1 The Indian Renewable Development Agency (ZIREA) expects to receive an IDA loan from the World Dank, together with loans and grants from other sources for the project, to finance private sector participation In the expansion of alternative energy utilization throughout India. The total financing package of about US$250 million will more than quadruple IREDA's present lending activities in the sector requiring additional technical and managerial resources on IREDA's part. The purpose of the management consultancy will be to support IREDA's Managing Director in building up the agency's resources to handle the workload, and to assist IREDAstaff to implementthe operationalprocedures endorsed by the World Bank. The assignmentis expectedto involveat least two experienced advisorsfrom the managementconsulting firm, who will be assignedto IREDA, reporting through the Managing Director, on a full time basis for up to three years. The management consulting firm will assume responsibility for recruiting experts, either from withintheir organization, or from outsideorganizations, or foreign experts as agreed with IREDA and the World Bank to fulfill the objectivesof the project. The managementconsultant will also be responsible for the in-housetraining of IREDA staffand ensuringthe qualityof the work performedby consultantsunder his control.

Scope of Services 2 The scopeof servicesshall include,but not be limitedtoo

(i) ReviewIREDA's entire lending program, legal obligations, reporting requirements, lending procedures and the planned institutional, organizational, staffing and office facility requirements for loan appraisaland project supervision; (ii) Identify key inputs required to support the lending program. including specialists secondedby otheragencies under the project,and assess the capability of IREDA'sstaff to handlethe work, specifyingthe additional training that would be required; (iii) Determine the work that could be handled by short term experts, and that which can be handled by a consulting firm with particular skills and/or specialist knowledge or engineering and financialservices in the area of activity Involved; (iv) PrepareTOR for all work assignments,identify and recruit suitable experts,consulting or inspectionservices organizations which could undertake the work involvedthroughout the lending project cycle.(Note that selectionof the consultants should be made in accordance with Bank procurement procedures as stipulated In the Loan Agreement and would be subject to post or prior review before being approved by the Bank.) - 60 - Annex 3.6 A Page 2 of 2

(v) Manase the consultancycontracts, assess performance and arrange paymentto the consultantsinvolved, without incurring additional on-costs for the administrationinvolved. (vi) Coordinatethe preparationof reportsas requiredby the WorldBank and other financingagencies involved in the project. Qualificationsof IREDAAdvisors

3 Two experiencedManagement Advisors will be requiredfor a minimumof two years as follows: (i) OperationsAdvisors who will undertake responsibilityfor the implementationof IREDA'soperational guidelines, and overseerecruitaent and training of IREDA'a staff in accordancewith the agreedprogram. The Advisorwill also performthe necessaryaudit functionsto ensurethe lendingpractices are implementedand preparethe necessaryreports and documentationas requiredby World Bank supervisionmissions. (ii) ContractsAdvisors who will identifyadditionsl requirements for managementand technicalsupport, including office facilities,prepare TOR, identifysuitable consultants to undertakethe work, negotiateand authorize contractsbetween the managementcompany, and the consultantundertaking the work. The Advisorwill supervisethe consultantswork and liaisewill the Operationsadvisor in the preparationof reportsto the Bank. ServicesProvided By IREDA under the Loan 4 IREDA will provideoffice space and basic office facilitiesfree of charge,under the contractwith the ManagementAdvisors as requiredto perform theirtasks. The Advisors will be requiredto work normaloffice hours in IREDAMs headquarters,observe company regulations and, in additionto reimbursementfor theirservices be entitledto companybenefits generally as appropriatefor IREDA senior staff. Funds for additionalequipment, facilities, vehicles and transportation,including other directcosts associatedwith the consultants activitieswill be made availablefrom the loan and procuredin accordancewith Bank guidelinesfor expenditureon equipmentincluding software. - 61 - Annex 3.6 B Page 1 of 2

India Renewable Resources Development Project Irrigation Based Small-Hydro Component Quality Assurance ConsultingServices to IREDA Terms Of Reference

Background

1 The IBRD is assisting the GOl to implement a multi-component le-nding operation for the development of renewable resources for energy and industry applications.one componentof the project involvesa US$ 70 million credit line to be established with the Indian Renewable Development Agency (IREDA) for financingirrigation based minihydelschemes over the period 1992-1996.IBRD and GOI require that all schemes financed under the loan are environmentallyand technicallysound in planning,design implementationand operation.IREDA, as the implementingagency, will thereforeneed to be assured that the projects will conform to the general concepts estab 4shed in the June 1991 IBRDIUNDP ESMAP study which has been approved by the CA..

Obiectives

2 IREDA will requirean evaluationof the qualityof engineeringplanning and design and analysesperformed by the Engineer appointedby each Developerof the minihydel sites. This will involvean audit of the proceduresused in the design and preparation of the procurementdocuments and a verificationof the quality of work done during constructionto ensure the vork conforms to established programstandards and quality requirements.Actual performancetesting will also be required to verify acceptability.

3 IRIDAwill also requirean evaluationof the environmentalimpact assessment includedin the Design Report to assure that adequate and reliabledata has been used to perform the assessment and that all significant issues have been addressed.

Scope of Work br a Consultantto Assist IREDA ProJectSupervision Staff To Carry out The Following Tasks:

4 At The Planning And Permitting Stage. Review the Design Report for designated projects with particular emphasis on the conformanceto Type Design standards includingthe followingaspects of engineeringworks

(a) GeotechnicalReview reportsof subsurfaceinvestigations and laboratory tests to verify the determinationof safe bearing loads and settlementpotential for soils, and competence and strength of rock foundations.

(b) Topographical and Hydrological Surveys Rev.ew verification of key elevations such as crest spillwaysand freeboardof canals.

(c) HydrolosicalReview flow duration records for availabilityof water in - 62 - Annex 3.6 B Page 2 of 2 an average year and range of variation. (d) Hydraulic Review range of headwater and tailvater elevations through the operatingrange of the project, need for irrigation releases, headlosses in conduitsand verifyheadiduration curves. (e)Energy Generation.Verify method of estimatingaverage annual energy with due allowancefor forcedoutages, guaranteed efficiency and lossesin the water/ power system. (f) Operatingand MaintenanceAccess.Rleviw plant layout to assureadequate accessfor cranesand trucksneeded to disassemblethe equipmentfor inspection and for removalto workshopsfor repairand overhaul. (g) Cost Estimates and Tims Schedules.Review for completenessand reasonablenessIncluding provision for contingenciessufficient to cover uncertaintiesand unknowns. 5 At The DesignAnd gEuipmentProcurement Stage. Review the completedtender documentsfor each project,the conformancewith ProgramGuidelines - Quality Assuranceprocedures to verifythat all calculations,drawings and specifications have been preparedand checkedby qualifiedpersonnel including a reviewof the particularindividuals qualifications and experience. 6 At The EquipmentFabrication and ConstructionStage. Verify (a) the equipmentsuppliers have providedthe specifieddocumentation of materialquality andworkmanship standards before release for shipment,(b) that test results show that the quality of work is acceptableand the correctmeasures have been implemented,and (c) the Engineerhas checkedthe criticaldimensions, alignment and elevationsof the projectas it proceededfrom startto finish. 7 At The PerformanceTestin andComissionin Stage.Verify that theEngineer has determinedthat testsare carriedout in conformancewith the specifications and has witnessedthe test as appropriate. a EnvironmentalAspects. Verify that the Engineer and any necessary environmentalconsultant has performed an adequate study of the conditions at the projectsite, that an adequatedata base is availableor has been collected,and that an impactassessment has been performed in a mannerthat has been properly justifiedand documented.Verify that all necessary clearances have been obtained beforerecomiending release of funds for procurementof equipmentand start of construction.Verify that work is being done in accordance with the conditions of the variousclearances and that monitoringrequirements have been met. - 63- Annex 3.6 C

India Reewablo Resources Developmet Project General Tems of Rfegence for Conaultants To Assist IREDAin Preparation of * Pipelin of Now Minihydel lPojects for Jurtler Development B¢ft&=gund

1. Under the Eighth Poer Pln the 001 proposes to develop over 300 NW of emall hydra resources by 1997. Towards this ends,the IndianRenewable Energy DevelopmentAgency (lIRDA) has applied for (secured) a loan from the World Bank to constructapproximately 100 MW of irrigation basedemall hydra etations, based oanconcepts developed under the 1990 etudy performedunder the Bank'sEnergy Sector ManagementAssistance Program (ESMAP). The projectswill be primarily developed by the private eector acting taking advantages of new SEB policies for energy "Wheeling and Banking" schemes. To ensure there is a pipeline of such projects for IREDA to support in the future, eonsultants will be required to review the approachunder the existing, project,to recommendstrategies fbr furtherdevelopment of small hydroresources, to identifyand prioritize projects for development, and to recommendfurther assistance and incentivesto develop hydro resources The scope of work by the consultants will include but not be limitedtot Scoon of iork

(i) Review of overall engineering, adminstrative and construction costs and implemaentationprograms of the ISMAPprojects to determineif thesemet the aims and objectives of the Project. (ii) Visit existing sites to "sess the quality of the works, the maintenance and operational arrangesents, the environmental affect of the installation and the impacton the localcommunity. (III)Review the commercialaspcts of the projectand determinethe affectof taxationIncentives (if say), customsduty and other subsidieson the overall viabilityof the projects.

(iv) Review I$DA loan procossing procedures and recommend improvements for projects being implemented under the existitg loan and design new procedures for future project appraisal and moitornsg. (v) Visit SEBs who have indicated positive support for mini hydro development and review Information available In terms of the: (a) the potential for further development using the ISAP design concepts; (b) new projects where further standardization programs cau be developed; (c) incentives and support available from the SEB8 to foster private sector development. (vi) Prioritizeprojects which can be consideredon a nationalbasis and determine the requirements for furthor engineering to define the scope and size of a follow-upIN8DA operation. (vii) Recommend an iUplemetation approach designed to facilitate a second lending operation and define the preparatory arrangements. RZNNWABSal*tRcrsr DBV8LOKSN PROJECT

PreliminaryList of Proposalsfor Small-Hydroand Vindfatm Projects I. SMALLRYIDRO CUISMM

Name of Prompter Protect Capacity ProeosedLocation SANCTIONEDBY IRDA .1. H/s Carborondum Universal Maniyar SHP 3x4000 KW Kerala 2. N/s Gokak PatelVolkart Ltd. Gokakfall 1:O100KW Karnataka 13000KW INDEKCONSIDERATION BY IBRDA 19 M/s L.K. PowerCorporation Mudhol 2s500KW Karnataka 2. Mis L.K. PowerCorporation Maddur 3z500XY Xarnataka 3. M1s L.K. PowerCorporation Devarabdekere U3500KW Karnataka 4. M/s HemadriCements Ltd. GunturBranch 3750 KY S. Nls Yukon (India)Ltd. Attehalla 1:350 RV Karnataka 6. M/s Yukon (India)Ltd. Tippangonda- 1:150KW Karnataka nahalli 7. Nls Yukon (India)Ltd. Vrishabha- 1:100XRV Arnataka vati Site A, Xarnataka site B xS0 KW 6400 XW SITE ALLOTTEDBY SWATS 1. Nis CauveryRydro Energy Shivasamudram 3000 RV Karnataka 2. MIs GokakPatel Volkart LTd. Dhupdal 2,800KW Karnataka 3. M/s DandeliSteel & FerroLtd. Rajankollur 1,300KW Karnataka 4. His DandeliSteel & FerroLtd. Anverl 1,300 KW Karnataka 5. N/s SagarCements Mo.0.550Guntur 4,000KW AndhraPradesh Canal 6. 19s SagarCements K 2.4.0Guntur 4,500XV AndhraPradesh CanaL 7. H/s GraphiteIndia MysoreLink Canal 15,000KW Karnataka B. His RukainiSteel Industry MysoreLink Canal 3,500IV Karnataka 9. H/s BhorukaPower Corp.Ltd. ShahapurBranch 6.550RV Karnataka ° _ 10. His ElectronicTech. Co. Ltd. Kilars 1,300KW Karnataka 1 11. Nis TungabhadraSteel Pdt. Ltd. Malaprabha 2,000KW Rarnataka urnA REWEVARLERESOCEIS DtvLOPMENT PROJ8CT Prellaiary List of Proposalsfor Small-Hydro and Windfarm Projects I. sumL UYDitOSCUSIES

Location status sam of Promoter Pzoiect Capaclty PtMpooed SITE ALLOTTEDBY STATE 12. Mis Tungabhadra Steel Pdt. Ltd. Nugu-NULC 2,000 Xw Karnataka 13. M/s VlkrantTyres Harangi 4,500XW Karnataka 14. Ml4 VlkrantTyres Kabini 1,940 XW Karnataka 15. His T.N.P.L. Allyar 2,500 RV T?mlINadu 16. His T.N.P.L. A_rhvathi 4,000 XW TamilNadu 17. His T.N.P.L. Perunchani 1,300XW Tamil Nadu 61,S00XV

TO BB ALLOTTED TO BB DETEIMINED SITS STILL Taail Nadu BY STATE PechiparalDam 1,300XS W ThirumurthyDam 1,950XK Tmil NaduI Thuilapattli 0.350 XK Tamil Nadu Canal Drop MhkurthyDam 0;700 w Taml Nasdu 4.300 XV -- U D LONWT DCT PreliminaryList of Proposalsfor Small-Bydroand VindfarsProjects II. UINDFAU Statue Mame of Pramoter Capacity ProposedLocation VWD= CONSIDUAION By II=l 1. Nis Soyadu Beedi Co. 1 s 250 XV TaullNadu 2. M/s Aquasub 3dginoeriug 1 x 250 KW Muppandal,T.N. 3. Ml4 AquapumpIndustrles 1 x 250 KV Kuppandal,T.N. 4. N1i ShreeAkilandoshvarl Hills 1 x 250 XW Kayathar,T.N. 5. Mis Autolec IndustriesLtd. 1 z 250 KW Kaysthar, T.N. 6. His TamilNadu Newsprintand 80.x 250 XK TsamlNadu PapersLtd. 7. Nis DelaluCements 16 x 250 XKW Tadl Nadu S. Nis Srl talawari Flre Vorks 1 s 250 XW Tamul Wadu 25500 XV 8ITE ALLOTT=DBY STAT! 1. His GoldenAgricultural & 500 XW TamilNadui Poultry Development 2. His Rajapalayem Hills SOO KV Tail Nadu 3. MI Ramao Industries SOO KW TaSmlNadu 4. H/s GoldenHills 2state Ltd. 250 KV TamllWadu 5. His VisaldeshiKNils Ltd. 250 XW TamilNadu 6. M/s Sri CoimbatorePoineer 250 XW Tamil Nadu Fertillsers 7. M1sSri Kateevarl FireVorks 250 KW TamilNadu 8. Nis BombayBurmah Tradin8 Corp. 1000 RV Tamil Nadu 9. HIs Vijayebree Cotton Kil1 250 XW TamllNadu 10. g/s Vijayshree Spinning K11ls 250 XK Tamil Nadu 11. M1s Soudararaja Kills 250 KW Tbail Nadu 12. 141. Sree Rarpagambal Mills 500 XY TamllNadu 13. Mls Vanaiyapauuel & Sons 250 XKW Tail Nadui 14. MIs TuticorinSpinning illes 500 K TamilNadui 15. 1419Gulf Olefines (P) Ltd. 250 XK Tamil Nadu 16. His India Cements 4000 KW Tamil Nadui 17. Nis NBPC-HIGOW 250 KW Tamil Nadu° 18. 14m WEPC-AGRO 250 XK TamIl Nadu 8250 KW IDIA

imvu asumr csULHI RJ

PrelJuuary List of Proposals for hmall-Kydro end Vladfarm Projects nj-i-- Statas Em of Printer Capecity proiog. Iaet sxTx STILL TO J ALLo BY STATE 1. Mt$ Sipres steel 2500 XV Tamdi Nadu Pit Ltd. 2. His Madras C_mate 4000 IToIl Nad SSOO KW

o

I :4 - 68 - Annex 3.8

INDIA RENEWABLERESOURCES DEVELOPHENT PROJECT

Small fydro Component

List of Six Type Drawings to be Issued by IREDA for Guidance to Developers'Engineers in their preparationof GeneralArrangement Drawings for Loan Approval by IREDA- and Detailed Drawings for Construction

Tvoe 1:Dam Site - Siphon Intake on Dam Crest

1-1 Site Development Planand Profle 1-2 Siphon Intake - Plan and Section 1-3 Power Plant- Plan and Section 1-3 Single Une Diagram and SEBInterface Arrangements

Tvoe 2: Dom Sit- Verticallyrbine

2-1 Site DevelopmentPlan - RepresentativeProfile 2-2 Power Plant - Plan and Section 2-3 Single Une Diagram and SEBInterface Arrangements

Tvoe 3: Dam Site - Horizontal FrancisTurbine

3-1 Site DevelopmentPlan - RepresentativeProfile 3-2 Waterway Plan and Section 3-3 Power Plant - Planand Section 3-3 Single Une Diagram and SE8 InterfaceArrangements

Tvoe 4: Canal Site - Elbow Tubular Turbine

4-1 Site DevelopmentPlan - RepresentativeProfile 4-2 By-passDetails 4-3 Power Plant and Taitrace - Planand Section 4-3 Singl Line Diagram and SEBInterface Arrangements

Tvoe 5: Canal Site - Shihon Intake or Pit TuMine

5-1 Site DevelopmentPlan - RepresentativeProfile 5-i By-passDetails 5-3 Power Plant- Plan and Section 5-3 Single Une Diagram and SEBInterface Arrangements

Type 6: Canal or Dam Site - Stralght FlowTurbine withRloht Angle Drive

5-1 Site DevelopmentPlan - RepresentativeProfile 5-2 By-passDetails 5-3 Power Plant- Plan and Section 5-3 Single Line Diagram and SEBInterface Arrangements - 69 -

Annex 3.9 Page I of 2 India Renewable Resources Development Project

Indian Renewable Energy Development Agency (IREDA)

PV Market Devlopment Component Project Implementation

Project Manaaement. The executing agency for the project is the Indian Renewable Development Agency (IREDA) which will be tasked with appraising, negotiating, awarding, supervising, and monitoring all loans and technical support provided through the Revolving Credit Fund for the PV component. IREDA will be responsible for establishing the detailed lending terms and guidelines, and in developingloan applicationevaluation procedures. Followingits current practice, IMEDA would continue to retain consultancyservices of technical and marketing experts to assist in the evaluationof loan applicationsmade to the Revolving Credit Fund, as well as providing technical assistance for product quality improvement,marketing, trainingand procurement. IREDA will also lead the publicity campaign. Monitoring and evaluatingthe progress of PV loans and technical support will be the responsibility of IREDA. A consultant has been commissioned to prepare the detailed procurement procedures for the PV sub- component. These guidelines will be ready be December 1992.

Revolving Credit Fund. The revolvingfund will be set up at IREDA from the proceeds of the IDA credit and GE? trust fund to finance the purchase of PV systems on credit. The revolving fund will provlde re-financing to financial intermediaries,or large volume purchasersof PV systems in the form of a credit line or loan that will be accessadonly as sales of PV systemsoccur. Applications for a llne of credit or a loan would be made to the fund by financlalintermediaries (such as leaslngcompanles, finance companies)or large volume purchasers to enable them to on-lend this money to purchasers of PV systems; and to large volume purchasers of PV equipment (companies, non- governmentalagencies (NGOs),cooperatives, public sector enterprisesetc.).

These applicationswould includethe followingelements:

* A description of products to be purchased, lncluding product specifications, product sourcing, and warranties. * DetaLls of the arrangementsfor after sales serviceduring and after the warranty period, includingthe facilities,equipment, staffing, training requirements. * Estimatedpurchase volumes,product prices includingcosts of after sales service,and cashflow required to flnance PV system purchases. * Environmental management plan * Financlal guarantees as required by IRBDA. * In the case of a finarcial Lntermediary,the following additional informationwill be requireds - demonstratedcapacity in lending in the proposed market area and recovery rates achleved; - proposed reglonal concentrationof lending; - proposed on-lendingterms and conditions. _70 -

Annex 3.9 Page 2 of 2

The credit and product flows under the PV Market Development Component are shown in Figure 1 belows

Productand Finance Flows

IREDA

.711]1J 7 Manufacturer/Suppler FinanalIntermedlaiy D butor - leasingCompanies - CommerdalBanks DI-LA1 - FinanceCompanies - BulkBuyers (Public andPrivate s t ' r ~~~Customer Ckses * Cooperaiv -NGO - CommunityOrganization - Private/PubllcCompanies *Individuals Figure1 SPVMWaktng Approach - 71 - Annex 3.10

Zndi& Renewable Resources Development Project Indian Renewable Eneg Developent Agency (IMDA) Solar PV Market Develoment Comionent PV Sub-Project Eligibility Criteria

!BCRICIULIIUII!?CRITEZRA:

Locally manufactured or imported products will be eligible for financing so long as they meet the reuired technical performance criteria. Key technical criteria ares 1. Product performance, quality, reliability, and safety; 2. Adequacy of the atter oales servoce arr nts, including consumer education, sres and consmables supply, technician training, technician availability, serice responsiveness, service costs; 3. Cost recovery plan and demonstration of its effectiveness (e.g. based on surveys of consmer capacity and willingness to pay); and 4. Unvironemut management plan, partlcularly the plans for collecting and safe disposal or recycling of used batterles. liDA must be assured of the financial and institutional capacity of these borrowers to implement and manage the project. Criteria includes the financial viabllity of the borrower; extent of their experlence and outreach among the customers in the region; and adequacy of their cost recovery in similar endeavors. In addition, the. borrower must provide the necessary financi.l assurances such as bank guarantees as required by lRiDA's lending policies.

ELIGICLBLR3iRORS: lINDA will lend to private and public sector enterprises, but not to SIB. or government agencies. lREDA would lend diroctly to individuals, companies, Noos, cooperatLves, and public sector enterprises if the financial transaction meets REA's minimum lendLng levels. Sale of products costing les than the minimum wLil be financed only through intermediary financing agencLes or leaslng copanies. They will on-lend funds or lease the PV products to their clients. 72- Annex 3.11 Page 1 of 3 INDIA Renewable Resources Development Project

TNPL Papermill Expansion ARRANGEMENTFOR PROJECT SUPERViSION AND MANAGEMENT

Th mainprojecb-wide physic actvities arn:

BasicEngineering Detail Engineering Procumementof Plant and Machinery Procureen_t of ConstuctionServices Scrtiny and awroval of VendorDrawng and Co-ordinationbetwen Vendors Expediting/Inspectionof Vendorprogress Constucion Suporvision Start-upand Commissioning

TNPL has appointedSPB-PC as Project Consultantsand the responbility of tho above ctivitiesare shard betweenTNPL and SPB-PCin the followmgmanner:

P3PB-PCis totallry rsponsble for Basic Eginng, whh is reviewed and approvedby TNPL.

Detail Engineeringis perfoed by to (2) of SPB-PC'ssub-contractors under the dirct supervisionof SPB-PC. This activityis also monitoredand approved by TNPL

In procurment of plant and machinery,SPB-PC is totaby espondble for prepaton of TenderDocuments and Technicalevuation. Boththse activiis are monitoredand appmvodby TNPL,who is activelya at every stago. Upon approval of sward of contact, TNPL i9 responsible for contact finalisation,using SPB-PCs assistance,as and when rqired.

SPB-PC is responsiblefor preparationof Tender Doments and Tecical evalustion for securing constructionservices (Civil Works and Mchiney Erection). Both these activioesare monitoredand approvedby TNPL, who is activelyassociated at everystagoe TPL is sponsble for conact finlison, using SPB-PC'sassisance, as ad when required.

SPB-PC is responsiblefor the scrutinyand recommedation for approva of vendordrawings/documents, which wil be fornally approvedby TNPL. TNPL will co-ordinatebtwn vendo, usingthe assistanceof SPB-PC,as and when required.

TNPL is responsiblefor followup and xpeding of vendorprgres, beides stage-wiseand finalinspections. TNPL has coatected with SPB-PCto availof thelatters services, on a per tiem bas, to assi TNPL in this activity, especialy during the periodsof peak load. Annex 3.11 73 - Page 2 of 3

TNPLis rsposble for aUconstuction sevison (civilwors anderection of pla and machiny). TNPL proposesto deploy its expeiced tm, coMItiuing tho Project Maagmt Division and augmentedby fesh amuitmetof Engs requiredfor option andmaintenance of theexpanded capacity. Supervisoysvices throughvendor thicas wil alsobe utilisd by TNPLfor all mjor qupnmt packages.In addition,TNPL has contracted with SPB-PCto prvide a mini_mucomplement of technicalpeo_e to be deplyed at millsite to assistTNPL in prviding clritionsmoifications of engineeringdesigns to respondto site contingencies.

TNPL is reposible for al start-up and commsoing activities. TNPL has contracd with SPB-PCfor tie provisi of specialst man-powerto assist TNPLin thsemactivities. The services of vendortechnicians will lsobe utilised by TNPLin thisactivity, in rpect of majorequipment packags.

TPL s r _esponslefor ovll Prject Manage and has conacted with SPB-PCto provideassit in physiadand financialmonitring of theProject and assa securing _tary qp_mw

In memc, TNPLis entirdyresponsible for all physicalactivities at the mill site (andat off- sites),while SPB-PC is eusted withdt esponsibityfor all Enginearingand Procurement _svotaaLHowevr, ThN s conact withSPB-PC secures assistance in all area of Project _ nediouto, augmet TNPL' man-powerresourees, us and whenrequired. lUlL

IOLNPIFlILL UIffISi FIOJBCtINWPLtATtON ...... UICI ...... ,*,¢*,, t , t l I 2...... 19t9 2 1995 a ...-. ,..

aiwelta. it P _ Paeeuuos t *m PimlizeUsBaIs UqIslrIce Prcwuust Pressdures as2 naau 3 BSISlCIflIwlnser ------Or*rI. UrniC _a___m ' 'aumaaaauamauauuw'. uifactura OetlldUS On &ICBfwas Prof 56rl t23t m.WUOUNIUUOMK___ IEOUAUMU Nr6iass Ice P ot g bIu : _ __2_ _ _ _ _ Buie Civfl U_swIasI: w :

U fatsue a I "Amp of ( ais alBow Uw.he Pow PlAt s _ Civil s I Cstentuan : _pmaamwaa _ 2 Uuulafctswe£& 9lVofr UWPul NEl a* d EbuuctE f guO WW3muUUUUIUUUWA . inwl ontPP 3 *------u--a--ouIWcc bect 1ff oetrA- Pl- atlp - - grest Plp 5f11 t _ great Om idCt ueowrd P-eat b Urs tCest ekgsaM -- - WO WnU8U U i Com_dsean5ff ltump Tratmewt Pleas 2 O eIssienCteumel Beveswry Plent Cemstin Pulp 111t a 2s cen obie Feas Ple* t Ka t P_perSaslina tMakls * ma a CamisuisaUrn-ICe Patgea tu1I C_lesen Peper bAn. a * eaat ProeejetCainseanils * * s *-----*--^-w*-*------*-**,---.-..-----...... ---.-.....-.-. 2 -.-..-.--.---......

0 .~ Pt' Annex 3.12 - 75 - Page 1 of 2 DIA RENEWAZLERESOURCES DEVELOPMENT PROJECT

EnvironmentalAssessment Susmary

IREDA Line of Creditfor RenewableEnergr Schemes 1. Small hydro Schmes. The schemesare on existingirrigation works and would not involveadditional Impoundments and thereforedisplacement of populationand reservoir-relatedenvironmental issues are not a concern. The developmentof dispersedmini-hydro sites is an alternativeto increaseduse of thermalgrid generationwhich involvehigher transmission and distribution losses. The no-actionalternative would continuereliance on back-updiesel- based generationby user industries. 2. WindfarmDevelopment. Windfarm energy generation is an alternativeto non-renewablefossil fuel burningtechnologies. Windfarms do not generate pollutantsnor greenhousegases associated with fossilfuel technologies. Land areas to be developed for windfarms need not be withdrawn from their existing use. Each windfarm project will be selected from a variety of proposals, according to economic, technical design and environmental impact criteria.

S. Solar Photovoltaic MarketLng.The solarpanels themselvesare relatively small and installation represents minimal environmental impact, if any. Solar photovoltaiceswithout the attendantpollutiou and greenhouse gas generationduring operation are a preferredalternative to fossilfuel energy technologies. The solarphotovoltaic technology will be evaluatedin terms of pollution and hazardous waste generation from manufacture of the solar cells. The manufacture of solar photovoltaic (SPV) cells utilizes a number of toxic raw materials,including: arsine, hydrogen fluoride, phosphorine, and silicatetraflouride. Usage of nickel-hydridebatteries would negatedisposal and recycling problems associatedwith lead acid batteries; however, in view of cost considerations,this is not currentlya projectstipulation. As part of the projectmonitoring, detailed informatiov. would be gathered for a full- cycle analysis of the environmentalefficacy of SPV systemsin comparisonwith other alternatives. 4. The environmental perfonmance of the various energy components would be monitored during project implemntation. Under existing procedures, IREDA requires that projects have the necessary environmental clearances and that government environmental guidelines are abided by during project construction and operation. IREDA's technical staff would review environmental issues related to the projects to be financed from IDA/GE' and advise borrowers on the preparation of the requisite environmental assessments. Technical assistancewill be providedto IREDAunder the projectto strengthenthe Agency'scapabilities in environmentalevaluation, monitoring, and in providing assistance to borrowers In conductingrequired environmental assessments. Training of qualified IREDAstaff vould be provided to enable them to make informed decisions on loan proposals, and to advise clients In the evaluation of environmental mpacts. -76- Annex3.12 Page 2 o 2

Imacts and Mitigation

S. Ipacts and mitigation strategies for the project components are presented in the following table.

NWPAcrTAND MMA1VE STRATE S

Wift4ydI VWinuse conS vfiwthkilgain otew uus * Pk4.te wI bedad atexWsin canals VWd dam. QvaUteIU * PlowvE oninue to be dctaed by Inigamonrequrnte. *Cleaanceftonki ngslon authoretfast beobtaine for seach

Desluollonof agdculklr0 ,V fretlad * DesignSeeINOn ofstucture foavoi desuuclon ofagullr6alt len andbfmors 1) oe dut and carl dropby paes 2DeVnaIns ofnow wate btM an twga struc indam bad dedgs. * Madmumnuse of adinulgh of ways Ic. water oonveyance sbuelureanmd pawe tanwn~Ir:, gWMist arrangrnente. * Desgnappovl contenent meeingloca envrnnrdl, and WI envfronnentalreuAMMY requlwnentL * IRMAtechica staf to advis Borraowesan pmepargatinof reIulari 2fDBone nss -

Fis enlhvrsnat dam sIe * Adequatedsign onsdemllonsfor 8itaksOucbxe Sow Valodl.Omrens. efta * rwlr,mentmlassessmet sholid determe*swno of uea restoufcead reoommend mullga tagileon a oftby ee bass Dam samo ety, anal bank saly . * orgMn dIet engin wuld reviewapp_caic at any of 1he dItcts dams o canl suct for dam safey

Whdfeam Damage,to Wsaural lads woodands * ib wsonwd be sensiv onvIronenta -llismons. * Lan am used forwlniam does not haveto be witdrw fton cotheuses * IlA poki uld encouag use of vacantlnd wher

* Enwsuadequate cowmpeston and prvovdfor contrinud use df bd by wAventoweers. * -. MA WI advs on ppardon of requisit bwtrnnm i

* IFDAIteci wold reviwapplicantonsltam en*twsrdsbrcpokt gdu Pu for * fM woul erea bes avai_abye n tchnoloy mulwftun WWo dwnimb b usd at a SW mawnftng pl * s etof poect nlof d@ed infr would be garnere fora *6cydl analyis of the wenvrnmentaefficay of WPVsystm in co wmpaiowith otwe aftmatves,

En*Ironmntareleas oflsad Itmspent * bidiahas an effectivputvat sectorled recclig Indusy smtorgballer.. * MNESwould asure ta adequatefeciie ameavailabl forsaf handingof leadkad balatsa durin proec in,lmentation *Usage, adaldedhd4Vde bftteies wol negatedisp osan recyclingproblems associated wMt lead-acid baette othiis not mm*nba proimsotspulation Annex 3.13 - 77 - Page 1 of 2

India

Renewable Resources Development Prolect IREDA's Environmental Assessment Function ProposedScone of Work

1. Introduction GOI and a number of States require that environmental assessment of projects be submitted to the concerned authoritias as a condition to obtain environmental and forest clearances for project implementation. In addition, there are Central and State norms for compensation and rehabilitation of population affected by Public Projects that power utilities must observe. 001 and the States issue environmental and forest clearances provided the concerned utilities undertake actions Indicated in the letter of clearance to minimize adverse effects of proposed projects. Only projects which have been cleared in this respect by all concerned agencies would be eligible for Bank financing. The World Bank requires, for all projects it finances. that the environmental and social implications of the same be appraised and dealt with in accordance with Bank policies in this regard. If Central and State regulations exist, the Bank requlres that the project conforms to the most stringent of all of them, including the Bank's. Because of the public interest in environmental matters and the need that IREDA-financed projects meet the necossary environmental and social standards, IRDA Intends to entrust such responsibilities to the Projects and Teehnical Consultancy Department which is responsible for appraisal/ monitoring of projects. 2. Responsibilities (a) To ensure that environmental assessment and social impact assessment of the project are incorporatedIn early stages of formulation as a factor In the analysisof alternatives and desigp of the project. (b) To assist the borrowers, as necessary, In identifying major eaviromental and social issues associated with the project.

(c) To assist in the preparation of terms of reference for environmental Impact assessments (BIs) of different kinds of projects and keep a roster of consultants who can help In preparing assessments and impact mitigation plans.

Cd) To monitor execution of EIAs to ensure that they meet acceptable quality standards. _Annex3.13 - 78 - Page 2 of 2

(e) To ensure that costs of mitigatory actions are properly considered In selecting end costing projects.

(f) To ensurethat BIAs are conducted in accordance with the applicable standards.

(a) To mo Imtorimplementation of mitigatoryplans and ensurethat actions Indicated by the concerned agencies for environmental clearance are carried out. (h) To assist borrowers In assessiag and proposing solutions for the correction of environmental deficiencies of projectsiplants already in operation. Mi To priote and asdsit utilities In the creation of units specialized In environmental aspects of power utilities (i.e. design, monitorlng, etc.). B,As would be carried out by this department on its own but would prowide assistance, review and smonitoring of any work undertaken by the project promoters or their consultants In regard to IRMDA-financed projects. S. Staff i No separate staff would be employed for the sole purpose of exercising this function. Rather, ZIRDAwill Initially avail the services of consultants and provide the necessary training In environmental assessmet to all technical staff engaged in project appraisal and monitoring. - 79 - Annex 3.14 Page 1 of 4

INDI _MMVABIXRESOUCS DVLORN? ROJCT

NPL Iaaasse-based Paperill Component EnvironmentalAssessment Su~mary

An SlU study for TNPL's existing plant and the proposed expansion was prepared by the National EnvIrotal and Egineering Research Institute (E3M3T), an Indin fim of enviromental specialists. The main conclusions of the study ares Air Pollution. Major sources of emissions are the power boilers, recovery boiler, digester, kraft mill and bagasse handling system. b1issions of SPm, TRB (Total reduced sulfur) Cl, and BOX will be neo1igible due to proper mitigation measures that will be applied. s, emissions1 wll ncrease from 66 grJsec to 108 gr/sec after the proposed expansion. The resultant highest ground concentration expected will be 43 ugl/m which is well below 80 ug/m6 (limit of G00's air quality standard) and V.B 100 uglma (Annual Arithmetic mean standard). Noise. Noise levels after the proposed expansion were estimated to be 56 dBiAat the employees colony (60 dBA - OSA standard) and 77 dBA inside the control room (Max allowable limlt for 8 hr. is 90 dBA). Additional noise attenuation will be achieved by a green belt which is planned as part of the expansion. Additional noise mitigation measures will be applied in the wood logs chipper units, as detailed below. Water. The various effluent water streame undergo a varietyof chemlcal, mechanical and biological treatment stages. Water is discharged from the final forced aeration stage Into the irrigation canal. Effluent water quality Is within the limift: set by 001's standards for sewage effluents used for Irrigation, except for sulphides which reach 2.4 mglliter and are not allowed at all. All the effluent water will be used for Irrigation. Unless long-term effect on soil will be detected, there is no foreseen negative impact on environment. Solid Wastes. Most of the solid wastes are being recycled and used as raw materials In cement, paper board and briquetting industries. Runoff water from occasional small piles of solid wastes may coantaminate surface water during rainy season. However, soil and water saples from nearby wells do not indacate any contamination. Bioloaical Environmant. No adverse effect has been predlcted on flora and fauna. DeveloVment of a green belt will attenuate noise and dust and maintaln the dlversity of birds and other animals observed In this area. The use of bagasse as raw material will reduce forest depletion i India. - 80- A 3.14 Page 2 of 4

Social and Economic Displacementof Population.The proposedexpansion of the TNPL papermilldoes not involveany new displacementof populationas adequate space is alreadyavailable on the existingplant site for the installationof the new papermachinery and ancilliaryequipment. However, operation of the existingplant has adverselyaffected 86 families living in the adjacent village of Kurukkapalayam due to seepage from the plant's effluent lagoon and settlingof coal dust from the plant. Fifty families own agricultural lands and the remaining 36 familiesare dependenton dailywage earnings. The residentsare mostlyemployed directly or indirectlyby TNPL. Thereare no tribalfamilies involved. In December 1990, TNPL acquired 8 hectares of land in a new site acceptable to the affectedfamilies and governmentapproval of the proposed site layout was obtained in July 1992. The relocation site is only 2 kms. away from the village and will not result In any economic dislocation to the people. Because the site is closer to the railway and main roads, increased economic opportunities for the transferees are expected. Under its action plan, TNPL has undertaken to complete the relocation process by February 1993. Site developmentto be providedby TNPL at its cost would include water supply, roads, street lighting and coiinity facilities,e.g., temple, school and toilets. The resettlement plan also covers provision of benefit packages for the affected families from Kurukkapalayam, for the host village,as well as for those familieseligible but unableto availof benefit packages earlier granted under the original project. With thesemeasures in place, the standard of living and potential for higher income generation among the villagers would improve. Adequate arrangements will be put in place to monitor and report progress on the lmplementation of the plan. Social Impact. The expansion will provide more employment opportunities. Supply of irrigation water to farmers, which otherwise could not afford pumping it, will increase crop yields and improve their income. It should be noted that TNPL is maintaining social housing and recreational facilities for the workers colony on a high standard.

Nesative ImPact. Influx of additional people to the area due to job opportunities may cause social tension. Increased industrial activity may affect public health. Health camps have been organized by TNPL and medical screenings have not revealed prevalence of mnyserious ailment. Overall impact was estimated to be positive provided that all mitigation measures will be implemented and environmental management plan be adhered to. Monitorins Plan TNPLhas a full fledged laboratory equipped with an appropriate number of Instruments and qualified personnel to carry out regular analysis of the raw water influent and waste water effluent and monitors the performance of the wastewater treatment plant. The unit also has air monitoring equipment for movnitoring and analysis of stack emLssions. Ground level concentration of g0o, s0o, SPN, Cl1 and H. will be monitored in three sites selected based on a model calculatfon. Sampling will be performed once a week, 3 samples per day. Continuous monitoring analyzers will be installed on all stacks for SOz and E0 emissions. - 81 - Annex 3.14 Page 3 of 4

Improvement In Existina Plant Changes would be applied to the existing plant to upgrade its environmental performance to the level of the new plant and correct some basic deficiencies related mainly to safety. Mitigation strategies for the project components are listed below and are part of TiPL's Environmental Management Plan (MP). NW§ND-UMAIWST"E

lWFLPipwin Orgaid. compouqpndssuue mxd tu * TndLssdindefgatnng altmaft few sowlolo b for inniAg pmdm~aMeoephern~ ornat odow. orrerndungodor emaisioneowdi9ftingom gu trnte folowinequIpmen: 1) Mlmw h* forto wooddigesir; 9 coolingNWquo reovey txnao 8) mumpIel~ e4aratous Apcpdatenmioay cdonwao preentd toiw Baskon Noembe 23, IM forcoMment

Ndoefm wood dwr d ad * Woodcdpr= opran 10 be noed to dalm ho^ vaeldontarea soae o ddp wouidbe udknt for24 hour ffodopeamra A oonutt wvilbe rtaned to xdsybmU noie redudon

bweeee- airc*onlan*iantemladetie * 0Eborataflopreopto wouldbe Iueted antwn wad g bolm to be commissiond_ In 1S99O * 5Wtighofu end eWif boIerftbe[ 01w[sedo7 m,eiesfor better dcspedion of 50a. Coal oge amacoa duds iions * Dtuppr_onv sm wDbe miealedln m oo ddoae yd. Fin'hazud od sra oyadand h * Atid pt aey aitad w be pwefnror Ilbd pq1pei r A orage bdi.o ndaln for*e _bron and alam "smn to be knpsmentd an aely hbeak

Otbdeh 11nge, oWal * At*d psy sally audt has ben pedmwd area apl hd rommndsIons 1Abe bupneted on a *nl be. Nodl_ owlngenoypan * Adb_aa oonfingencyplnum pdepd bylTNPLIn Ju 1S2 nd was reewedand comm_ ed on bytw 3arr cread inbin hs pre,m *.TN "LWcomp and p_ANtO e "a mdo pu dxisephaof ryinsodon.. formoe trhahalalb to dat andreinrcme pubo_ht pub and wainbd m pprn morilodgsysnm Medloaleaeeing ondued by TNPLIn adjacentge hawnot d prlene y uoIN anet P he camh aveben dadubdfo nritrhet ibmion anong middw * TPL wOppar a nmdbalpra forplat wodins 1t alltIe to oocupaona IeIItI Theprogamn wE be submbd to meSan for reviewon,or beore NovembeSO,U8Z TML w ue wderviceo lt OcouP Ha SerGMesom, D_epewar ofMoes. BHEL.tonmrn ft meheam of ThPl eml o aa. * itfiprovWditeIIodo flousefto n*I I e beraeneapli wlDbe inmted. tn am usap dd ineet for * Thes bwrus idnAto pA efldbd I [Oon_wat mw hv damagingd_a ue *wIAX ble %mi pumpingcepebl ofTNdL on sgtodaiwelea,s suh as A * The Ul anth ah boen ;ed by lodalemi InOft dammd od peme its. manne foree ymea nrw Ueffecta - 82- A-x 3.14 Page 4 of 4

* p pCadshso beosed,i sIe rin pxmp hM unbWedaaop y asopposem Fippereaundwt - OepunentofAgslcmleIn fto Stb ofTang Naduahas desud mw.ofWaa esentfor fsAm * slnm usaeof paper mr sat for IWlonh1s been sadad by TendNsdu Awe,b*W nul Lbllwruf AWi~obxuwbl defthewwnto ls bumeadee pwmdesll weeelbeeiwd In li mm skadd rendNadu u).

wasin WrISolivmtm atbw * lai wasWAr Wboiun "son vAJbe upgrded wi

* Ce gnc plm*gaopumnil beafft awe0sr amenmsya ha been p _ol. at n lago n bin beused for uqg wpa*. * The 1'in agraonIagoon wIA be drained nd lined w a bupeMia matWdato pl eeepa e ltM oon A be wed sea -ug pandI rquhrdat a ler ag. * TNPLOuady df aspebftnt Inoseeshond ad ame

&dbaln d lanlilor bagr. asfad * Ihe Inpdonnt enaslon 1hm fad dhanIe i dIn atto auarnib, Inaddiknbuf pstO bowbepw di lpLdatdbi_s. BI n coanbeniatad by ft u d bo_m%VA asa ue ie_hiaonot wsydwe t onlio#t4r balsa pedmoIn ft *aEPi eIna _nmeehi polu tonishr"lOrcmen he negigl inenpan lqtuNbent airqlty. lWLbds.banmis Theidna of sddpoopin p in f * TNPLAwnoreo emploe b t. howuses by usemayode edidig enWs19 pm*4dighouisin ben suiho andneeomy kbiuckmr *otwwOPP- 0uh_:spol endm inIoIIa n_ b na indlise_u Anbrmmin e iundir roadmide, * ToswAb a ft webapuchastuft c nond,rod duehemy ta goagonI ha ben A_ol Intkin b d eit a goodtanapoAatba S*M b - inb dedw 11hsmay inde badt moe wnd wr mob aid - iprepeWsW re-Om TNPLh hsEd M Patl TewpostOn*noy SaMoa.bondut tail

EsnSlon Ar-wa c_dwpmh In * Pdaden In ft asto wlge d be preidd *N Wmd TPL1e prOll . Itb Isid eos _wes meansuchas nie l duei upoeni ltotnm lireaMosbe pnsd by diapnemlenooopeaiWe tOR snm.Hea amPs TNPLatladi i tejntsa4meffifa heaveshdybeen Orgawisbyft muuagemenSuch adM odwbe Mngftmnd In ft Wisp of K pdayi n 1dInda ;o inh1190 TNPL re She dlnd atfdtsoulmnd ft 1N1.Ombin, OePa ftoM de AMM ofto TNPIccmpound, paot od wAhvh w nas lagn, dash in at anted a Inh lIi ea nIts toilaes _for _hmb on. A lou seepagbae in be d.' lamedord pws forfg aloolno dhd inlot U8I s was al gms calnftI -a p ond eppwd by ftD =elordToswPlaun 1NFL. mlbqth in ftw 8SiVL gofood dusltem ftst ls dtohid Isqutudlbto beodgwmmnint inpiatin h troblmi. (SubOcla Koo forburn of reozalsp_anb on!Up do&unawn in kdMldui b in i A rawnaet padg in beg dend in ornlmion Ww fab d buujas. WL hasn dstua in omplboal-o i of e bls by bJw

csf Edwu inwse h i h * TaInLha dmgy pried os fw Inedpeopl. Addln inAftWOgMUn aid o _W*hvPI" jobs wud be dbatd basedon XMLe jo dlsbaln id d_omnt mor jo opp Aen and e%lbw Odierjcowoebapvd psuun we UKLan &Ahd bybd people beb dsie WTPL inidu1 ng OduWin_tbin -I moIm bod anhtlabour,6 INDIA *UU ALE RESOURCES DKVEW?NEMT PROJE SCHEDULEKOM RESITLEMENr PLAN

Advty .92Au Sepembe Odtobr Nmvebe Deweber J0_93 a Feblure Sta as n Mtv. 4.14,2

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T___s______iil iIh. I I I Completiondate - .1 [1m mm 1 1m. 1.. I [ - Juane 30, 1993

2. dm1of so 1p: lbA_t13 199lam abf Ceq noIM 10 muth lflt Aug1I1 . s~~~~ -84 -

An 3.16 INDIA Page,i1of RenumbteResources Development Project IndWenRenewable Energy Develop ent 9Agncy(IREA) PROJECTCOST SNISE A. 100NW WSALLNYDR COPNEOW RfteeNillion USS itlli1 ...... Item Local Forefin Totel Local Foreign Total ...... Electrical 0.0 461.3 461.3 0.0 17.? 17.t Necianicel 3.5 m1.8 775.3 0.1 29.? 29.6 Civitl Works 403.4 26.3 429.7 15.5 1.0 16.S GridTie 17.5 70.2 8P.? 0.7 2.7 3.4 ...... Tot*l Baseline Costs 417.0 1337.0 1754.0 16.0 S1.4 67.5 ,...... PhysiealContinwg ei 41.7 133.7 175.4 1.6 5.1 6.? PriceContingencies. 104.0 221.0 325.0 3.6 7.6 11.2 ...... ¢...... Total Project Cost 562.7 1691.7 2254.4 21.2 64.2 85.4 Inteesot earing Comt. 66.0 169.0 237.0 2.3 .8 6.1 ...... Total Finaning Required 630.7 1860.7 2491.4 23.5 70.0 95.5 ,,,...... _......

D. s NWUIDFARS COmPONt Res Millions USGMilions ...... Turbins-ertor 856 1339 2115 32.9 51.5 64.4 Eltetrcatl orks 167 167 6.4 6.4 Cfvfl Works 197 197 7.6 7.6 Lad 85 85 3.3 3.3

,...... Total Baselin Costs 1305 1339 2644 50.2 51.5 101.7 ...... Phrsical Contngecies 131 134 264 5.0 5.2 10.2 Price Conting fenes. 203 78 281 6.5 2.5 9.0 ...... ^...... Total Project Costs 1639 1551 3169 61.7 59.2 121 Intert during Coast. 104 26 130 3.5 0.9 4.4 ...... _ ,....*...... Total Finaning RIteq d 1743 1577 3319 65.2 60.1 125.3 ......

C. SOR PV 4ARETDEVELOPMT COON Rues Millions U#SXillion ...... ,...... ,,,...... ,...... Ite Local Foreign Total Local Foreign Total ...... Cost of SPVProdats 696.4 299.3 997.7 26.9 11.5 36.4 Othrs S.6 1.2 6.6 0.2 0.0 0.3 ...... aslineCosts 704 300.5 1004.5 27.1 11.6 38.6 ...... Physical ContIngencies 70 30 100.5 2.? 1.2 3.9 Price Contingenclos. 249 46 295 8.3 1.5 9.8 ...... Total Project Costs 1023 37 1400 38 14 52.3 Interestdurlng Const. 92 0 82 2.6 0.0 2.6 ...... Totat FinancingRequired 1105 3?? 1482 40.? 14.3 54.9 ...... USIA ReWAlble _eewce lm t Project

gIIPL 11pMi ERmIOA Proct cot s_m

fs. ittiena to. Mitllns In US S 1illons (Official Rate5:R.S to 1) (Nwket Rat:sJ.$30.S to SI) ...... It" Lcal Fordgn Total Local forein Total Local Foreign Total ......

CII ilwets 5.3 5.3 137.8 137.8 162 1Id qipmnt ard Spae 16.0 65.3 81.3 416 1698 2113.8 488 1990 2478 Erection 3.0 0.0 3.0 76 78 91 91 Suties Nd Tae 38.7 0.0 38.7 1t0.2 1006.2 1160 1188 Wul_erf- 1.1 0.3 1.4 28.6 8 36.4 35 8 43 ,...... w...... _*...... Total Plit Cost 64.1 6.6 129.7 16t6.6 1m.6 3372.2 1956 1"9 3954 Prooperating Costa 1.8 1.8 48 48 48 48 eo ~~~~~~~~~...... Total kselftw Costs 65.9 6S.6 1.5 1714.6 1705.6 3420.2 2004 19M8 4002 ...... Physical Contingencies 6.4 6.6 13.0 167 171 337 194 200 394 Price Contingencies. 10.4 4.7 13.1 346 89 435 346 89 435 ...... TotaLProject Costs 62.8 74.8 157.6 2228 1965 4193 2544 2287 4831

Working Capital 1.9 0.0 1.9 S8 58 58 58 Interest drlng Coest. 10.8 0.0 10.8 361 361 361 361 ,...... ------...... Total Finmicing Reqidred 95.5 7.8 170.3 2647 1965 4612 2963 2287 5250 ...... ------......

pha% - 86 -

Annex 3.17 Page 1 of 2 India

RenewableResources Develolment Proiect

IndianRenewable Energy Develoinent Agency Limited (INEDA)

Ellible Procurement Items for Credit Line

The following is a summary of the items which would nozmally be expected to be funded by lINDA using the credit line facility funded from proceeds of the proposed IDA Credit and GNP Trust Funds 1. Small-Hydro Schemess The IDA credit line may be used to finance project maagement and engineering services; electro-mechanical equipment including hydraulic control systems, turbo-generators, electrical Interface equipment, tools*, and spare parts; training and OWM manuals generally as listed below. Financing for site development, civil works, buildings and buLlding facilities Including power and lighting services, cranes, workshops and the like is to be provided by the developer. Specifically, the credit line should cover:

- i() Intakes, Casings and Draft tubes (i1) Inlet and Entry valves (iii) Control Linkages and actuators (iv) Hydraulic pumps and servo systems (v) Monitoring and Control Systems (vi) Turblnes, Casings and ancillaries (vi) Generator and ancllaries (viii)Switchboards, Protection and Control Equipment (iz) Power and Control Cables (z) LVIMV Switchgear (xi) Transformers, and NV svitchyardfacilities (zii) Support structures and subtransmlssion. line equipment (xiii)Outgoing Switchgear at SEB substations 2. Vindfarm Schemess Funds from IDA/GETand co-financiers would be used for procuring imported equipment and materials requlred for wind turbine generators and for related engineering services, Including the followings (o) Anemometers (i1) Assembly and erection (111)Cabling (iv) Capacitor banks (v) Components of turbine-generators Including blades, gearbozes, nacelles, brakes, bearings, shafts, generators,hubs, couplings, etc. (vi) Computers and peripheral equipment (vii) Control and monitorlng systems (vill)Design and Engineering (iz) Towers - 87 - Annex 3.17 Page 2 of 2

3. The GETJIDAfunds may also be used to financ, equipment complementary to the main wind generator plant and control and monitoring facilities. This could include all ancillary electro-mechanical equipment, including towers, electrical interface equipment, tools, and spare parts generally as listed below. Financing for site development, foundations and civil works, buildlngs and building services is to be provided by the developer. (i) Tower Structures (ii) Monitoring and Control Systems (iLL) Switchboards, Protection and Control Equipment (iv) Power and Control Cables, LVYMVline equipment (v) LVIXV Svitchgear (vi) Transformers, and UV switchyard facilities (vii) Support structures and subtransamission lne equipment (viii)Outgoing Switchgear at SB substations 4. Solar PV Schemes: The IDA/GE? funds may be used to finance complete systems for variousPY applications given in Annex 3.4.

Rural Electrification ApDllcations 1. Solar lanterns. - 2. Lighting and other low power applications in domestic or comercial estiblishments. 3. Communityservice systems (e.g., schools, community centers, health centersetc.). 4. Streetor securitylighting S. Village power systems a. DC systems b. AC systems c. AC PV-diese1hybrid systems Water SupplyApolications 6. Water pumpingapplications 7. Water purificationsystems a. Filtrationplants b. Disinfection(UV, ozone)

Other Applications 8. Batterycharging stations 9. Ventilationsystems and evaporativecoolers 10. Crop sprayers 11. Electric fencing - 12. Educationalkits 13. Vaccinerefrigeration INDIA

RENEWABLERESOURCES DEVELOPMENT PROJECT

TNPL Papermill Expansion Procurement Status

Description Approx. Tender Cumulative Status Value (FOB) (US$ million)

01 Paper machine 37.92 37.92 Second stage tenders opened.

02 Paper machine online process control 1.31 39.23 03 Reel handling, Reel wrapping and 3.06 42.29 Cleared by Bank for two warehouse mechanisation - stage tendering. Tender document under preparation.

04 Sheeters 1.40 43.69 0 OS Salvage winder 1.14 44.83 06 Paper machine fiber recovery 0.43 45.26 07 Bagasse storage stacker 0.60 45.86 Cleared by Bank for two stage tendering. Tender document under preparstion.

08 Continuous digester 1.51 47.37 First stage tenders opened. 09 CHP Refiner 0.57 47.94 10 Brown stock washing 0.40 48.34 Cleared by Bank for two stage tendering.

11 Screening and cleanAng 0.25 48.59 12 Post screeningdecker 0.17 48.76 13 Chemical bagasse pulp bleaching 1.00 49.76 Tender issued on 15th July 1992. 14 Black liquor evaporationplant 1.46 51.22 First stage tenders opened.

15 Chemical recovery boiler 2.11 53.33 First stage tenders opened. 16 Lime mud rebumningkiln 1.94 55.27 17 Power boiler 1.19 56.46 First stage tenders opened. 2 Description Approx. Tender Cumulative status value (FOB) (US$ miliont)

18 Turbo generator 1.32 57.98 First stage tend rs opened. 19 Recausticiizng 0.30 58.28 Clearedby Bank for two stage tendering. Tender docueamt under preparation. 20 Others 2.50 60.78 21 Ocean freightand insuranceat 6.S2 3.95 60.78 22 Vendor technicians 0.25 64.98 23 Price contingency e 102 6.50 71.48 24 Price escalation e 4.5S 2.92 74.40 Total (roundedoff to) 75.00

w1 0. a S m l~~~~~~~~~~k

ox .asoIs an as_ I

go X afs as an to go x , , W n axtussZ:s - 91 -

Annex 3.20 Page 1 of 2

Supervision Plan

IREDA Line of Credit for Energy Schemes

The staff input indicated in the table below is ln addition to the supervision being carried out by IREDA. It is also in addition to the regular supervision needs for the review of progress reports, procurmusnt actions, financial state_ents and audit reports, and associated correspondence. About 20 staffweeks will be required to establish appropriate procedures for monitoring the program during Its initial yearsg thereafter, an average of 15 staffweeks would be needed to supervise the project. In addition, co-financiers would provide staff/consultants to conduct field evaluation. These will generally be combined with the supervision of other Bank-financed projects under execution.

Bank Staff Innuts for Protict Sunervision Approximte Activity Anticipated Input in Dates Skilt staff Requirmets has 12/92-1293 *Review of IREDALanding policies, _nhemmnt 3 guidl trm to borrowers, procedre fr Enggconsultmnts 6 prasal, monitoring & control of E,wironaental 2 poJects 'Reviewpower purchase//heeling facilities 'Reviewtechnical guidelines, modelbidding documents,elearances procedures, quality assurancecontrol requirements 'Review TAproposals 2193 Surervision Miss0in Review PVmarkt surveys Economist 2 * Reviewloan applications and appraisals Finance 2 * Reavewactivities by SOMs Engineer 3 * Reviewengneering design PV consultant 3 * Reviewprocurement and costs 'Visft design offices and review project ament arrangeents 'Site Visits *Revew IREDAOsaccounts 10/93 SimervisionNission ' Reviewproject lirplementation Engfneer 2 * Reviewloan applications Economist 2 ' Reviewof procurementprocess Financ 2 * Reviewproject pipeline Tech.Consultant 4 ' SiteVisits ' ReviewIREDA's finances 3/94& 10/94 OugervisionRfs&LM E n n *e * r s a Econ/Finanoe 4 3/95 SuArrvisfonNission - Mid TewmReview ' Reiewproject fsplementation In term of Economist 3 project objectives Ffnance 3 * ReviewIRAEDs instftutional end Engineer 6 financial capabitlty Tech.Consultant 6 * Reviewconsultants reports and action plan * Reviewproject pipeline * ReviewproJect financin arrangements - 92 -

Amex 3.20 Page 2 of 2 INDXA RE5SOURCESDEVEL2P1lT PROJECT

SYrv9niso Plan

TRPL Paper.mll uxpansion

8ank Staff Inputs for Proieot SuoerlUion AFproximte Activity Inpstfafpated In Dates Sk{ll staff Requirements weeks 1/93-12/93 *Reviewof ICBdocuments end bid evaluation _angement 3 'onwitor progress of BMPlnptementetfon Engineer 3 'Monitor project financing Eiwironmant 2 2Z93 SunervislonMission 'Review of procurementand csts Economist 2 'Revfewof iMPand resettlement activities Engineer 2 *Reviewof detailed engineering Environment I *Site Visits 'Reviewproduct prices and market 10/93 SunerJisfonMission - Reviewproject ilplementation, progress Finance 2 of civil work Engineer 2 ' Review EMP • Reviewof audited financiat statements - SiteVisits 2/94 JidTerm ReAWew - Reviewproject nptleentatton In terms Finance 2 of schedute,project objectives andcosts Engineer 2 ' Revew TUPLtscorporate operations Eonnmist 2 ' ReviewTNPL*s finances Eawirorsmnt I ' Rview privatfiatfon schedute ' Reviewof ENP 10194 SamervisfnNitssion Revlewerection of ptant systemsand Firnance 2 comaissioningschedules Engineer 2 ' Reviewof audited fin ncit statements 2/"9 SuwefvisionNission * ReviewPaper NMahine Trlats end other Engineer 2 ptanttests and commissioning Ecosumist 2 1996 Project ComptltionReport P4%4

10'1 ZWu WuZ Z9,ff taleZ 2Z81 wt K 9t91 I Z*S"It - Solt ...... sltd 3 t'VIet wa't alas .191" tro 69£9 02l 69-"1 9ril.l OS-Z "It "ln= o UDISIAO MW Colo 00-0 00-0 00-0 OD- 00-0 sol 0tl 0W-0 0000* 00'0 03-0 03 BfP JVA JOIJd W Stt ulW2 W-OO a,IZ-£ 0-K6 VVIO u-n 9Z-W "n-z A1 b t rLsI MI Si" MM ...... _ _... 20'10 woo 08 £" u - tS£9 "40 U-1 a-t GM "I z £9 "lo ...... r 8aof glwao 193o1 90'l£ 90*|£ 90-W£ 112 It'6 0 0 0 IN WI 1U03= ;O 1w1nam IGwrit £ bD*K- W" In SX 6-Z' =* P"J; UIAWI ,, wo 0o lZOa0 S20 0 al K-0 A|-0 -0o 0||0 tt-0 2 O t0l0c 1)de j" uollAd W60 £t-ol S2" £Z-vt SZ-Ot 69-9 29-t St's SI'? w9 691 11,$ S-0WqO I uot$aSUP"t 11'£ WSs 65't £lt- SO-£ AZ-Z 89l ut£- 58-0 69-0 Z£-0 SilO lM"°Jd

VIMet OiL-|8 All= LfrXm "lostl 08919 S99S SS1£i uL-Stlrt a's ffWs- oaul.0 ,,,,,,,,,,,,,.,,,,...... ,,,,...... _...... I ...... 90 96Ws 6o0 wo0 L-O 910 9190 SSi0 ARTo 8£- 0SlO tl-0 J"qu I M"y 4+ O °M

"'A6Z U-OSZ WMJ9 ff'glt 08*1lW WU'9 arssK 0 t "InS 200 9Z-S S8lom 39MaSal1" Grist wil A9Xrm W-1t 819f Slt," OSlZZ 19-ZZ "It 00-0 00-0 0010 was@dx $@o@$Iltom8 D S59 We"t "lotY-IS ll-b9 89-nt Z6tt Z t A9-65d WA ZOOl 9Z-S SS-lt ...... I } 490"WIloot ...... __...... I...... _._ U*zU Wur Uo WutSZ£K "D 9291 96rAt "I"j U@t Solt 9lZ lO suoodmuo xswoz

...... #......

...... - 1Oi ...... -...... 1, *...... MOM ...... 3> 4M-U96t WM"6* AIMSS WU"56 S16-6" lS-SbtW £ Zrl6U-066 Wdr69S 069s91 9-lJ6 Wp "u it*_a OU 1wA )=*A

*lu Its ammIP"MfteJ Pot leal@gtI . 4 gW SIMI NW vo IINIA Istoricat aid Projected Sources en Application of 9Wm) (fs. fItlUn)

Fica Twtc mnding N t 31 IW1 88 198-89 198-9 199-91 19-92 1929 1993-91 1994-95 195-964 9697 199-9 1W9199 'C ...... 1ited--d...... 3 - P r oj...... Projwtedc t ed------.-- ...... * ...... Soures of ruww ...... ftt Incomebefor Intret 1.05 3.3 5.42 3.55 39.13 43.94 61.37 121.09 214.07 315.7 350.28 3.62 Depreciatio 0.01 0.02 0.13 0.10 0.28 o.9 0.21 0.23 0. 0.27 0.30 0.33 Plsmtlen for Bad Losie e n.29 35.11 S5.04 40.86 ".03 2.29 Ancthatlon of T/A 0 0 0 9.32 21.74 31.06 31.06 31.06 R_pst we0lved 0.00 4.70 12.49 25.30 26.42 30.21 64.78 153.05 258.20 384.75 151.25 1096.91 Grants 0.00 46.38 29.61 0.00 91.86 154.00 164.96 0.00 0.00 0.00 0.00 0O'O Grants Proposed ProjestaEF/Swses tcof. 110.1 154.02 2Z0.50 99.43 101.10 104,40 Strnt. Proposed ProjiettDAMIDA 357.50 453.00 630.00 81.50 0.00 0.00 EUtty Contributlon 42.50 25.00 16.00 16.50 0.00 40.00 50.00 S0.00 0.00 0.00 0.n0 0.00 Other 0.00 0.00 16.50 (16.50) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Srants for Tochnicat Aststane (QEF) 38.82 51.76 38.82 3orrasns: lends 0.00 0.00 0.00 250.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 601 (IDA Ftds) 0.00 0.00 0.00 0.00 0.00 0.00 330.33 797.28 1,300.95 676.45 252.75 261.00 _N1S 0.00 0.00 0.00 24.07 40.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 tOWl Deorrieng 0.00 0.00 0.00 274.07 40.00 0.00 330.33 77.28 1t300.95 676.4S 252.15 21.00 *. totol Sources 4356 79.43 8.16 303.02 197.69 268.33 1,201.V3 i,S;4:5 2,719.6 1,630.06 1,409.77 1,c71.61 ...... Applcotlon of Fumd -...... Proposed: Ntnf-Uydro Project 0.00 0.00 180.18 570.7 970.20 456.40 0.00 0.00 WirdFsm 0.00 0.00 557.70 706.68 952.80 127.14 a.0o 0.00 SPV 0.00 0.00 10.06 126.84 196.45 23.81 353.85 306.40 Other Loins DLsbursed 1S.51 6.57 49.16 82.29 1o0.90 321.91 133.62 0.00 50.00 77m.04 407W37 75.06 Total DIsbursements 15.51 46.57 49.16 82.29 101.90 321.91 M51.56 1,404.30 2,201.45 1,"34.42 761.22 1,091.46 Advances 0.94 2.54 2.61 12.78 13.78 15.16 16.67 18.34 20.17 22.19 24.41 26.85 Debt Uepeument 0.00 0.00 0.00 0.00 24.07 0.00 0.00 0.00 0.00 36.70 125.29 269.81 tnterest Chargedto Spwstlens 0.00 0.00 0.00 2.48 22.67 22.0 43.1s 96.88 1W7.45 243. 261.96 257.59 Chang. In Working Cap.(out. c_s) (1.0) 0.67 2.14 (U1.40) (13.54) 218.10 17.8s 212.52 276.42 (45.03) m1.8s 209.11 Chu soIn Assetes Fined 0.00 0.30 0.46 0.11 0.75 0.17 0.19 0.21 0.23 0.25 0.27 0.30 other 0.15 (0.02) (0.02) 3.04 7.19 1.04 1.14 1.25 1.38 1.52 1.67 1.83 TeshnilatAesistoce 4.58 62.11 46.50 ...... Total ApWlcatlens 15.65 so.07 54.36 8.30 156.81 5s7.88 1,157.10 1,795.61 2,n3.69 1,480.32 1,306.70 1,06.98 27.91 29.36 25.80 215.72 40.87 *310.55 44.27 29.21 -4.03 149.74 97.07 14.6 Cosh an7 0.00 27.91 57.27 83.07 296189 33.67 29.12 73.39 1O2. 98.61 2.5 365.42 CashE 27.91 57.V7 83.07 29679 339.AT 29.12 73.39 1A. 98.61 2.35 35.42 360.04 . w~~. ISMA t00,A3 UIAt3L MM39 NEVULWUUAME (I386) Nistorical Ord Projectd Belaice Iheeto lb., Nittion) Flsoat yew arngbw Mr S1 1W-OS 1906N 1o9890 1990.1 1991-2 199293 1Me.9 1K9945 1995- I99-97 19974 1995-199 LIBILITIES AM E ITY...... Paid-In captal 42.50 67.30 6330 100.00 100.00 140.00 190.00 310.00 210.00 310.00 31.00 31.00 Ua" Appliation bNyW 0.00 0.00 16.50 0.00 0.00 0.00 0.00 0.00 Reserve & sarplw 0.00 0.00 0.00 0.00 lmaral Reerve a owlu 0.44 1.06 4.6 0.26 10.14 23.00 33.9 48.46 70.43 113.91 146.90 222.72 Special Reserw 0.61 2.52 5."4 10462 17.20 25.78 33.07 42.78 5740 Paid-in Capital p1w Rsserv 86.38 121.71 1W.93 43.55 71.88 19P.80 11048 127.34 188.77 257.00 331.21 367.83 440.29 518.61 W21.S Grants 0.00 46.38 76.00 76.00 167.66 32.86 406.12 486.82 GFSMt raae ProjestiGEp 486.82 486.82 486.8 486.82 0.00 0.00 148.93 354.71 614.63 713.46 014.56 @18.90 ts p Prsjes*MIOA 0.00 0.00 357.50 810.50 Touta erants 1440.50 152.00 15.00 1522.00 0.00 46.38 76.00 76.00 167.86 321.86 993.25 1652.65 2541.35 2722.28 2823.O3 2927.78 Total "evoing, fui 43.55 118.27 185.80 186.87 295.20 510463 1,250.24 Lewtam Debt 1,983.21 2,0.18. 3,162.57 3,351.99 3,549.43 Pdnd 0.00 0.00 0.00 250.00 250.00 250.00 250.00 250.00 00 (IDA Foub) 250.00 250.00 5.00 250.00 0.00 0.00 0.00 0.Oc 0.00 0.00 330.33 1,127.61 2,42856 3,066.31 3,193.77 3,186.93 _15 0.00 0.00 0.00 24.07 40.00 40.00 40.00 Total Lm.bm LihbItitles 40.00 40.00 40.00 40.00 40.00 0.00 0.00 0.00 240 2.00 290.00 620.33 1,417.61 2,716.56 3,358.30 3,485.76 3m476.92 Lens Currt Nsturitles 0 0 0 24.07 0 0 0 Me Lownte kebt 0 36.70 125.29 269.8 125.29 0 0 0 250.00 290.00 290.00 620.33 1,417.61 2,661.85 3,233.01 3,215.92 3,35163 Cw6nt LiPbitities O etdAy rediHtwo a ot" Otr5 0.29 0.46 2.83 2.96 3.2 3.59 3.9 4.31 Obtr (Proviion fr Tom) 4.77 5.25 S.7 0.48 1.92 2.6 13.082 30.51 57.79 80.96 111.79 158.0O 250.4 343.60 481."4 cwLet awturitiesof LTD 0 0 0 24.07 0 0 0 0 Totat Curret LiebilItles 36.70 125.29 269.8 12S.29 1.26 2.21 3.12 40.72 33.47 61.05 84.57 11S.74 199.4S 380.69 438.12 612.51 Total Liadlitles mdW ltt 44.61 120.4 188.92 477.59 618.67 861.68 1,935.14 3,S16.56 5,790.48 6,7r6.27 7,206.04 7,513.57 Leas atotrdn 1S.51 S7.36 94.0S 151.04 226.S2 S18.22 1,365.00 2,636.25 4,599.41 S,869.0? 5,959.04 S,f93.59 Leas Lem Lose Provision 0.00 23.29 Current 56.40 113.43 154.29 11.32 200.61 Maturities 4.70 12.49 2S.30 26.42 30.21 44.78 193.05 238.29 384.75 651.25 1,09.91 1,318.00 et Lam Outtuadlng 10.81 44.89 68.75 121.62 196.31 453.44 1,208.66 2,339.56 4,101.22 A*AnVes S,043.53 4,488.81 4,434.98 - 0.94 3.49 6.09 18.J8 32.65 47.81 44.48 82.M 102.99 125.18 149.59 176.44 T_echial Assistel and Pstlon 0 0.00 46.58 currant Ats 99.3b 124.22 93.17 62.11 31.06 Cb 7.91 7.2V 6.7 298.79 339.67 29.12 73.39 102.63 98.61 248.35 345.42 360.04 Im*eeblo. SecuiteLe& lDposits 232.89 351.08 550.36 eeIvdabes 817.21 380.61 S4S.73 761.22 0.00 0.14 0.82 0.95 5.30 17.79 40.60 8456 140.63 211.62 292.77 404.80 Othr 0.22 1.71 4.08 4.08 3.00 3.30 3-3 3.99 Cuent str1ities of Portfolfo 4.39 4.8 5.31 5.81 4.70 12.49 25.30 26.42 30.21 64.7 153.05 236.29 364.75 651.25 1,09M.91 1,318.00 ; Total oet Asset 32.63 71.61 t13.27 330.23 378.18 347.89 621.15 rfixe Asset 979.93 l,45.79 1,49645 2,286.15 2,849.91 o Grams Fixed Awmts 0.00 0.38 0.84 0.96 1.71 1.86 2.06 2.27 Less: AccAmleted 2.50 2.75 r8 3.32 32 Depecfiation 0.01 0.03 0.16 0.26 0.53 0.72 0.93 1.16 1.41 1.68 1.98 2.32 1 et FixedA sets 0.07 0.35 0.68 0.70 1.17 1.15 1.14 1.11 0 other Aset 1.09 1.07 1.04 1 01t 0.15 0.14 0.12 3.16 10.36 11.39 12.53 13.78 15.16 16.66 18.34 20.18 Total Asset 44.81 120.48 188.92 477.59 618.67 861.68 1,955.14 3,516.58 5790.48 6,776.27 7,206.04 7,513.57 IwIIAs 1M1 NIS .ILH5 AOENC(14NlA IlsotialaaNW Projected Pforfmnce indicator (ft. Kitties)

Fi nt VeerYew dng SNot 31 9-811 193-891989-981990 t-9 1991-92 *4-.-- I-..-di.-.-Audited 1992-3 1995% 1994-951995-96 1996r9r 199798 1931999 ...... P...... Projectad ...... *'..> A- LENIN P_ FOUMN ...... 1.1nt.lrnoM s X of AwV.Asset 6.4 6.5 5.4 10.9 2.LatInt. Ixmin. X of'vAbasets 10.6 8.5 7.8 7.8 8.1 7.8 7.5 3.Operat.EaJpwsa 6.4 6.5 4.6 6.7 r.5 5.4 4.3 s X ofAV.Asafot 0.8 1.4 1.0 0.8 4.0 4.3 4.0 4.0 4.t Profit*s of Av..sAts 1.0 2.5 2.3 2.2 1.7 1.2 1.2 S.1st.xpwe 4.0 3.5 0.3 3.0 2.9 1.3 0.9 0.6 ns X ofTotal Liabiltites 0.0 0.0 1.7 7.4 1.2 1.3 1.3 6Ittersttram fra LWim s X of 6.7 8.2 8.T 8.0 7.5 7.0 6.6 AIvrapLo us Outatidlnn 6.7 5.5 5.5 7.9 11.0 7.1stlIntwssdatioen Wn (65) 6.7 10.3 9.2 9.0 8.0 8.8 8.8 8.NotProfit an AW.CpItat 5.S 3.8 0.5 4.3 2.1 0.6 0.9 1.3 + seerweX 2.4 5.8 6.0 1.0 13.8 13.6 1.0 2.2 9.MetProfit en Av.Csital * iserwee X3* 8.2 8.2 10.5 17.9 U.2 16.2 1N.1stCash 6n4ertihn *s X of 1.3 3.6 .0.1 0.9 4.4 12.9 13.2 11.2 ytwly Didarseonts 13.5 15.8 32.3 48.5 32.0 11.Ptr.& At. asof X LIm Portfolio -51.7 -1.2 0.7 3.4 58.2 69.7 70.5 5.4 1.7 3.0 2.6 2.0 1.7 0.9 0.7 12.Ccstof AveraeRescurces x 0.0 0.0 0.0 0.7 0.5 0.3 0.3 0.2 .8.4 3.0 3.1 3.5 3.8 3.9 3.? 3.S B - LlWIDIT?

13sbt SevticeCwverag Ratfo 0.0 0.0 0.0 11.7 14.InterestCXoorg Ratlo 1.4 3.3 3.5 3.2 2.9 2.6 2.6 0.0 0.0 0.0 11.7 2.9 3.3 2.7 *o 15. Ninh of Diswsemnt In 3.5 3.2 2.9 3.0 3.9 5.?7, Llqutd Assets ?i! 14.0 12.1 35.2 12.7 3.0 3.0 3.0 6.0 6.0 6.0 8.4 C - CAPITALADEMCT 16.PidFinCpltalt+eserves asI of ttot Masts 97.2 59.7 S8.1 23.2 20.6 17.RevotVfniFd as X of 21.9 13.1 9.4 6.4 6.5 7.3 8.3 TotalAssets ** 97.2 98.2 96.3 39.1 47.7 59.3 63.9 56.4 18JsebtftowolvingFuadRatio * 0.0 0.0 0.0 1.S 50.2 46.7 46.5 47.2 1.0 0.6 0.5 0.7 0.9 1.1 1.0 1.0 C*)In ret torw(after adjusting for doustic fnflatfon) (*) ReowlvingFuln Includbs Paid-ln Caital * Reseres.Strrnts. - 97 - IND 4.1 Page 5 of ? -,DEUW~ BeOTi Indin gemwlble gera Devlo.nt Ancy Limited(I=&) AesumJtions ulleid In in -anialiPr.oecticas

FlS f94 F95 MG6 PY7 1798m F99 DomesticIflation S 10.0 8.3 7.3 6.1 5.0 5.0 5.0 ForeignInflation 1 3.7 3.7 3.7 3.7 3.7 3.7 3.7 ForeignExchange US$ 26.7 28.6 30.2 31.5 32.6 33.6 34.8

IncomeStatement 1. Interest on Loans Interest on Mini Hydro projects, Wind Farms and Other Loans is assumed to besl993-94 and 1994-95 equal to the domesticinflation plus 2S: 1995-96: inflationplus 32;1996-97and onwards: inflationplus 4S.

2. Income from Investments It is assumed that Investments yield should not be less than the levelof the domestic inflation plus 1S.

3. Personnel In addition to adjustments for inflation, an increase in staff of 15? is assumedin 1992-93, 252 in 1993-94 and 1994-95.

4. Administration Calculated to increase with the portfolio but allowingfor increasesin productivity.

S. InterestTax Equivalentto 32 of the net loan interest income; this tax is assumedto be passed to GOI.

6. Provisionfor Loan Losses Calculatedas 2.52 of the loan disbursements made in the year.

7. Amortiwationof TIA Expenditures in technical assistance and promotional activities are assumed to be amortized in five years.

8. Tax Provision Estimatedat 56S of the TqxableIncome. It is assumed that Income Taxes are not paid sincea Specialleserve in maintained. - 98 - Annes 4.1 Page C of 7 Sourcesand Applicationsof Funds

1. Iepasments Received As psr schedule projected for each group of loans following the following temust Mini Hydrot10 years total repayment, including3 years of graceperiod.

Wind Parms:same. SPVs threeyears, no grace period. Other Projects*7 years including2 years of grace.

2. Grants The balance of the existingDutch granted to be disbursed half in 1992-93 and half in 1993-94. Grants for the proposed project are projected as reimbursement of the loans made by IREDAas per specific schedules built for each category of project. 3. Euitv Contributions It is assumed that additional 001 equity contributions of Rs 100 million requested for the 8th Plan will be received 112 in 1993-94 and the balance in 1994-95.

4. Bonds It is assumed that no additional bonds will be issued. S. Disbursement of GOI Loans (IDA Funds) Are calculated as reimbursement of the loans made by IREDAto fund Mini Hydro schmes (equivalent to US$70 million) Vindfarms (US$15 million) and SPY (US$30 million). It is assumed that the funds are received In s. from 001, with a repaymentperiod of 12 years,including 3 years of grace,and at the Interestrate normallycharged by 001 for its onlending of foreignfunds, currently set at 12.52 p.a. and projectedto move with the lenel of domesticinflation. Funds disbursed in a particular year carry a fixed interest at the rate prevailing that year.

6. Disburse*mnt of Lonsn Mini Eydross the US$70 million IDA funds equivalentare assumedto be approved 15l In 1993-94,35? In 1994-95and 502 in 1995-96. A disbursement profile of 2 -99 - Anne 4.1 Page 7 of 7

years Is aOr ad *o follows3 year 1:601x year 2:40?. Wd Tan sFa total of U8$78million equlvalent, financed U8$13million from 011, US$50 million by DAIDA and US$15 miLlion frm IDA. In 1993-94 251 of the fonds are approved; SOX In 1994-95; 401 In 1995-96 and 51 in 199-97. Disbursement is made the same year the loan li

SPY. a totalof 1U8$42million equivalent, fanced by: 01 US$8 milion (plus1US$ 5 K for technicalassistance), us$ 4 million frm the SwissGoverme nt and US$30 millionby IDA. Apprvals and dibursemnts are assumed to be simutwwous as follows:1993-94: 52; 1994-95:10?t 1995-9615t;1996-97t201; 1997-98:3251 1998-99225a. OtberProjectss It is assuowd that the loans approved in additionto those Included In the proposed project will be imited to the availability of funds. Sixty percent iL disbursed In the first year and the balance In the second one. 7. Technical Assistance A total of U$ 6 million (US$ 5 million groat from GO and US$1 millionfrom IRDA's own resources)are assumedto be disbursedfor technicalassistance and promotionalactivities as follows:30S in 199S-94;402 in 19"4-95;and 301 In 1995- 96. lalanceSheet

SundryCreditors and Debtors Since both borrowlngand lendingtoers includepayments per semester,it is assumedthat at the end of the fiscalyear thereare threemonths of each accrued but not yet payable. IIIDIA RenewabteResae4ws ehveopet Project TMIlL M*MU huSUPhIUT AMS PAPfRSLTD. (TM L) UIstoricat *n Prolected Inuom Statemnts (Is. NItllin) 1969.90 1990-91 1991-92 199243 1993-94 1994M9f1995-96 199697 1997-98 199w-99 199900 *C ...... Jkdfted ------* *...... Projected ...... 2 installedCapaeity (tp")SNuaoprint 50.000 50,00050,000 50,00050,000 50,000 100,000 100,000 100,000 tQ,0000 100.000 InstalledCapaclty (tps)tPrintAIrItO 40,000 40,000 40.000 40,000 40,000 40.000 80,000 00,000 80,000 600000 80,000 CapacityUtillzation (1):Nahcnle 1 104.4 100.3 96.9 100.0 1000 100.01 100.0 100.0 100.01 100.01 100.OX CapacityUtitikation (%)asdehine 2 80.01 90.01 100.0X 100.01 100.01 Prouaction(tpa)Uemw_lt 45,005 39,064 37,837 50.000 50,000 50,000 80,000 90,000 100,000100,000 100,000 Produetlen(tpa):Prfntfinu/Viting. 48,961 51,236 49,366 40,000 40,000 40,000 80,000 60,000 80,000 80,000 80,000 Priceper TencleAoprint (Rm) 13,567 16,146 17,544 18,e06 20,150 21,621 22,940 24,087 25.292 26,SS6 2,884 Priceper TonsPrinting & Uriting 16,853 18,120 20,907 23,000 24,909 26,72 28,358 29,76 31,264 32,828 34,469 Priceper TAn:Ueuaprint(US 6406.0 612.7 622.6 633.3 642.5 652.6 663.6 675.4

Salesmmewsprfnt 610.6 630.7 663.8 930.3 1,007.5 1,081.1 1,835.2 2,167.8 2,529.2 2,655.6 2,768.4 Seles:PrInting * Writing 825.1 928.4 1,032.1 920.0 996.4 1,069.1 2,268.6 2,382.0 2,501.2 2,626.2 2,757.5 Total S6le1 1,435.7 1,559.1 1,695.9 1,850.3 2,003.9 2,1S0.2 4,103.8 4,S49.9s,030.3 S,281.8 S,S4S.9 Niscellaneous Income 43.5 16.2 17.2 14.3 1S.5 16.6 123.8 141.8 161.2 169.4 177.9 total 1,479.21,515.3 1,713.1 1,864.6 2,019.4 2,166.8 4.227-7 4,691.? S,191.5 5,451.2 5,723.8 Cost of Goods $aids Opening Stock Ffnished goods & VIP 23.2 5.0 2.8 Adds VrPIale Cost of ProActictn:1P I 4t.6 53.6 576.8 918.8 1,085.3 1,26.2 1,329.5 1,396.0 vriaoeaCost of Protttimm U S88.9 61.9 714.6 397.4 430.4 U6.8 930.9 977.S 1,026.3 1,07o.7 1,131.5 fixed Cost of Prodsctiont Repars * Nainteno 45.0 55.6 64. 71.0 76.8 82.4 179.3 188.3 197.7 207.6 21L0 Labor Cost 55.0 77.1 96.8 111.8 126.9 142.3 199.9 219.0 239.5 261.6 285.2 Adinistrative Exp_s 93.1 115.6 130.8 143.9 15S.8 167.2 354.8 372.S 391.1 Totat 410.7 431.2 fixed eCst of PredstIon 193.1 248.3 292.1 326.6 359.5 39.9 734.0 9.6 82.4 89. 934. Total Cost of Pc tlon 782.0 864.3 1,006.8 1,185.6 1,327.5 1,430.5 2,583.7 2,842.6 3,120.9 3,267.0 3,461.9 ieet Closing Stock Finished Goods * VIP 5.0 2.8 9.3 Cost of Goods old 100.1 866.5 1,000.2 1,185.6 1,327.5 1,430.5 2,5S3.T 2,842.6 3,120.9 3,287.0 3,41.9 sros Pl it 679.1 70B.85 3.0 679.0 69.9 736.2 1,643.9 1,849.1. 2,070.6 2,164.2 2,261.9

firnaial U,sp s existing dekt 168.5 176.6 140.1 115.9 89.2 62,9 35. 9.3 Finacial Repses; now debt 0 0 0.0 6.1 117.4 285.8 476.2 477.2 40.2 431.5 3t.3 Interest en Vorkin Capitat Lo 17.5 50.S 78.9 73.8 79.2 109.2 118.2 125.9 132.2 Lees: Intst Ouring Contnuctien 6.1 117.4 236.1 0.0 Total FianciaiEt e_s 168.5 176.6 15.5 166.4 168.1 186.4 591.2 595.t S83.4 SST.4 520.6 Oepreciation 215.3 218.8 224.4 261.0 296.9 327.1 753.7 I048 719.0 741.S M.8 Opertin Profit 29M.3 313.5 331.0 251.7 226.9 m.7 269.0 S48.6 768.2 8MM.3 1,007.S 0 Net n-Operating Inco 15.5 51.0 97.1 29.3 1S.0 15.0 15.0 43.0 99.0 148.0 190.0 a.. Taxe 0.0 0.0 (0.0) 0.0 (0.0) 33.9 12.0 29.5 31.2 365.3 586.0 lot Profit (Loss) 310.9 364.S 428.1 281.0 241.9 203.6 272.0 562.1 636.0 648.0 611.5 Dividwnd 143.5 171.8 0.0 0.0 0.0 0.0 36.4 346.4 346.4 346.4 ..t Rtr n Iquity 1 ...... 39.... 3 1 get fturn an Edty X 39.9 S5.9 33. 18.1 9.S 7.4 9.0 17.4 22.4 16.1 14.3 uSIA Iteneum lelsou,ces Srewltqmt Project TMIL UmU EPRIUT Am PAStBLID. (CM) WIstetic.ld ProbeatedBkia mh sts (is. NiUlmon)

1989-901990-91 199-92 199293 199394 1994-951995-% 199697 1997-961996.99 -999-OD

growsfixed Assets 2,456.42,S'0.5 2,53.2 2,398.23,206.4 4,260.5 6,677.6 8,7m7.6 6,902.6 6,992.6 9.082.6 LesssmaprecIation 957.7 1,17 .6 1,399.0 1,660.0 1,956.9 2,284.0 3,067.7 3,772. 4,491.S s,233.0 5,966.8 Net FixedAssfts 1,498.7 1,335.9 1,184.3 738.2 1,251.5 1,976.5 S,609.9 5,005.1 4,411.1 3,759.6 3,115.8 CapitallVrk In Pr-res 6.1 15.4 23.7 1,205.5 3,116.3 4,066.9 Current A.ts Cau & s_cs 33.4 120.9 21.3 174.2 91.5 173.4 74.0 172.4 167.S 397. 460.3 Reseivables 143.2 237.6 250.2 304.2 329.4 353.5 674.6 747.9 826.9 866.2 911.7 Inwentories 338.7 391.0 382.8 395.4 428.2 459.4 913.S 972.4 1,034.8 1,086.6 1,140.9 tIestme ts 10.2 36.S 239.0 m0.01,600.0 2,200.0 ,8M.0 Totat CurrentAssets 525.5 786.1 893.4 83.7 U49.1 986.2 1,662.1 2,692.7 !,629.2 4,5S2.6 5,312.9 ° Loan& advances 164.2 266.7 454.8 1S8.6 171.8 184.3 195.S 205.3 215.6 226.4 237.7 ,% ...... _. .X ...... Totat Assets 2,214.S 2,426.1 2,556.2 2,976.1 ,386.7 7,214.0 7,467.6 7,903". 8,256.0 ,5311.68,666.5 OlWTV& LIABILITIES Paid p Capital 968.3 961.8 961.8 961.8 1,731.8 1,731.8 1,731.8 1,731.8 1,731.8 1,731.6 1,731.8 Profit & LossAcount (189.7) 0.1 Reserves 1.0 32.2 288.5 569.5 811.3 1,01S.2 1,287.2 1,503.0 1,992.6 2,294.2 2,559.4 Total let Lorth 9.6 1,014.1 1,270.3 1,Y.. 3 2,543.1 2,747.0 3,019.0 3,234.8 3,724.4 4,026.0 4,291.2 Loterm loans 1,079.9 696.2 717.6 953.2 2,236.5 3,96O.1 3,776.4 3,5ff.S 3,214.5 2,862.1 2,052.6 CurrentLiabilitiesflvidoW Payabte 143.5 171.8 0.0 0.0 0.0 0.0 346.4 346.4 346.4 346.4 TaxesPtyable 0.0 0.0 (0.0) 0.0 (0.0) 33.9 12.0 29.S 31.2 365.3 566.0 CurrentNaturities 188.2 181.8 161.8 161.8 181.8 229.1 183.7 180.9 381.0 387.3 774.5 Other 166.7 188.6 214.7 289.9 427.3 243.9 476.4 S16.1 SS8.S 586.4 615.8 Totat CurrentLiabilities 354.9 S13.9 W66.3 471.7 609.1 506.9 672.2 1,072.9 1,317.1 1,665.4 2,322.6 T...... ; ...... total Equlty & Liabitftles 2,214.4 2,426.1 2,556.2 2,976.1 5,388.7 7,214.0 7,467.6 7,903.1 8,255.9 6,538.6 8,666.4 ...... 5F DebtsEqmutvRatio 1.39 0.89 0.56 0.61 0.88 1.44 1.25 1.11 0.86 0.70 0.48 Debtas X of Capital Structure 0.58 0.47 0.36 0.38 0.47 0.59 0.56 q.53 0.46 0.41 0.32 CurrentRatio 1.5 1.5 1.6 1.9 1.4 1.9 2.5 2.5 2.8 2.7 2.3 Iameslho lsoures owlqlemt Project TMIL UNI UWP PRINTAMS LIM. (ttPL) uhtorwicat.id ProjectedSources owl Applicatiusmof FwWi. (Is. 31itlen) 198940 1990-91 19"-12 19n-24 1993-94 t994-95f19956 19964M719743 1994-9 199900

Profit (Los) befhreInterest & taxes 479.4 541.1 585.6 447.3 410.0 424.1 575.2 1,187.3 1,450.6 1,570.7 1,718.1 2,156.7 Ie treciatlon 215.3 218.6 221.4 261.0 296.9 327.1 783.7 704.8 719.0 741.5 733.8 1,468.7 Mn Cob apwes 1.1 O.S 0.0 IntemrnI Cash.ienSmtimn 695.1 760.3 810.0 70.3 7C.9 751.2 1,656.9 1,892.1 2,169.6 2,312.2 2,451.9 3,025.4 ItelYes. In Sttr. Capital 13.5 130.0 70O.O gwrodn1t 0.0 Ibid Oank 211.9 1,339.4 950.7 0.0 0.0 0.0 0.0 0.0 2,502.0 OtherLeon-term 1.2 205.5 12S.7 1,002.0 0.0 0.0 0.0 0.0 0.0 1,333.2 Total Sronvidngs 0.0 0.0 1.2 417.4 1,465.1 1,952.7 0.0 0.0 0.0 0.0 0.0 3,635.2 ...... - 0.0 tot6t sour3es 695.r m.8 t1.21,12S7 2,22.02,70.0 1,658.9 1,892.1 2,169.6 2,312.2 2,451.9 8,4t0.4 F0 WPUCIATIOUOFFUND0 0.0 'I capitatleqendture: 0.0 Ongolpn 33.6 63.4 81.0 250.0 100.0 50.0 75.0 100.0 125.0 90.0 90.0 415.0 PrepssxdExpwsimn 472.8 2,453.4 1,f92.7 275.2 S,154.1 listdFarm 274.0 167.6 441.6 ...... _____...... Total tCpital Eqxpendture 33.6 63.4 81.0 996.8 2,M.0 2,002.7 350.2 100.0 125.0 90.0 90.0 6,070.7 0.0 DebtServIes 0.0 _epsostof Lac tExa ting 229.6 188.2 1A8.4 181.8 181.8 181.8 181.8 136.4 72r.2 Uorld80* 0.0 0.0 0.0 0.0 0.0 0.0 200.1 206.4 0.0 Others 0.0 0.0 0.0 0.0 0.0 47.3 47.3 130.9 180.9 160.9 47.3 Total epst of Loons 229.6 188.2 1U1.8 181.8 181.8 181.8 229.1 183.7 130.9 38t.0 387.3 7m4.s tnterest 168.S 176.6 1S5.5 166.4 168.1 186.4 591.2 595.7 583.4 S57.4 S20.6 1,112.0 lotal 398.1 364.8 339.3 348.2 349.9 368.2 820.3 779.4 764.3 936.4 90?.91,806.6 Pa"mnt of Dividends 0.0 143.5 171.8 0.0 0.0 0.0 0.0 346.4 346.4 346.4 171.8 Ta"es 0.0 0.0 (0.0) 0.0 (0.0) 33.9 12.0 29.5 31.2 365.3 33.9 Increase(uecr.) Inworking Capital (') 62.4 114.7 (21.7) (8.7) (79.4) 238.7 542.7 92.5 99.0 6S.2 68.4 693.3 Other 182.9 133.1 368.6 (53S.2) 13.2 12.5 11.2 809.8 810.3 610.8 611.3 (498.3) ~~~~~~~~~~~~~~~~~...... _ Total ApwleatIans 677.0 676.0 910.8 972.8 3,004.7 2,o22.2 1,758.3 1,793.8 2,174.5 2,081.9 2,3S9.3 6,358.0 Surplus (DefIcit) 18.6 97.8 (99.6) 152.9 (82.7) 1t.8 (99.4) 98.4 (4.9) 230.3 62.6 S2.6 OpeningtCb & Banks 4.5 23.2 120.9 21.3 174.2 91.5 173.4 74.0 172.4 167.5 397.8 460.5 ClosingCash & snbs 23.2 120.9 21.3 174.2 91.5 173.4 74.0 172.4 167.5 397.8 440.3 513.1 0.0 0. (*) xeludingcasb 0.0 ...... Debt Servic CSSa"goRatio 1.7S 2.08 2.39 2.03 2.02 2.04 1.98 2.41 2.80 2.43 2.30 2.01 - 103 - Annex 4.2 Page 4 of 5

INDIA

RENEWABLERESOURCES DEVELOPMENT PROJECT

TNPL PAPERNILLEXPANSION Assumptions Followed in Financial Projections for TNPL Base Case FY93 FY94 FY95 FY96 FY97 FY98 FY99 DomestIcInflation Z '.0.0 8.3 7.3 6.1 5.0 5.0 5.0 Foreign Inflation X 3.7 3.7 3.7 3.7 3.7 3.7 3.7 Foreign Exchange US$ OfficialRates 26.7 28.6 30.2 31.5 32.6 33.7 34.8 MarketRates 30.7 32.9 34.7 36.2 37.5 38.8 40.0 For Sensitivity: 30.7 36.2 38.2 39.8 41.2 42.6 44.0 …------__------______

Income Statement 1. Revenues: Sale pricesescalated as per domesticinflation; 2. VariableCosts Unit cost calculatedto reflectImpact of new equipment,escalated as per domesticinflation rate.

3. Repairs& Maintenance:1991/92 cost of Rs 716.67per ton of installed capacityescalated as per domesticinflation.

4. Labor: Reflectsthe Increaseof 600 employeeson coamissioningof expansion,plus 52 p.a. Increaseand adjustedfor domesticinflation. 5. AdministrativeCosts 1991/92cost of Rs 1,453 per ton of installed capacity,adjusted for domesticinflation.

6. FinancialExpensess: Data for existingdebt provided by TNPL. World Bank loans 7.6Z p.a. plus 1X GOI Guarantee Fee. It is assumed that TNPLwill purchase the foreignexchange at the market rate. IREDA 15Z p.a; FinancialInstitutions: 19.6X WorkingCapital Loans: rate equal to twice the domesticinflation rate. 7. Non-OperatingIncome: Includesnet lncomefrom wind farm energysold to TNSEBplus returnon excesscash investedat domesticinflation plus 22. - 104 - Aunx 4.2 Page 5 of 5

8. Depreciationt Straightline, 3.34Zfor buildingsand 11.312 for Plant and Machinery. Wind farm is depreciatedin one year as per currenttax Incentives. 9. Taxes Becauseof investmenttax-credits no tax is projectedto be paid before1996-97. The tax rate is 51.752of the taxableIncome. 10. Dividends: The practicein Indiais to fix the dividend pay-outrate to the paid-incapital. It has been assumed20S.

Sources& Applications Borrowings World Bank: US$ 70 millionat the market exchange rate. Fifteen years repayment period after 5 years grace; Financial Institutions: 2.5 yearsgrace and 7.5 repayment period; IREDA: 3 yearsgrace plus 7 years grace. BalanceSheet

WorkingCapital: Receivabless60 days of sales (historicallyhas been around56 days). Inventories:270 days of raw materials (bagasse,coal, chemicals)plus 20 days of finishedproducts. Other Current Liabilitiess it is assumedthat 302 of the inventory and receivables would be f$nanced by banks. In addition, short tenm loans for Rs 80 aillion will be required in 1992/93, increasing to Rs 200 mlllion in 1993- 94. - 105 - Annex 4.3

INDTA RENEWABLERESOURCES DEVELOPMENT PROJECT

TNPL Papenmill Expansion

Hiahlightsof TNPL's Puture Oerating Performance Base Case and SensitivityAnalysis ( Rs Million )

FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY2000 Utilization (I)s Machine 1: Base Case+Alt.B&C 100 100 100 100 100 100 100 100 AlternativeA 100 100 100 75 80 85 90 100 Machine 2: Base Case+Alt.B&C 80 90 100 100 100 AlternativeA 75 80 85 90 100 Net Profit (Loss): Base Case 281 242 204 272 562 836 648 -611 Alternative A 281 242 204 (119) 168 430 487 829 Alternative B 281 36 (24) (192) 6 259 404 539 Alternative C 281 242 204 238 .550 824 636 600 Return on Eauity (Z): Base Case 18 9 7 9 17 22 16 14 Alternative A 18 9 7 (4) 6 15 16 24 Alternative B 18 1 (1) (9) 0 11 16 20 Altermative C 18 9 7 8 17 22 16 14 Current Ratios Base Case 1.9 1.4 1.9 2.5 2.5 2.8 2.7 2.3 AlternativeA 1.9 1.4 1.9 1.8 2.4 2.2 2.3 2.1 Alternative B 1.9 1.0 1.1 1.1 1.4 2.1 2.0 1.8 Alternative Z 1.9 1.4 1.9 2.5 2.5 2.8 2.6 2.2 Debt Service Covera8e: Base Case 2.0 2.0 2.0 2.0 2.4 2.8 2.4 2.3 AlternativeA 2.0 2.0 2.0 1.5 1.9 2.3 2.1 2.4 Alternative B 2.0 1.4 1.3 1.4 1.5 2.0 1.8 2.0 Alternative C 2.0 2.0 2.0 1.9 2.3 2.7 2.3 2.2 DebtsEouitY Ratios Base Case 0.6 0.9 1.4 1.2 1.1 0.8 0.7 0.5 AlternativeA 0.6 0.9 1.4 1.4 1.3 1.1 0.9 0.6 Alternative B 0.6 0.9 1.7 1.8 1.7 1.3 1.1 0.8 AlternativeC 0.6 0.9 1. 5 1.3 1.2 0.9 0.8 0.5 -106 - page 10O

RenewableResoures Develcpuet Project

mtll Ny*o 8meh

Eonamic nalysis

A. Om Based Sdm

SCiiu. VWMAE IVESNET ENERGYPRCD. KEi NWVs2i ...... (Rs./kW) (kVUPe/100 Rs.) (X) (fs. million)

KARNATAXA Brindwvan 5592 117.5 65.7 428.7 Raangs S4,42 51.8 30.8 103.0 Kabini 10972 29.8 17.5 57.8 Euiu 8827 32.2 19.1 50.0 Devereibertere 5204 58.9 42.1 61.0 Wudiol 891s 58.3 34.5 33.2 Malaprabbe 8228 44.2 26.3 50.4

TMIL hADU LouiwIhavni S891 58.3 34.6 172.6 Thirumwrtby 94602 45.9 30.4 64.4 A^maevathy 8482 46.1 27.4 75.3 AtLy.V 11642 61.6 38.S 57.7 Sathanur S362 75.7 44.0 136.9 Peechperal 11724 33.2 19.7 43.9 Perumohani 12962 26.5 21.3 39.0

ANDHRAPRMi Lo~er Nanhfr 9297 71.3 41.4 136.5

Peech 7836 7n.2 41.2 210.0 Nugtsla. 14140 20.4 13.5 10.6 Kuttfydi Csesade 9130 55.5 40.7 199.5 Xmnfyar 5426 71.4 41.1 394.9

SORCE: EWAPestimates -107- Annex 5.1 Page 2 of 2

INDIA Renewable Resources OevelopmfntProject

Sall Hydro Schemes

EconomIcAnalysis

8. Canal Orops and Weirs Sch e

SCNE VAWE INVESTIENT ENERGYPROO. EIRR NPV a12x .__...... (tRs./W) (kUh pe/10O Rs.) CZ) (Rs. million)

ANDHRAPRADESH Guntur RC Cluster 12395 44.3 22.9 429.8 Adfnk BC Cluster 12891 21.3 14.2 119.4 Lock-In-Sula 9607 56.0 29.2 97.0

PNJA Mhatinda SC Cluster 14702 38.5 20.4 91.5 Katie C Cluster 194?8 27.9 14.7 222.1 Aboahr SC Cluster 17396 29.6 18.6 305.2 Dhakra 14406 S1.0 19.7 368.5

KARUATAKA Shahpur BC Cluster 16981 21.6 13.3 206.8 Attehala Meir 22560 28.6 12.2 22.7 Naddur 10089 4.4 29.1 67.8 Kilara 16199 26.5 13.9 55.2 Anveri 10245 42.8 29.3 44.0 Rajankollur 9848 30.3 20.3 49.8

SOURCE: ENAP estimates - 108 - Annex 5.2 Page 1 of 3

INDIA Renewable ResourcesDevelopment Project

GENERIC CRITERIA FOR GEF PROJECTELIGIBILITY

1. Lead to potential benefits for the global environmentin terms of either (i) a reduction in greenhouse gas emissions; (ii) protection of biodiversity; (iii) protection of internationalwaters; or (iv) a reduction in ozone layer depletion.

2. Have some innovationcharacteristics.

3. Be of sufficientmaturity that has a good chance of succeeding.

4. Be replicable,both within the national and internationalcontext.

5. Develop human (through education,training and research) and institutionalcapability.

6. Contribute to human welfare and sustainabledevelopment.

7. Be placed in the context of comprehensiveexisting or evolving national and regional environmental programs.

S. Have an adequate scientific and technicalbasis.

9. Include plans for evaluationof disseminationof results and knowledge.

10. Include plans, as appropriate, for post-GEF project continuation of the activity within the national context.

11. Develop, as appropriate,national inventoriesof, for example, greenhouse gas emissions,biodiversity, sources of water pollution,or halocarbon emissions.

12. Be participatoryin nature involvingclose collaborationwith local commities wherever possible.

13. Be unlikely to be included in the country'sdevelopment portfolio without GEF funding, even though it has significantglobal and national benefits.

14. Be of sufficientmaturity that it can be developedwithin the three-year GEP time horizon for project approval.

15. Be subject to a comprehensiveenvironmental impact assessment that examines potential adverse consequencesfor each one of the other GEF environmentalissues. - 109 Annex 5.2 Page 2 of 3

Reduction of GreenhouseGas Emissions Criteria for Project Elisibility

1. The project includes a technologythat has not achieved its full technical, economic, and market potential,and opportunitiesfor realization can be greatly enhanced with GEF funding. Therefore at least one of the following sub-criteriamust be met:

(a) Given that an emissions-reductiontechnology (ERT) is technically feasible (in the sense that the research and developmentare complete) but not yet proven, GEF support is necessary to demonstrate it or prove it; or

(b) Given that ERT is technicallyproven, GEP support is necessary to make it economicallyviable by getting the costs right; or

(c) Given that an ERT is economicallyviable (using accepted social rather than individualcriteria), GEF support is necessary to demonstratehow to make it marketable by getting the market right; or

(d) Given that an ERT is technicallyand economicallyviable, but the country is lacking institutionalcapability, appropriate policies, legislationand/or skilledpersonnel, technical assistance and training support is necessaryto overcome these shortcomings;

(e) GEF support makes ERT's implementablebecause they would not be Implemented without this demonstration and proof of implementability.

2. To ensure the replicability of the project either within or outside the country, the project should:

(a) result in the preparation of complete implementation packages identifying and specifying all the hardware as well as the software (policies, policy instruments,policy agents, Institutions, financing, management, etc.);

(b) ensure that performance evaluation plans, such as monitoring of actual greenhouse gas reduction measures and their cost- effectiveness, are built into the project. - 110 - Annex 5.2 Page 3 of 3

IRNUVAIL1RnSOURCIS DIVILOPHENTPROJECT

Suamary of Alternative Investment OpportunitIes Investigpted Out of several project proposals in the.alternate energy sector In India presented for OGF funding,. four projects, namely, windfarm, solar thermal power plant, solar PV. and compact fluorescent lamps (CFLB) demonstration, were initiallyassessed to have the highest potential for meetlng the GEF-STAP criteria. The tablebelow gives a suimaryof the result of the evaluation done by a Dank-GiFmission In 1991,updated to 1992 costs. Resultsshow thatmodest levelsof GEP supportfor windfarmand solarPV projectswould sufficientlybuy- down the Investmentscosts and allow these technologiesto compete with conventionalenergy sourcesthus permittingrelatively; lower cost of carbon displacement.Details of the analysisare presentedin the reportentitled IndlasNon-Conventional EnergyProjects for GEF Funding,dated December 20, 1991.

Privte Solar Th.rml CF1. SectorWinad PWPl"SlrP eosrto

CapacityInstltled 70 80 2.L W 1i (IM (Ino yr) 18.9 MW .~~~~~~~~~~~~~~~~i (1 0 yr).I capitalcoat -Mll Ions USI .65 7? U.S 4 - Re. Crors 217.0 104 100.4 11 UP GrantCoatribotlon 18 46 14$ (Ml1I I ons USII Foreip laehaun 42.8 41 11.C 2 RequIrew (MllI le_ion am vWithout -10 4 1.5- 8.5 lo0 R"l ( au .

______With do 12 12 14.0-14.0 FIr Without 6-S28 -2 1.2- 5.8 Real(I) GM with GoCitF o 4011 6 7.6 -18.8 Costef Carbo _ 27 in 20 77 Displced (USI/toa of

osN fto or DiR voi1_ frep rwnw m chom in go osi or n prdcsb suplied The of carbon displaoW by PV Is basedon the 180 W of Pe msas tht cold be catalped by the UP contribution. By the yer 0002,approximtly 10 11 of PVcod be instl lled. Ih cost of carbon dilaoed by the Pv system by the yer 2000, assmig tht the projec starts In 19t, In about W188/tonneof carbondlsplaced. The rang, of PIEt for the wind project reflects howaval lble tax i artilizsdbythe pelvt wind arm dlopsrs. Thowld *farM estimaterebaeon displacing captive diesel gnrators. INDIA RENIMBLE REuSoM DEELOP tNTPROJECT

IRM VINDFAUDEVLOP9UIT COPET ECNMIC ANAL"SI ( In i Nilttin )

...... ,_...... FISCAL WITAL COSTS OPRATIS TOTAL bEFITS NET EW LOCAL Fmi TOTAL COS COSTSoosEMIATED WEELEDsAVINS U FITS ...... *A U 1993 343 441 78 784 784 1994 Soo 1028 1828 182B -1828 1995 52 52 71 69 193 140 F 1996 52 52 141 139 365 333 1997 52 52 141 139 385 333 1998 52 S2 141 139 385 333 1999 52 52 141 139 385 333 2000 52 52 141 139 385 333

*: : : :* tasW s : : : :

2015 52 52 141 139 385 33

ElM: 10X

Aommptensa Capctyt 85 Wt EconadmcLffe: 20 wea8 O & N Costs: 2 X U.ltn Fee 2 Xot ofswonticn SCFs 0.8 . Dieel cost: Rf 2.76/kh -112 - Annex 5.3 Page 2 of 4

India

Renewable Resources Development Project

Indian Renewable Energy Development Agency (XRUDA) Solar PV Market Development Component

Results of Financial and Economic Evaluations of Sample PWVSystem

The financial and economic viability of PV applications were assessed in relation to currently used technologies, on the basis of complete life cycle costs for providing comparable services. The annual stream of costs associated with the use of a PV technology was compared to the annual stream of costs avoided by replacing currently used technologies. The design characteristice of PV systems and the estimated costs of their components are given on the basis of both current costs in 1992 and since it is expected that the cost of PV panels will fall over the next five years, thelr costs in 1996 (year 3 of the five year period of the PV Component of the RenewableEnergy Project).

Table 5.3.1 shows the economic and flnanclal viability of the appllcations on the basiL of a 12% discount rate. The flnancial and economlc viability li estimated on the basis that the benefits are: (a) due only to the value of alternative fuel displaced, and (b) that the consumer shows an added willingnoes to pay due to the much higher quallty of service available from the PV system compared to thelr alternatives. Assumptlons used in the analyses are presented in Tables 5.3.1 and 5.3.4.

Table 5 301 KeYAssumptions for Financial andEconomic AnalysLi of PV ApplLcations

Arnalysis Economlc Financial Discount Rate to) 12 12 zxchanoe Rate (RS/USS) 26 26 Standard Conversion Factor 0.8 1.0 PV Panel Cost (1992 Rs/Wp J Yr 3 of 1OS 150

Kerosene Cost (1992 Rs) 6.3 4.75 Diesel Cost L1992 Rsl S.6 5.6 Gasoline Cost (1992 Rs) 16.0 S.6 IRJC Power (1992 Rs) 1.8 1.3 Real Escalation Power il) 2 2 Table 5.3.2 Sumary of Ecnemic and Financtal WPVotf Rplacg Cornentiatl ystem wfth PV Syste

-oonu,. INPV 12XDlscwut Financial IPV B 12SDicowut (Re 1992) (Rs 1992) replaement replacment cost plus cost ptus replacement Wittliraness replat willngnel cost only to pay extra Application cost only to pay etra Eeppnt Replaced Target Narket (a) (b) (a) (b) Solar S att Lantern, LeadAcid leane Lep Dstic Battery -2070 -407 -3785 -1470 ___i______t__.40 ______4____

Solar Battery Charging Station, urriane Lop Domestic per Watt Lantern__ -610 '505 -2990 +245 5 ______Solar 2 Light System Hurricane Lop Domestic, comerclal -2400 *2885 -5280 +1325 Solar 2 Light syate plus other Hurricane Lantern Doestic, coumecial -tO .sm -3525 +3080 lab plus Battery . - Solar 2 Light System Petromax Commercial 2600 viable .1337 viable Solar 4 light plus other loads !atoline 6enset Commercial *19445 viable +52880 viable Centralized PV Village Grid Extens1in, up Coops, HGO,public -103235 not viable -3979955 not viable Electriffication, 200 Hoaseholds to 10 b sector asgencies Centralized PV Village Grid Extens1in, up Coops, HGO,public +435120 viable .404920 viable Electrification, 100 Households to 10 km sector agencies CaimX ity Voter Puipingq5u Grid Extension, up CoOps,N00, public -127540 not viable -148165 not viable head, 30 m3i'day to 0.5 km secor agemies ______(a) Benefits are measturedas the costs of the kerosene lantern replaced by the P SystemL (b) Bewnfits aremeasured as the replacement costs of the kerosene leap, plus a willingness to pay for additional andbetter qjalitt light. ftatam Sizing Asmemtns for do VWAWIiatimw

Lights S hWdIy) (o x 1uwob tom Aticatten PYsin (w) 8attery (AY) .dayht) 1d)

W .1sotwLantern 9 14X6 7 Blattery aisrolaw Station 420 14xa6 SWzS ______lu tight stem 18 40xt12 2250 __ _ Two lights, other etoo 51 1OOx12 2is50 125 FOurtights othr toAs _ 116 2012M 450 250 200 NU Village 60 BOX9 425 Wm

10011 Village 04089 200x350ml . ~~~~~~~~~~~~~~~12r - oatrPtsp 1000o 30 idday a W

Tabe S.3.4 Cost _sesptlmm for dt PVApptfcstwss EWatitoM

firwnciat Cost Ecenosi Cost (1992 f.) .(992 ts.) Application 1995 1992 W199 S V Solar Laitern 400. 4700 360 _ _ _ 0 lattery Cheruie tation 207 thous. 152 s. 1745the. 113 thbus. Two light ystem 10100 7800 6900 6100 Two teihts + ohr 22500 17500 14S00 12300 Fos tights + othw 47300 7000 30100 2S100 21OOMVillge 2.9.111. 2.4 111. 1.9o11. 1.7.w11. -115 - .

i .

.~

ji * 0| S ja

*! . .a i* ag;||X0l|* 5 £

am Om 416 1L: £ ' K9 9gm- 9- 002- 951- as- 9f- 0O-SW

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waR - 117 - Annex 6.1

India Renewable Resources Development Project

Deeumentu in Proiect FiL

1. IndIat Mini-hydro Development on Irrigation Dam and Canal Drops pre- investmentStudy Vol.1-II1.,E8HWP Report No.139A/91,July 1991.

2. lIdiat Windfarm Pre-Investment Study, ESAP Report (Green Cover),October 1991.

3. IndLas Won-ConventLon43EZnerftProjOcts for global EiVIkonmental Facility SU d in, Vol.1-l1, Alternative Energy Development, Inc. (Bank/GUF Consultants),December 1991

4. IndLat SPY Market Development Project Pre-Investment Study, Bank ConsultantsReport, June 1992.

S. IndLs Opportunlties for Commercialization of Noq-Conventional Energy Systems, NS-XP Report No. 091/88, November 1988

6. TamLl Nadu Newsprint and Papers Ltd. Expansion of Mills Final Proposal, ovemr 1991 IBRD24281

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