-%3/AI L-83

FUAE C|0PX RESTRICTED

Public Disclosure Authorized FThis report is restricted to use within the Bank'.

INTERNAT'IONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized

TECHNICAL REPORT ON THE DAMODAR VALLEY CORPORATION BOKARO - KONAR PROJECT IN INDIA Public Disclosure Authorized

March 162 1950 Public Disclosure Authorized

Loan Department TABLE OF CONTENTS

Page

Summary

The Damcdar Valley 1 The Unified Scheme of Development of the Damodar Valley 1 The Project Submitted for Bank Financing 3 The Damodar Valley Corporation 3 Installed Electrical Generating Capacity in the Region 5 Mlarket fQr Power 5 Description of the Project 8 Stage Twlo of Damodar Valley Development 11 Cost of the Bokaro-Konar Project 11 Schedule for Completion 13 Work Accomplished to the end of January 1950 1 Contracts Placed 15 Phased Requirement of Funds 15 Availability of Power from Sindri 18 Cost of Production and Transmission of Energy 18 Rates Proposed by DVC for Energr and for Irrigation YJater 19 Financial Analysis 20 Comments 21 Conclusions 23

Annex: -

Statement of Dollar Contracts and Payments Statement of Contracts in Foreign Currencies Other than Dollars Letter from S. N. Mozumdar, dated March 5, 1950 Pro Forma Estimate of Financial Returns

IMap S U M0IA

The Damodar Valley Corporation was created by the Indian Legislature in March 1948 to carry out a unified scheme of development of the Damodar River which envisages the construction of 8 multi-purpose storage dams, 2 additional hydroelectric plants without storage, a thermal plant of 200,000 klr, an 80 mile navigation canal and a network of irrigation canals to irrigate 967,000 acres, including the 185,000 acres now seasonally irrigated from the Damodar River. The total cost of the scheme is estirnated at the equivalent of $,142.3 million.

The Bokaro-Konar Project which the Bank has been requested to assist in financing is part of the Damodar River development. It will consist of the 150,000 kwrBokaro thermal plant located on the Konar River (a tributary of the Damodar River), the Konar No, I Dam and powerhouse located 12 miles upstream from Bokaro, and 470 miles of transmission lines with the necessary substations and swlitching stations, The total cost of the entire project is estimated at the equivalent of about f>5?.8 million. A loan of 418.5 million is desired from the IBRD. No request is made for reimbursement of expenditures made prior to 1 January 1950 or for interest during construction. The project will be ad- ministered by the Damodar Valley Corporation.

The Corporation, which was patterned after the TVA, is administered by a board of 3 Directors appointed by the Central Government. While it has a cer- tain degree of autonomy, the scopq of the Corporation's activities is limited by certain powers conferred in the Act on the Central and the two participating Provincial Governments of Bihar and West Benga;. The entire capital require- ments of the Corporation are supplied by the 3 participating governments as con- tributions to capital on which interest is payable. The Corporatiori will derive revenu.es from the sale of energy, of water for irrigation and other uses and from navigation fees. The net profits are to be divided among the participating Governments. The Act gives the DVC a virtual monopoly of the generation and distribution of energy in the Damodar Valley.

Coal for the Rokaro thermal plant will be obtained from a seam -1/2 miles away to be leased by the DVC, containing sufficient coal to supply the plant for about 30 years. It wrill be delivered to the plant by aerial ropeway at an estimated cost of 9 rupees (t1.89) per ton. Ample cooling water for the plant will be provided from the Konar Reservoir. Water from Konar will also be utilized by a 10,000 kw hydro plant at the dam and, through existing irriga- tion canals in the lower part of the Damodar Valley, to irrigate about ho,0oO acres during the dry season.

The contract for the machirery and equipment for the Bokaro plant has been awrarded to the International General Electric Co. The Kuljian Corporation of Philadelphia has been retained as consultants to supervise erection of the plant and train personnel for operation. The design of the Konar Dam was prep,- ared by a French consulting firm, Societe de Construction des Batignolles. The plans for the transmission lines' were prepared by the Central Electricity Com- mission of India. Contracts for a large part'of the transmission and substation equipment required have been placed with firms in the-U.S,, the U.K,, Canada and Italy,- - ii -

The government-owned fertilizer plgnt now under construction at Sindri on the Damodar River, which will have a thermal power plant with an installed capacity of 80,000 kw, has earmarked 30,000 kw for the DVC. With thermal power from Sindri and Bokaro and hydro power from Konar, the DVC will have available in 1954-55 an installed capacity of 190,000 kw and a firm capacity estimated at 132,000 kw. At a 6O% annual load factor the Corporation's production is esti- mated at 694 million kwh three years after conpletion of the project.

A thorough power market survey of the Damodar Valley and adjoining areas has indicated that the demand will be ample to absorb all of the power from the unified scheme. For computation of the reverues for the gokaro-Konar proj- ect, which will be the first phase of the unified scheme, only loads which are more or less assured have been taken into account. Within 3 vears, they will absorb all of the finm power of the project. The cost of production-and-tran- smission per kwh will total about 7.6 mills 1/ per kwh for delivered energy. The proposed rates are estimated to produce an incoQme of about 7.9'mills per kvjh. W1ater sales are estimated to bring $3.15 per acre annually for perennial irriga- tion.

Four years after the completion of the Bokaro-F(onar project, it is ex- pected to produce a net income of about 20 million rupees (M.3 Diillion) be- fore interest and depreciation. After depreQiation estimated at ccnventional rates, interest (estimated at 4% on the IBRD loan and at 3-1/2% on cther fumds) vould be earned about two times. The net income would comfortably provide for all debt service during the life of the IBRD loan.

The DVC has been handicapped by a long delay in the appointment of a Chief' Engineer. It will provide for technical supervision satisfactory to the Bank before the execution of the loan agreement.

In view of the anticipated financial return from the investment, which will make the project self-liquidating, and the fact that the project will sup- ply urgently needed pover for India!s most highly industrialized area and also water which can be immediately utilized in existing irrigation canals, it is considered financially and economically justified.

y 1 mill 1/10 U. S. cent THE BOKARO-KONAP PROJECT

Damodar Valley Corporation, India

The Damodar Valley -

The Damodar River flows about 300 miles in a general easterly direction through the southern portions of the Provinces of Bihar and 'est Bengal and empties into the Hlooghly River about 30 miles downstream from Calcutta. It has a drainage area of about 8,000 9quare miles, Tn the Damodar River Valley, vrhich is about 80 miles wide at its widest point, the population numbers about 3.3 million representing a density of about 415 per square mile..

The upper part of the Valley is gently rolling country suited best for forests, but the lower valley consists of fertile alluvial soil suitable for year round cropping, provided an adequate supply of water is available, At present the lowfer valley is served by 26 mile6 of main line and 21 miles of branch line canals and about 2h2 miles of distributaries wvhich provide water during the monsoon season (15 June - 15 September) for the irrigation of about 185,000 acres. During the dry seasons there is no flow in the Damodar fliver,

The area extending roughly 125 miles north and 100 milep south of the Damodar River, which might become the "Operational Area" of the Damodar Valley Corporation, is the richest mirneral and the most highly developed industrial region in India. In this area are deposits containing an estimated 15,500 million tons of workable coal (about 75% to 85% of India's reserves) including coking and non-coking coal, 8,000 million tons Qf high grade iron ore and sub- stantial and workable deposits of manganese ore, copper ore, limestone, mica (tlhe world's chief source of supply) bauxite, asbestos, kyanite, clromium, vana- dium, gold, fire clay, soapstone, silica, sand and gravel,

Practically all of India's coal production (20 to 24 million tons), 95% of its steel production (1,000,000 tons), all of its mica production (100,000 cwts) and a large proportion of its copper ore production (400,000 tons) come from mines and plants in t4is region, Other industriep in the area include: rod mills, wire and cable plants, steel sheet and tinplate mills, foundries, pipe plants, steel fabricating plants, locomotive works, machine shops, paper -mills, ohemical plants, lime and cement mills, stone quarries, ceramic glass and refractory works, textile mills, shoe factories, sugar mills, aluminum plants, cycle and wragon factories.

The Unified Scheme of Development of the Damodar Valley -

Prior to the enactment of the legislation creating the Damodar Valley Corporation, a unified scheme of development of the Damodar Valley was formulat- ed by the Central Technical Power Board of the Government of India. This scheme envisaged the ultimate construction of:

a) 8 flood control storage dams with hydroelectric plants having a total installed capacity of 182,ooo kw; - 2-

b) 2 additional hydroelectric plants without storage having an installed capacity of 16,750 kw;

c) a thermal povwer plant of 200,000 ki ultimate capacity;

d) approximately 600 miles of transmission lines to serve the Damodar Valley and adjacent areas;

e) a navigation canal about 80 miles long; and

f) an irrigation barrage on the lover part of the Damodar River to divert water into a netvwork of 477 miles of main line and branch line canals. These canals vwould provide irrigation for about 967,000 acres, including the 185,000 acres now irrigated from existing canals on'ly during the monsoon season.

The total cost of the entire scheme of development has been estimated at .l1h2.3 million (630,000,000 rupees) of which CIO million (190,000,00 rupees) would be foreign exchange costs. The anticipated benefits would include:

i) The prevention of floods vwhich frequently disrupt rail and1 road communication between Calcutta and North India, destroy crops, damage land and urban property and cause human suffering;

ii) An increase in food production by making year round cul- tivation possible on 967,000 acres as against 1835000 acres now seasonally irrigated;

iii) The provision of about 300,000 kvw of firm power for mining, industrial and domestic use;

iv) The supply of water for industrial use and the relief of shortage of drinking water during the dry season by providing year round flow in the Damodar River;

v) An additional means of transportation by the 80 mile navigation canal connecting the Damodar with the Hooghly Piver about 30 miles'above Calcutta;

vi) The cultivation of fish in the'reservoirs to add to the food supply.

The first project to be undertaken is that wlich the IBRD has been re- quested to assist in financing (Bokaro thermal plant, Konar I dam and tranamis- sion lines). It has been given priority over others primarily in order to sup- ply the urgent demand for additional electical energy in the Damodar Valley region buit the Konar Reservoir will also provide water for industrial and domestic use and for a small amount of irrigation (40o000 acres).. Later these works will be integrated into the unifiqd scieme of development in which the thermal plant will be utilized to maximize power production and the Konar reservoir wil. con- tribute i'ts share of flood storage and powers -3-

The Project Submitted for Bank Financing -

The Bokaro-Konar Project will invol3e:

a) The construction of the Bokero thermal power plant of 150,000 kw, located in the Province of Bihar on the Konar River (a tributary of the Damodar River);

b) The construction of an eartlh fill dam to be known as the Konar No. I Dam on the Konar River about 12 miles upstream from the thermal plant. The purpose of the dam will be to create a multi-purpose storage reservoir which will provide cooling vwater for the thermal plant, storage capacity for flood water, and water for irriga- tion and the generation of 10,000 kw of electrical energy; and

c) The construction of transmission lines and substations to carry the energy throughout the Damodar Valley and adjacent territory,

These vworks are being constructed and adTninistered by the Damodar Valley Cor- poration, which was established by an Act of the Central Indiar Legislature in 19ho. The IBRD has been requested to finance the portion of the dollar cost still required for the completion of the project.

1 7he total cost of the project is estimated at the equivalent of ,52.8 million-'. The local currency requirements are estimated at 19.5 million and foreign exchange requirements other than dollars at $7.4 million. The total dollar cost of the project is estimated at about $25.9 million, of which i,7. million had been already paid on contracts as of 1 January 1950, leaving Ola8,5o, 00 as the amount desired as a loan from tho ThRD. Of thie t8.5 million, the equivalent of Al.5 million is for purchases in Canada. No re- imbursements of amounts spent prior to 1 January 1950 or interest during con- struction are requested.

The Damodar Valley Corporation -

The DVC was created in liarch 19h8 as a public corporation to execute the unified scheme of development of the Damodar River. It was patterned after the Tennessee Valley Authority in the United States. It is adninistered by a Board of Directors consisting of a Chairman and two other members, all of 'whom are appointed by2 he Central Government after consultation .with the two Provin- cial Governments-J, Bihar and Vrest Bengal, in which the Damodar Valley lies. The Secretary of the Corporation, who is the Chief Executive Officer, and the Financial Adviser are also appointed by the Cqntral Government. Other officers and servants are appointed by the Corporation. In August 1949, it had 1,270 permanent employees, 436 of whom were classified as technical and OBh as non- technical.

1/ Including the cost allocated to flood controli t/ At the inception of the Indian Republic on 26 January 1950, the provinces became known as States. - 4 -

While the Corporation enjoys a large measure of autonomy, the scope of its activities is limited by certain povwers cDnferred in the Act on the Central and the two participating Provincial Governments which provide all of the Corporation's capital. The Act provides that the Corporation shall be guided by such instructions on questions of policy as may be given by the Central Government and that the Central Government alone will decide whether a question is or is not a question of policy, The Central Government may also make rules regarding the salaries and alloy,an es and conditions of service of the appointive officers, the duties of the financial advisor, the forms of the budget, the manner in which the accounts of the Corporation shall be maintained and audited, and regarding dams and other works which may be constructed in the Daamodar Valley without the approval of the Corporation.

The relations between the Corporation and the Provinces are set forth in the Act, which provides that the Corporation must: a) have the approval of the Provincial Governments before constructing canals and distributaries; b) consult with the provincial Governments relative to the rates to be charged for irrigation-water and the minimum quantities of water to be made available for such purposes; and c) obtain the permission of the Provincial Governments before supplying electrical energy beyond the limits of the Damodar Valley (or its Area of Operation) or selling energy directly to a consumer at less than 30,000 volts.

The Corporation is subject to the income taxes Qf the Central Government an(i has the power to sue and be sued. It also has the right of eminent domain (compulsory acquisition of land).

The Central Government may, after consultation with the Provincial Gov- ernments, by notification in the Official Gazette, direct that the Corporation shall carry out such function and such powrer in such area other than the Valley as may be specified which area shall then be called the "area of operation" of the Corporation.

Regarding the supply and generation of electrical energy, the Act states that no person in the Damodar Valley may in the future generate electrical energy at an installation having an aggregate capacity of more than 10,000 kw, or sell or transmit energy at a pressure of 30,000 volts or more without the permission of the Corporation. Existing generating stations of more than 10,000 kav may continue to operate but cannot expand. The Act also provides that the Corpora- tion may extend its transmission system and sell energy beyond the pamodar Valley, with the permission of the Provincial Government concerned. Thus by law the Damodar Valley Corporation has a virtual monopoly in supplying electrical energy in the region in the future.

The capital requirements of the Corporation are provided by the parti- cipating Governments (the Central Governmept and the Provincial Governments of Bihar and West Bengal). On the capital so provided, the Corporation is re- quired to pay interest to each participating Government, at a rate fixed by the Central Government from time to time. As there is no provision in the Act for the repayment of the capital, the amounts provided are in the nature of share capital. If any Government should fail to supply its share of capital, the Act provides that the Corporation may, with the permission of the Central Government, borrow in the public market to make Up the deficit at the cost of the Government concerned. The capital costs.of.poluer are shared equally by the three participat- ing governments and the. capital costs of.irrigation are the responsibility of the Provincial Governments...The capital cost:of flood control, up to 140 million rupees, is shared equally between .the Central and. t,est Bengal govern- ments. Expenditures'for'flood control in excess of 1LO million rupees will be the liability of the'West Bengal Government.

The.net profits .of,the Corporation, if any, are credited to the parti- cipating governmenits in proportion to their contri,butions and net deficits will, according to the Acet,'be made good by the participating governments in the same proportion except that the net deficit in respect.to flood control is the re- sponsibility of the W1'fest Bengal Government, the chief beneficiary. For a period of 15 years,.'however,.if the Corporation runs in deficit,' the Act ptovides that interest charges and.all other expenditures shal).be added to the capital cost and all receipts shall be taken in reduction of such capital.cost. The Corpora- tion will.derive income from the sale of electric energy, the sale.of vwater for irrigation.industrial and domestic use and from navigation fees.

Installed Electrical Generating Capacity in the Region

The installed electrical generating capacity in the loperational area" determined by a suryey made in 1948 wras about 391,600 kvt, not inicluding the 80,ooo kw power plant now under.construction at the Sindri Fertilizer Plant. The installations consisted of 2h,000 kwr in small plants in 12 tovms and villages, .269,300 akw'in.industry,'and 9a,300 Itw in 39 independent power stations and 3 major licensee power netvforks in the coalfields. The maximum demand on the 391j600 kw installed was about 200,000 kw.

In addition there was in use in the area a total of 465,6bo kvr of steam and internal combustion engines supplying powqerfor purposes other than the gen- eration of electricity, The maximum demand on these engines was assessed at 250,000 kwr. In 11 of, the 12 power plants in towns and villages, the condition of the plants was unsatisfactory and their operation had become unecorlomical., The managements wiere reported to look with favor on,-receiving power. rom outside sources at reasonable rates as at most of$thp.plants the installed capacity was inadequate and old. The power plants at the major,industries were, as a rule, fairly ell maintainedd bt these industries cannot expand their plants without goverrment consent or coopera:tion. Mlany.of the colliery plants are old ancd need replacement. Expansion of these existing-,plants is likewise dependent on government consent or cooperation.

14Iarket for Power -

An exhaustive load survey was carried out in the Operational Area by engineers of the Government of India!A Central Electricity Commission, during the course of which they covered 243 localities and practically all of the in- dustries and mines in the area. Their report dealt writh all types of prospec- tive loads. Estimates of the.-prospective.loads likely to develop by l955, 1960 and 1965 were made and also of the amounts of the existing sapaci,ty likely to - 6 -

be available to supply the demand. The difference between the prospective loads and the effective capacity available indicated the probable demands to be met by the Damodar Valley Corporation's projects.

The load grovith from 1950 to 1955 was estimated to be very small (450 M.W, to 494 M.V!.) because very little new capacity was expected to be added. From 1955 to 1960 the load was expected to grow from 494 1W. to 680 M.VI., about 6,6% compounded annually; from 1960 to 1965 the load was anticipated to grow slowly from 680 }I.W. to 772 DI.jJ. or at a rate of only 2.6% compounded annually. For the total period 1955-65 the rate of increase was L.6% compounded annually.

To supply this dem4and, however, it vwould be necessary to install addi- tional capacity at a more rapid rate than the rate of growrth of the load in order to offset the deterioration and obsolescence of the existing equipment. This situation is shown in the table below which gives the estimated load growth, available effective capacity and balance of demand.

Table 1

Load Growith Estimated by DVC 1955 1960 1965 5ys. l~3s. lF~s. (i) Anticipated load 494 Ur 680 mW 772? il

(ii) Available generating capacity without new installations and making due allowance for old plants likely to go out of operation 188 uiir 182 1lT! 174 Iwix

(iii) Balance of demand 306 T':r 498 mnw 598 ixr

Demand for additional generating capacity, as- suming a diversity factor of about 1.10_1 282 IN 459 ior 550 TV

The balance of demand to be supplied by the DVC projects as shown above indicates an anticipated increase of 10.3% compounded annually for the period 1955-60, 3.7% for the period 1960 to l965, and 6.9% for the entire period 1955-l965.

The net balance of demand - 282 to 550 MIT - was composed of six classes of loads as showm in the following table.

1/ A diversity factor takes into account the fact there will be a diversity as to the time! of individual demands on the plant. Table 2 Classes of Prospective Loads In miegawatts

Class 1955 1960 1965

1. Town and village areas 33.5 50.6 65.8 2. Hleawy and special indus- tries 153,2 221,6 258,9 3. Coal fields 87.2 137.2 176.3 h. .lica mines 6.6 8.4 10,8 5. Irrigation 8,0 12.0 17.1 6. Railway Elect0 18.0 68.6 68.6 Total 306.5 198.4 597.5 Allowing diversity factor of about 1.10 282 I59 550

As the DVC estimated the maximum demand that could be suppuiied safely by all of its proposed hydroelectric projects and the Bokaro thermal plant with 200,000 kw installed at 389 M.V7.r, the DVC concluded that at sometime before 1965 it would be necessary to import power into the operational area.

In the opinion of the IBRD's Engineering Staff, the load survey was carefully made and its projections of increases in loads and effective capacity available are reasonable on the whole, except that the loads expected to dev- elop from irrigation and railwray electrification are somqewhat optimistic as to rapidity of development. If these loads were eliminated from the estimatefor 1955,it would then be 280 1-B, a demand considerably more than the Bokaro-Konar project could supply by 1955. Howrever, the "operational area" of the DVC h-ias not yet been extended to include the area covered by the load survey and in fact the transmission lines contemplated in connection witlh the Bokaro-Konar project will cover only a portioh of the area surveyed. The DVC, therefore, for initial computation of revenues for the Bokaro-Konar project have taken into account only the loads listed below, vwhich according to DVC, are more or less assured.

Prospective Load Bokaro-IKonar Project

Source Amount in IF

Coalfields 5° Locomotive shops, Chittaranjan 7 Tata Irpn & Steel Co., Jamshedpur 35 Karagpur, incl-. Mach. tool plant 18 Burdwan area 10 Towns and miscellaneous 12

Total 132 H,jf

The DVC assumed that the development of the above load would be 60% in the first year of operation of the Bokaro-Konar project, 80o in the second year, and l00% in the third year.

A spot check of the prospective rmarket for the 4bove power revealed that in all probabi4ity a demand of at least 132 Pm! would develop within 3 years after - 8 - the completion of the Bokaro-Klonar project. The sales would be entirely to large consumers. As these types of consuners are prohibited by law from ex- panding or building their own generating plants without express permission from the DVC, they will be forced to buy from the DVC.

In view of the age and condition of most of the generating equipment in the area, the desire and necessity of the region to expand mining and industry and the relatively high cost of production at existing thermal plants (there is no hydro production), the market for the Bokaro-Konar power seems assured.

Description of the Project -

The three main features of the project are:, a) the Bokaro thermal plant; b) the Xonar No, I Dam; and c) transmission lines and substations.

The Bokaro Thermal Plant - The 1 0,000 kvf Bokaro thermal plant will be an essential part of the powver development program of the DVC. It vwill comprise about 38% of the ultimate capacity contemplated under the unified scheme of dev- elopment and will be expected to carry the base load of the entire system for 37 weeks out of the year wvith the hydro plarnts carrying the base load the remaining 15 weeks during the monsoon season, Although the 10 proposed hydro stations in the scheme will have an installed capacity, according to present plans, of about 198,000 kw, the firm powzer available from them would be only 100,000 kw at a 600 load factor. By integration of tile hydro power with the thermal power from the Bokaro thermal plant with 200,000 kvw installed, it will be possible to provide about 300,000 lvi of firm power at a 60% load factor from the Damodar Valley system.

The location of the Bokaro Plant was carefully selected wiith respect to coal and vrater supplies. It vwill be situated on the bank of the Konar River about 4-l/2 mniles above the confluence of the Konar and Damodar Rivers and about 4-1/2 miles from the ooal loading points of the mine which will supply coal. While the plant will be designed for an ultimate installation of 200,000 kw, the ini- tial installation will be 150,000 ky., consisting of 3 turbo.-.generator units of 50,C00 kw each. Each unit will consist of a multi-stage steam turbine, directly coupled to and driving a hydrogen cooled 3-phase electric generator which will generate at 13,800 volts and 50 cycles. Three main station transformers of 65,ooo kva eaoh will step-up the voltage from 13,800 to 132,000 volts. Each unit will have a condenser capable of maintaining a vacuum of 28.3 inches Hg. (mercury) and the conventional accessory equipment. For each turbo-generator unit there will be two boilers designed to burn pulverized coal with an ash content up to about 270. Each boiler will have a capacity to generate 300,000 pounds of steam per hou:r at 850 pounds per square inch pressure at 900 degrees Fahrenheit. Coal will be inoved to the plant by an aerial ropeway or (in emergencies) by rail. It will be taken either from track hoppers or storage pile by belt conveyors. Ashes will be removed by a sluicing system and will be used to fill depressions in the vicinity pf the plant. Coal consumption is estimated at 1.33 pounds per kilowatt- hour.

The international General Electric Company has the prime contract to sup- ply the turbo-generating units, boilers (manufactured by Combustion Engineering Co.) and accessory equipment, including the equipment for the coal and ash handling _9- systems and the water softening system. The IGE will also design and supply complete architectural and structural drawings for the powerhouse. The Beth- :Lehem Steel Co. has the contract to supply the structural steel for the plant. The DVC has retained the Kuljian Corporation of Philadelphia, Pa., as contract- ors for the erection of the powerhouse and for the design and installation of the necessary piping, wiring, etc. and as consulting engineers to test equipment to coordinate the services of erection supervisors'of the various manufacturers, to train operating personnel (partly in the United States), to install a system of log sheets, daily reports, etc., to insure proper control of plant operations and to establish a standard form of aqcounting procedures. The Kuljian Corpora- tion will also purchase for DVC items to be obtained in the United States which are not included in the IGE contract.

The coal required for the Bokaro plant will come from the Bermo Seam of the Kargali colliery. The loading point of the mine is located about 4-1/2 miles from the plant. The Bermo Seam is about 40 feet thick and the total reserve of coal in the seam is estimated at more than 50 million tons. The coal will have a calorific value of 11,200 B.T.U., (dry basis), 20% volatile matter, 53% fixed carbon, and about 26.6% ash. The DVC has decided to trans- port the coal by aerial ropeway, the capital cost of which is estimated at 2 million rupees ($420,000). The cost of delivering coal to the plant is estimated at about one rupee (about 21 cents) per ton including operation, maintenance, depreciation and interest. The cost by rail would be 2 rupees 3 annas (about 45 cents) per ton, and in addition, the DVC might be required to supply special railroad cars, the estimated cost of which would exceed the cost of the proposed ropeway. Rail connections between the mines and the plant will be provided, however, for emergencies.

The requirements of the Bokaro plant with 150,000 kf installed, are estimated at about 300,000 tons annually. The DVC will sub-lease a Part of the seam from the Railway Board containinig about 10 million tons (30 years supply) and will mine the coal by open cut methods, either by contract or by its own forces. It is estimated by the Chief IvMining Engineer, Railwvay Board, that coal can be mined and delivered to the ropeway for not more than 8 rupees ($1.68) per ton at a maximum and perhaps leps. / The delivered cost at the plant would, therefore, be 9 rupees or about $1.89 per ton. The controlled price for this grade of coal purchased in the open market at present would be 12 ($2.5?) to 13 ("2.73) rupees per ton at the mine.

Water supply for the plant will be obtained from the Konar River, the flan of which will be regulated by the construction of the Konar No. I Dam about 12 miles upstream from the Bokaro plant. As the Konar River has no flow during thE dry season, it would be necessary, without a regulated flow in the river, to construct expensive cooling towers or other facilities to provide adequate quantities of cooling water, but as the Konar Dam was scheduled to be constructe in any event as a unit of the multi-purpose scheme, it was included in the thern al power development scheme to supply cooling water at Bokaro. A small barrage about 2,700 feet long with a lift of 12 feet will be constructed at the site of the plant. 'This will create a pool from which water will be taken through ducts to the circulating pumps by gravity and will pr'ovide a small amount of daily regulation. After the water has been utilized at the thermal plant, it will be returned to the stream, except for evapo'ration losses, and wvill be used downstre 1 An' independent estimate made by an' engineer retaired by*,"the IBRD indicated that the cost of ooal delivered to the ropeway vwould be 5 to 6 rupees per ton, provided a reasonable amount of mechanization were used. The cost of 8 rupees per ton therefore is considered conservative. - 10 - for domestic and inaustrial purposes and for the irrigation of about 40,000 acres in the dry season through existing canals and distributaries located in West Bengal.

Konar IIo. I Dam - The Dam, designed by the French firm Societe de Con- struction des Batignolles, will be an earth fill structure about 12,600 feet long with a maximum height. of about 160 feet. The initial hydroelectric instal- lation will be about 12,1X00 kva (10,000 kw at..80 power factor). The reservoir, which has a maximum capacity of 260,000 acre feet and a dead storage of 25,000 acre feet, vrill provide useful storage of 235,000 acre feet. of this the DVC proposes to reserve 95,000 acre feet for flood storage. Evaporation losses are estimated at about 22,000 acre feet (about 5 feet in depth over the reser- voir). The net useful storage available for cooling water and povwer, tlherefore, wiJ'l be 118,000 acre feet from which a regulated flovw of 250 cusecs could be obtained. The estimates of inflow into the reservoir are based on rainfall records of 34 years and streamflow records of 15 years duration.

The maximum cooling water requirements for the Bokaro thermal plant with 150,000 kw i nstalled and operated at 100% load factor would be 165,000 gafons per minute or 360 cusecs. As the. load factor at the plant will probably never exceed 60%, the normal cooling rater requirements would be about 216 cusecs. The minimum regulated flovw from the Konar reservoir during a dry year under the most unfavorable assumptions (flood storage empty) of 250 cusecs would therefore meet Bokarots normal reouirements.

The Transmission System included in the project will consist of 350 miles of '132 kv double'circuit lines, 30 miles of 66 kv single circuit lines, and 90 miles of 3.3 kv double circuit lines together with nine 132 kv, five 66 kv, and1 ten 33 kv svwitohing and distributing substations. The conductors of the 13:2 1v lines will be aluminum and the towers will be steel. The conductors of' the 66 kv and 33 kv lines vwill be copper carried on tovrers made from steel rails. Orders have been placed for about 25% of the transmission and substa- tion equipment. The Associated Electrical Industries (India) Ltd., local repre- sentatives of the Aluminum Union Company, Ltd,, of M.1ontreal, Canada, have con- tracts for some conductors and accessories, the International General Electric, N. Y., for some oil circuit breakers, lightning arresters, insulators and ac- cessories, the English Electric Company, Ltd., for some transformers and the Societa Anonima Elettrificazione of JTilano, Italy, for the steel towers for the 132 kv lines.

The transmission system has been designed for. almost twice the initial load anticipated and has been laid out to include the Sindri Fertilizer Plant, other'lhydro plaits to be constructed at some of the proposed multi-purpose dams as well as load centers such as Tata Iron and Steel Works expected to develop quickly, This procedure will be more economical in the long rn than construct- ing initially a transmission system designed to serve only the immediate loads and plants and later expanding it to a larger capacity. Lines to serve only the immediate needs would probably cost only 20Y to 25% less than those proposed. The area to be served by the 470 miles of transmission lines vwill be entirely within the Damodar Valley except the area served by 147 miles of 132 kv double circuit; line to Kharagpur which will include the Tata Iron and Steel Company at Jamsheclpur and about 30 miles of the 132 kv line to Burdwian. In the second stage of development, it is proposed to externd the transmission lines to Calcutta. 11 -

Stage Two of Damnodar Valley Development -

In three years after the completion of the Bokaro-Konar project, Stage TV!o is expected to be completed. The second stage is not before the IBRD for consideration, However, since Stage .Two is expected almost inmediately to fo:Llow and wvill be so closely related to the project under consideration, a brief description of the scope of this stage follows. It provides for the dev- elopment of additional'hydro power at two sites below Konar No. I Dam, knovm as Konar Nos. II and III, and the extension of the transmission system. The installed capacity at these two sites is expected to be about 40,000 kwv, of which 30,000 kw will be firm power. The two hydro stations, which will have no storage, will use the regulated flow from Konar I. The transmission lines, under the plan for Stage Two, will be extended to Calcutta from two directions, thereby providing a closed circuit over vwhich Calcutta can be fed. This will provide for added security of service. The additional transmission facilities required will consist of 125 miles of 132 kv double circuit and 10 miles of 33 kv double circuit lines and one substation of 25,0oo kva capacity. The additional powxer made available by Stage Two is expected to be absorbed in two years.

The cost of Stage Two povwer plants and transmission facilities, exclu,- sive of interest during construction, is estimated at 10,034,000, of which $1,463,000 will be for purchases in the dollar area.

Cost of the Bokaro-Konar Project -

The total investment required for the-project, inclusive of interest during construction, but exclusive of the portion of cost of Konar No. I Darn and reservoir allocated to flood control, is shown below, broken dovrm to show the foreign exchange requirements.

Bokaro-Konar

Total Cost of Project

M i ll i o n s Total ex- U.S. Canad&tn SterF- Swiss pressed in Item Dollars Jollaro ling Francs Rupees US Dollars_

Bolcaro Thermal Plant

a) Land _ _ _ _ e90 0 b) Roads &ccolony - - 7.53 o c) Barrage at plantsite - - 3.00 - d) Powerhouse bldg. 1.20 - - - 2.90 6 e) Machinery installaticns1 .45 - .10 2.67 0 f) Erection equippment ,17 - - - - g) Custom d4tiea-loca hauls - - - 6.oo h) Ocean freight 20- .23 - x i) Engineering costs .50 - - 2.00 j) Esculation charges & contingencies l.95 - - - 2.00 c

Sub-total 2047 - .33 - 27.00 27,o6 Int.dur.construqction 2,78 - .03 _ 2.56 3.4o Total 23.25 _ .36 _ 29.56 30,46 - 12 -

Bokaro-Jonar - Total Cost (cont.) Item l1 i o n Total ex- U.S. Canadian Ster- Swiss pressed in Dollars Dollars i4ang Francs Rupees USDollars$X

Coal a) Ropeway & bunker - - - 2.98

b) -line development - - -

Sub-total -- - - 4.69 .98 Interest - - - - .32 .07 Total - _ - _ 5.01 1.05

Konar Dam & Power House a) Land et reservoir clearing 2.5o b) Roads and colony - - - 1.20 c) Dam & appurtenances .66 - .39 33.9k d) Poirerhouse, civil works - - - - 1.20 e) Powerhouse machinery - .23 - .50 f) Engineering & contingencies - - - .50 1.23 Sub-total .66 - .62 .50 40.57 Less amt.chargeable to flood control 16.3k 2k.23 7.39 Interest .10 - o0 .04 1.77 .65 Total .76 _ .66 .54 26 .oo 8.o4 Transmission Lines and Substations a) Land and surveys - - - .50 b) Transmission line equipment 1.39 2.4l .51 _ _ c) Substation equip- ment 1.14 _ .56 7.20 - d) ErectiQn and con- tingencies .02 - - 16.02

Sub-total 2.55 2.412 1.07 7.20 20.52 13.65 Interest .59 16 .10. .5a 1.87 1.41 Total 3.1k 2.57 1.17 7.70 22.39 15,06

Total Cost 23.68 2.41 2.0o 7070 76.44 49,o8 Total Interest 3.47 .16 r .54 6.51 5.53 Grand Total 27.15 2.57 2.2i 8.24 82.95 54.61

A/ Using tiwio rates Sfconversion: (1) pre"devaluation rates for expenditures prior to September 1950, and (2) post-devaluation rates for expenditures after September 1950. - 13 -

Ihe cost per kilowatt installed i2n the Bokaro thermal plant, amounts to about $180. This compares favorably with the cost of about P;180 per kilo- watt for the 110,000 kw thermal plant now nearing completion in Calcutta, the equipment for which sas ordered in 1945 before large increases in prices were effective. Both costs are somewhat'high if compared with the costs of similar plants constructed in the U.S. in-19h9, which ranged from dp140 to 165 per kilowatt. However, if costs included in the Bokaro plant consisting of Indian customs duties, travel and extra pay of erection personnel and ocean freight amounting to 12.2 million rupees were deducted, the cost per kilowatt would be 417 less or about $163 per kilowatt which would be not fla out of line with U.S. costs and well within the range of European costs.-

For the =rupose of estimating the financial returns of the project, only the cost of the Konar No. I Dam allocated to power and irrigation are included in the capital cost of the project, as neither the cost nor the benefits from flodd control enter into the financial calculations.

Schedule for Completion -

! The entire project, except for about 20 percent of the transmission system is scheduled for completion by mid-year 1953; however, the DVC plans to put one 50,000 kw unit of the Bokaro plant into operation by mid-year 1952. Consequently, the completion of Konar No. I Dam to create a reservoir sufficient to supply cooling water for the one unit in Bokaro and the partial completion of the transmission system to take the power to the coal fields by mid-year 1952 are proposed. The final completion of the transmission lines and sub- stations is scheduled for 1954. The IGE contract calls for the delivery of one turbo-generator unit to be shipped from the factory not later than September 1951 and for the complete shipment of all equipment during the month of. January 1952. The table below shows the anticipated rates of completion of the various components of the entire project.

I/ The estimated cost per kilowatt of thermal units totalling 1,000,,000 kw proposed by OEC Electricity Committee for installation in Europe in 1950 - 1951 was: France $175; Italy $160; Greece $;)200; Austria $180; Benelux ,k165- - 14 -

Table 3

Schedule for Completion

% Completed Anticipated Progress at end of r Completed during Calendar Yr. 1949 1950 1951 1952 1953 195M

Bokaro Thermal Plant

a. Roads and colony 10 70 20 b. Barrage at Plantsite 20 50 30 c. Powerhouse bldgs. 60 30 10 d. Miachinery installa- tions 20 55 25

Konar I Dam & Power Station a. Reservoir clearing, re- location & resettlement 25 50 25 b. Dam construction 20 45 35 c. Power station i. Civil Works 15 55 30 ii. Machine installa. tions 70 30 Transmisson Lines

a. 132 kv lines (350 miles) 10 25 25 20 20 b. 66 " ( 30 "'.~) 75 25 c. 33 " ( 90 ) 22 33 20 25 Substations & Switching Stations a, 132 kv substations (9) 10 40 30 20 b. 66 " (5) 60 h0 c. 33 kv switching stations (10) 40 30 10 10 10 (The percentages show the progress of physical work).

Work Accomplished to the end of January 1950

At Bokaro, the foundation investigations for the plant had been com- pleted and grading of the site had started; grading and placing of culverts in 2-1/2 miles of the 5-1/2 mile access road had been completed and short railway siding for unloading supplies had been constructed; a layout of the colony had been made and the construction of some housing, water supply works and warehouses had been started; poles for the 3 mile transmisaion line to bring construction powrer to the site had been Dlaced and surveys of the route of the aerial ropeway had been completed; preliminary investigations to determine the depth to rock and some core drilling along the center line of the barrage at the plant site had - 15 -

been undertaken; surveys of the stream bed for 10 miles above and below the site had been completed and arrangements had been finalized to have model tests of the preliminary designs of the barrage made at the River Research Institute of Bengal.

At Konar, detailed surveys of the dam site and reservoir area and designs of the dam had been completed; core drilling (with h drills) for foundation investigations was under way and'test pits had been put dovm at regular intervals along the center line of the dam. Numerous soil samples had been taken and soil tests were under way; a graveled access road 8-1/2 miles long had been completed; the construction of the'colony, warehouses, vwater supply, a small power plant, and a bridge over the Konar River were under way; competitive bids for the construction of the dam had been received and consulting engineers to supervise the construction of the work had been selected.

On the transmission lines and sub-stations, detailed designs and specifications had been completed for all of the 66 kv and 33 kw lines (120 miles) and 205 miles of the 350 miles of the 132 kv line projected and also for all of the 66 kv and 7 of the nine 132 kv subv,stations and all of the 33 kv switching stations. Orders had been placed for a large part of the equipment required for both the transmission lines and sub-stations. As erection will be undertaken by DVC forces, organization of erection crews vras under way.

Contracts Placed.-

Contracts totalling fl5,487,000 had been placed in the dollar area at the end of December 1949. Payments on these contracts as of the same date amounted to f7,379,000.l/ Contracts placed in the sterling area totalled on December 31, the equivalent of 10,745,000 rupees or 8t2,256,000 on which 2,13h,000 rupees or .h448,000 had been paid, Final payments on all of these contracts, except one to the Kuljian Corporation, are due in 1952. The Kuljian contract extends to 1954, as it-provides for training of Indian operating personnel after completion of the Bokaro plant.

Phased Requirement of Funds _

The estimated amount of funds required, by currencies, for each of the years 1950 through 1954 is shown in the following table. These f'unds include the cost of Konar Dam allocated to flood control (16.34 million rupees) but no interest during construction.

1/ For detailed list see Annex. - 16 - Table 4 Phased Requirement of Funds (Figures in millions of currency indicated) Total U.S, Canadian Swiss expressed Year Dollars Dollars Sterling Francs Rupees in rupees-

1950 9.51 .47 .48 3.76 37.09 95.11 1951 5.54 - .83 3.77 25.30 67.07 1952 1.26 .46 .40 0.17 16,58 30.09 19',3 .50 .45 .11 - 39t80 9.59 1954 .19 .27 .04 - 3,35 5.95

l'otal 17.00 1.65 1.86 7.70 86.14 207.81 U.S. $ equi- valents 17,00 1.50 5.21 1.80 18.09

These funds do not include any amounts for reimbursement for expendi- tures made prior to 1 Januar7r 1950 or for interest during construction. Since the interest and coTimitment charges qn the IBRD loan during construction will be paid by the Government of India, they are not included in the dollar reqluire- ment. For purposes of computing the financial returns on the project, horwever, interest during construction on all funds is taken into account. The following table shors the list of goods and services to be pur- chased with the U.S. and Canadian dollars. The amounts.paid to 31 December 1950 on contracts are ihdicated.

1/ The rates used in ponversion of the various currencies to rupees were:

U,S. 't1 ...... 14.76 rupees Canadian $1 . . . , 4.32 rupees U.K. UI . . .. . 13.33 1/33 rupees Swiss Francs 100 . . 1J5,rupeds Table BOKARO - KONAR PROJECT Estimate of Dollar Cost--(In thousands)

Total Cost Pd. thru 12/31/49 Balance to be financed Cana- Cana- Cana- Total in U.S.$ dian $ U.S.$ dian $ U.S.$ dian $ U'S.$ Bokaro Thermal Plant IGE contract 13,362 - .6,300 - 7,062 $7,062 Spare parts IGE equipment 400 - -- 400 400 Erection costs 412 _ _ _ 412 - 412 Structural steel 918 - - 918 - Piping 91& valves, etc. 1,000 - - - 1,000 - 1,.000 Station wiring conduits,, etc. 1,000 - - - 1,000 - 1,G00 Misc. erection equipment 175 _ - - 175 - 175 Kuljian.Purchasing Commission 63 - - - 63 - 63 Kuljian Engineering Fee 500 - 175 - 325 325- Kuljian Supervision Fee 488 - - - 488 - 488 t _-KOnar Dam-

7 Construction equipment 656 - - - 656 - 656 Transmi8sion Line Equipment, Co~Mctorst,et& 2,407 - 762 - 1,645 1,495 Insulators, etc. 624 - 185 - 439 - Ground wire 439 174 - - - 174 - 174 Erection appliances 101 - - - 101 - 101 Communication system 489 - _ - 489 - 489 Substation EquiPment breakeras uit 26 - 26 - - - - Lightning arrestors 80 - - - 80 - 80 Isolators 384 - - - 384 - 384 Control & protective equipment 314 - - - 314 - 314 Misceellaneous fittings 342 6 - - 342 6 347 Erection tools 23 _ - - 23 - 23 Esculation Charges (IGE) and 9%hexr Contingencies 1,953 - - - 1,953- 1,953 Ocean freight 202 - - - 202 - 202 Grand totals 23,686 2,413 6,68k 762 17,000 1,651 18,500 - 18 - Availability of Poi.rer from Sindri -

The DVC- has contracted to obtain 30,000 kw of power for 25 years from the.fertilizer,plant now under construction by the,Government at Sindri on the Pamodar R.iver about 40 miles below Bokaro. The power plant at Sindri, which is a thermal plant, vwill have a total installation of 80,000 krr. It was planned that 50,'000 kw of the 80,000 kw would serve the fertilizer plant and 30,000 kw would b6 allocated to the DVC so that this quantity of power could quickly be made available to the coal fields. It is estimated that this power will be available by 1951 or perhaps sooner. The DVC will pay an annual demand charge of 60 rupees ($12.60) per continuous kilowatt and an estimated energy charge of .0125 rupees, (2.63 U.S.mills) per kwh. The cost of the energy at the Sindri bus bars based on a sale of 100 million kwh per year will be about .0260 rupees or (5.46 mills) per kwh. This energy charge is, however, subject to adjustment to actual costs after the Sindri plant begins operations. This energy will be'distributed through the DVC transmission netyrork and the Sindri plant will become an integral part of the nVC power grid. Cost of Production and Transmission of Energy - The cost of electricity production at the bus bars of Bokaro Thermal Plant, including interest during construction, is estimated at 5.19 mills Per kwh based on coal at 9 rupees per ton and the sale of 552 million kwh annually. This volume is expected to be reached the third year after the completion of the project. Including energy from Konar and energy purchased from Sindri, the average cost of Dower from the Bokaro-Konar project will be 5.35 mills per kwh. The cost of transmission will be about 2.11 mills per kwh. The cost of energy delivered to the large consumers' transformers or to sub-stations will, therefore, be in the order of 7.46 mills per kwh (0.0355 rupees per kwh). The cost of transmission is relatively high as the capacity of the system initially will be larger than required, but this cost will decrease as the amount of energy transmitted increases. The total cost of the energy delivered to the consumers' transformers of 7.46 mills per kwh includes interest on the total capital investment (which includes interest during construction) at 4% on the dollar bo`rt1ion a.nd 3-1/2% on the'other'portions, depreciation, maintenance and operation costs and 12%. transmission losses.

A spot check of several power plants in the Valley revealed that this cost will probably be cheaper than any of the existing plants 'could produce power, as the.followirng examples will indicate: (a) The.ll0,000 kr thermal plant now under construction in Calcutta .expects to have to pay 23-1/2 rupees per ton for coal delivered (compared with .9 rupees at Bokaro) and the -capital cost of this plant.p'er kw installed will be about the.same as Bokaro. (.b). The Loyabad Power Station of the Sijua (Jherriah). Electric Supply Company, a licensee with an installed capacity of 18,000 km, located in the coal fields, was paying 18-3/h.rupees per-ton for coal and its costs of production on a 64% annual load factor was over one cent per kwh including capital costs. (c) The termal power plant of the Aluminum Company near Calcutta with an installed capacity of 16,000 kw required 2.2 popnds of coal per kwh - 19 - as compared with 1.33 pounds per kwh for Bokaro and coal from their own mines was costing 11 rupees per ton at the plant as compared with 9 rupees at Boakro.

Frorm this check it is evident that the Bokaro-Konar project will have no difficulty in producing power as cheaply or, in most instances, considerably more cheaply than the existing thermal plants in the Damodar Valley area.

Rates Proposed by iVC for Energy and for Irrigation Wfater -

The preliminary electricity rates proposed by the DVC for energy consist of two Tariffs - A and B. Tariff A sets forth a demand and an energy charge for high tension bulk supply for loads below 5,000 kva and Tariff B the demand and energy charges for loads of 5,000 kva and above.

The rates in Tariff A are:

Demand charges per month:

For first 1,000 kva . . . . . 5 Rs. 14 As. - (f41.2h) kva " next 1,500 " . . . . . 5 ' 2 " - (sL.o8 " all over 2,500 kva . . Li " 6 " - ($0.92)

Plus

Energy charges per month:

For first 200,000 kwh . . . . 0.5 anna (6.56 mills) kwh " next 300,000 " . . . . O.15 " (5.91 mills) " " all over 500,000 kwh . . 0.40 " (5.25 mills) "

The rates in Tariff B are:

Demand charges per month:

For the first 5,000 kva ..4 Rs.l14 As. ($1.03) kva " " next 10,000 " ? . 4 " " ($0.89) " "i "t "t 15,000 " . . 3 " 10 " ($0.76) " all over 30,000 " , 3 " 6 " ($0.71) "

Energy charges per month:

For'the first 500,000 kwh _ .45 anna (5.91 mills) kwh " "i next 1,500,000 _ , 4r40 (5.25 " ) t " all over 2,000,000 " - .375 " (4.92 " ) "

The above rates are expected to return an average of about 6/10 anna (7.9 mills) per kwh sold. As the DVC is prohibited by law from distributing energy at less than 30,000 volts, it will serve only large scale consumers on a wholesale or bulk supply basis. The rates appear reasonable and should be attractive to communities, mines, railroads and large scale manufacturers that are now Durchasers or producers of electrical energy. - 20 -

The rate proposed for the sale of irrigation water is 15 rupees ($3.15) per acre for perennial irrigation - or about 7-1/2% of the additional gross income of 200 rupees per acre expected to be obtained by the farmers after year around irrigation is available. This rate compares favorably with those prevailing in other parts of India.

Financial Analysis

As the project itself will not earn dollars, the financial analysis set forth herein is made primarily to determine whether or not the project would be self-liquidating under conventional business procedures and would be able to carry the service charges of the loan contemplated.

As the Bank has been requested to assist in financing only the first stage of the development of the Bokaro-Konar project, stage two of the project Thich is expected to be completed in 1955 or 1956, is not taken into consideration - nor were any other power projects of the DVC - in estimating the financial returns. Consequently, revenues from the sale of energy from the Bokaro-Konar project, wrill level off after the third year of operation and not increase thereafter. Sales of irrigation water will also not increase because only the sale of water released from Konar Dam is considered.

The total capital investment in the project amounts to 221 miulion rupees. This does not include the portion of the cost of Konar I Dam allocated to flood control, 16.34 million rupees (29.2%) as none of the benefits from flood con- trol are included in the income column. Revenues from the sale of energy were based on the estimated average income of 6/10 anna (7.9 mills) per kwh expected to be derived from the preliminary tariffs. The income from sale of irrigation water was based on 15 rupees per acre for perennial irrigation of about 40,000 acres, less the amounts now paid to the Provinces for seasonal irrigation, the net being about 13-r1/2 rupees per acre.

The total gross income from the Bokaro-Konar project is expected to reach 32.55 million rupees annually three years after construction is completed. About 98 percent or 32.01 million rupees will be derived from the sale of energy and 2 percent or .54 million rupees from the sale of water for irrigatioi

Annual operation and maintenance costs of the project (including the cost of energy purchased from Sindri) are estimated at 11.79 million rupees. After deducting these costs from the annual income, a net operating income before interest and depreciation of 20.76 million rupees remains. This amount in norma practice would be available for interest and amortization charges on the IBRD loan amounting to 7.68 million rupees annually and interest on the non-dollar capital investment amounting to 4.65 million rupees. The surplus after interest and amortization charges would amount to 8.43 million rupees.

If annual depreciation charges of 4.0o million rupees be deducted from the net operating income, the surplus remaining will be twice the total annual interest charges on both the dollar and non-dollar investment. If the non- dollar investment contributed by the participating governments be looked upon as equity capital on which no interest should be payable, then interest charges on the dollar loan will be earned 4.7 times before taxes.

Depreciation is computed on a 3% sinking fund rate based on a 25 year life for the machinery in the therm4l and hydro plants, a 40 year life for transmission lines and a 75 year life for the Konar Dam and reservoir. - 21 _

In the annex a detailed analysis of the financial returns of the project is presented on a pro-forma basis. The table below shows briefly the revenues and various costs in millions of rupees in the fourth year of opera- tion after both income and expenses have leveled off. Interest on the dollar loan (Rs. 38.06) is computed at h% and on the non-dollar portion of the invest- ment (Rs. 132.9t) at 3-1/2"'.

Millions of Rupees

YIaint. Net I;sEM Charges Balance Gross & opera- operating On On Bal. of after Income tion income Loan invest. Total Deprec, Deprec.

32.55 11.79 20.76 3.52 h.65 8.17 4.00 8.59

Comments -

The Project - The Bokaro Thermal Plant, designed by the IGE and the Kuljian Corporation, is a modern type steam generating plant of conventional designl writh no particularly unusual features, The boiler pressure, 850 pounds per sl. inch, will be the highest in India. It will also be the first steam plant in India to use pulverized coal. The layout of the plant, its proximity to low priced coal supplies, and cheap transportation of coal by cableway, plus the gesnerally high rated efficiency of the equipment should result in the pro- duction of power at a cost lower than any plant now operating in the area.

The Konar reservoir will provide an adequate supply of cooling water for the Bokaro thermal plant. Only the costs allocated to powrer and irrigation are included in the amount of capital investment for purnoses of estimating fin- anciaL returns. This procedure is considered reasonable and justifiable. The design of the dam, produced by the French firm Societe de Construction des Batig- nolles, as revised by the Consulting s'ngineers retained by the nVC to supervise the construction of the project (Gruner Brothers, Switzerland) is satisfactory.

The transmission system to be built initially to carry the power from the Bokaro-Konar project is somewhat larger in capacity and length and more ex- pensive than would have been necessary for the power to be made available from this project alone, but as other generating plants are expected to come on the line in the next 5 to e years to supply about double the initial load, the con- struction of the transmission system as proposed is considered the most econo- mical in the long run and justifiable. The technical details of the system appear to be adequately engineered.

The Cost-of the Project - The total cost of the project, including Bokaro-Konar and the transmission system, is somewhat high by U.S. standards, but not unreasonably high considering the costs of ocean freight and other costs which would not be included in a U.S. plant. The dollar cost of the project includes some items which may be purchasable in the soft currency areas and the DVC has stated it intends to buy these items (chiefly for transmission system) in the soft currency areas if time of delivery is acceptable. Considera- tion wvill also be given to standardization of equipment to avoid the necessity - 22 -

of maintaining multiple stockpiles of spare parts. There are other items, however, such as special structural steel, valves, fittings and miscellaneous electrical equipment and a small amount of construction equipment which DVC wishes to purchase in the dollar area for technical reasons. The DVC also has included in the dollar estimates amounts to cover commissions for the purchasing and preparation for shipment of non-IGE equipment from the U.S. ($63,000), per- sonnel expenses for U.S. erection crews, consultants' fees and the consultants' personnel expenses. All of these items are considered reasonable dollar expenditures and necessary for the most efficient erection of the plant. Only $202,000 of the total cost of $850,000 for ocean freight is included in the dollar cost.

The DVC Organization - In judging the DVC organization, the fact that it came into existence on 7th July 1948, only 18 months ago (9 months at the time the mission was in India) must be kept in mind. At the outset the DVC made policy decision against undertaking dam design and construction 'departmentally" i.e., with its own personnel. It decided to appoint consulting engineers to handle dam design and to supervise construiction, to employ contractors to con- struct its various projects, to appoint a high-caliber chief engineer of broad experience to coordinate and direct the work of its technical staff and to train a maximum number of carefully selected Indians, both in design and con- struction by associating them with the consultants and pontractors who -vuld later be able to assume responsible positions in the organization. As the Central Technical Power Board of the Central Government had formulated the unified scheme of development of the Damodar River and had started work on plans for the Bokaro steam plant and as its successor, the Central Electricity Commission had continued the work on the Bokaro plant and related vork, the DVC did not attempt to set up an organization to take over the work the CEC was doing in its behalf, but let the CEC continue handling the project until the bids were accepted and the Kuljian Corporation was appointed as consultants.. At present the CEC continues to wrork for the DVC, but the DVC expects soon to appoint its own chief engineer and under him to build up its technical organ- ization and with his advice to appoint consulting engineers. The order in which these steps are taken is important. It would have been inadvisable and expensive for the DVC to have built up a large technical staff and hand it over to a chief engineer who had had no part in its selection. The DVC has delayed appointing a chief engineer longer than it should have. This has left the technical organization admittedly wieaR, but the DVC is fully aware of this deficiency and will provide for technical supervision satisfactory to the Bank before the execution of the loan agreement.

As the DVC enjoys a large degree of autonomy, it is only natural that jealousies and rivalry should arise, between the DVC and the other government agencies in thse same field - notably CMINC. / This situation has resulted in the criticism of the DVC within the government and also criticism from the Indian engineering profession who resent and view with alarm the DVC's policy of attempting to hire foreign engineers and consultants,

By any Western standards, the DVC organization is weighted down with too much junior administrative personnel, but since its records must be audited by the Central Government they must be kept in the manner prescribed by that Gov- ernment and therefore the staff to keep the records corresponds to the Central g/ Central Watervways, Irrigation & Navigation Commission Government nattern. It is also in the process of building up an organization -to administer a large volume of future vork. In addition, it is the Indian tradition to carry on its administrative work in a time consuming manner. The DVC is attempting to introduce some reforms in this direction but progress is slow.

Such technical staff as nVC has at present is reasonably good vith a fevw exceptions, but the work of the various divisions lacks coordination and drive. This reflects the lack of a chief engineer. The absence of a chief engineer throvws the burden of initiative and coordination either on the Chairmm or the Secretary to the detriment of their other duties.

On the vwhole the TVC has a high morale and all of the executives and engineers are sincere and keenly interested in carrying out the obiectives of the organization. The functional organization of the DVC is basically sound and with an aggressive chief engineer who is also a good organizer and executive the establishment could be expanded quickly into a smoothly functioning outfit that could adequately handle its assigned tasks.

Market for Power - A spot check of the Drospective market for the power to be ptoduced by the Bokaro-Konar oroject revealed that there will be an immediate absorption of all of thee energy made available - mostly to large consumers such as the Tata Iron and Steel "orks, coal mines and mutnicipalities. There is little ctestion but that rates at which the DVC expects to sell its energy wrill be attractive as most of the existing plants are old and high cost nroducers. However) as the DVC has a monopoly on the generation and distribution of energy in bulk in the Damodar Valley and. adjacent region, larger users of povrer will be forced to buy: from the DVC because they cannot expand or build their owm plants. The DVC plans in the second phase of its operation to extend its transmission lines to Calcutta, By this time the market for the power in Calcutta should be available, because the pent-up demand now will practically absorb the new block of power shortly to become available from the new 120,000 khr plant at Cossipore.

Financial Returns - As the Konar dam Will supply cooling wrater for the Bokaro plant and as the hydro power at this dam will also be integrated with Boakro power, the capital investment in this dam, exclusive of that allo- cated to flood control, as vrell as the returns from the sale of power and wtater for irrigation vwere taken into consideration in estimating the financial return Also taken into consideration are the net returns from the sale of power pur- chased from the Sindri Fertilizer Plant which will be distributed over the tran mission net.. This integration is considered entirely justifiable and desirable The-revenues,estimated to be received under the proposed charges.for energy and irrigation water appear to be adequate to earn inttrest charges %wo times and also to amortize the loan.

Conclusions-

As the proj6ct will nrovide much needed porer for Indials most industrialized region at reasonable rates and also provide a small supply of water for industrial use and for irrigation during the dry season and will earn its interest charges twice, it is both financially and economica ly Justified. A N ITE X

Bokaro-l:onar Project Statement of Dollar Contracts and Payments

SL Amount of Payments to dato line Name'of Firm Contract (31.12.49) $ 1. Associated Flectrical Industries(India)Ltd.,Cal- cutta(ll/33 kv Conductors & accessories) 13,066.45 12,0820.97 2. A-ssociated Electrical Industries(Tndia)Ltd,OCal- cutta(66 kv Conductors & accessories) 66,h01.80 39,8hl.08 3e Associated Electrical Industries(India)Ltd.pCal- cutta(l32 kv Conductors & accessories) 1,139,326.00 64o,ooo.oo 4, International General Electric Co.(India)Ltd,, B3onbay(66 kv Insulators & accessories) 46,5o8.6 Nil 5. International General Electric Co.(India)Ltd., Boqmbay(132 kv Insulators & accessories) 2811,641.30 185,ooo.00 6. International General Electric Co.(India) Ltd., Bombay (Lightning Arresters) 6,807.24 Nil 7. International General Electric Co.(India)Ltd., Bombay (Oil circuit breakers) 43,900.45 26,340.00 8. Irnternational General Electric Co. (India)Ltd. B3ombay(3 Steam turbine generators and equip- rnent for Bokaro Thermal Power Station) *13,362,320.00 6,300,000.00 9, Kuljian Corporation-fees payable for equip- rment inspection,construction management and initial operation of the Bokaro Steam Power Station over a period of 5 years 500,000.00 175,000.00 10, AEI Hlydraulic Compressers 5,000.00 Nil 11. International General Electric Co, (India) Ltd., 132 kv Control MJetering and Relay- ing Equipment 19,000.00 Nil

15t486,971.81a 7,379,002.05

Balance 8,107,969.79X

* This base price is subject to a ceiling of 15 percent. The escalation money amounts to an additional sum of I2,004,348. The final price will be as per day of shipment ex-factory. A N 'iE K Bokaro-Konar Project Statement of Contracts in Foreign Currencies Other Than Dollars

SL Amount of Payments to No. PaQne of Firm Etc. Contract date(31.12z49) Remarks Rs, Rs. I. Societa Anonima Elettrtficazionej,Milano, Payable in Italy (132 kv Towers) 3,723,920 2,493,000 sterling 2, English Electric Co.,Ltd.,Calcutta(lO,000 and 7,500 kva transformers) 859,531 5o6,0oo 3. English Electric Co.Ltd., Calcutta(6,ooo kva Transformers) 456,614 135,000 tt i, Associated Electrical Industries Ltd,, India, 132 kv Vibratcrs and dampers 228,000 - 5, Nippon Gaishal Kaisha 33 k.v. Pin Insulators 28,50C - 6. S.A.E. -ilatro 33 k.v. Suspension clamps 66,5cc - tl 7. BijjarinaJ Tilaram 132 k,v. Pedastal and Strain Insizlators 155,000 tC

S. Steaej t ,'ining Equipment India, Ltd., 15,300 lnra transformers 2,512,G0O - ti 9. B. I. Cables Ltd., 20,000 kva Transformers 1,493,000 - 10: A.E.I. Ltd. 20,000 kva tran- sformiers 744,00 -0 11. Reyrolle & Co. Ltd. Potential transformers, Isolating Switches, Cables, Control Miotoring equipment and oil circuit breakers 425,000 - 12. Easun Engineering Co. Isolating switches 53,000 -

l0,Y7S,o 65 2,13L,oC0 A ITIN E X

M,Jarch 15, 1950

Dear MTr. Beecroft:

I have examined the attached pro forma estimate of the financial returns of the Bokaro-Konar project and consider that it reflects the net operating income from such a project if considered entirely apart from other DVC undertakings; The net ouerating income would be sufficient to cover interest re- quireiments and income taxes at existing rates.

The DVC will not be required to pay land revenues (local taxes) on such land as it acquires nor is it likely to pay any income tax during the life of the requested IBRD loan. Vihile the attached estimate indicates a txable income, the non-income producing activities of DVC-,as flood control and soil conservation will, in all probability, absorb the surplas and leave no taxable income.

Sincerely yours,

(Sgd). S. N.l ozumdar

Mr. Eric Beecroft Loan Officer International Bank for Reconstruction and Development Washington 25, D. C. A N N E X Bekaro-Konar Pro ject Pro Forma Estimate of Financial Returns (in millions of rupees}

InteresV-ad LMQrtizat~on Income after Gross Income Operation Net Int.@ 4% & Int. 3: It. & amortizationd Energy Water and Operating amortizat on on balance of SalesSales Total ~Maintenance Income on $ IoZ investment Total Annual!/ ~1tv (Rs.88.06) (Rs.132.94)

1953 1.97 3.11 5.08 - 5.08 - 5.o8 1951 - _ _ 2,872 3.38 6.25 - 6.25 _ 11.33 1952 3.71 - 3.71 30o4 .67 3r*27 4.11 7.38 - 6.71 _ 18.04 1953 19.58 .54 20.12 9.19 10.93 3.41 4.47 7.88 A 3.05 - 14.99 1954 25.93 .54 26.47 10.92 15.55 3.49 4.59 8.08 7.47 - 7.52 1955 26.03 .54 26.57 11.79 14.78 7.68 4.65 12.33 2.45 - 5.07 1956 29.03 .54 29e57 11.79 17.78 7.68 4.65 12.33 5.45 f .38 1957 32.01 .54 32.55 .1,79 20.76 7.68 4.65 12.33 8.43 8.81 1958 32.01 .54 32.55 11.,79 20.76 7.68 4.65 12.33 8,.43 17.24 1959 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.431 25,67 1960 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 34.10 1961 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 42.51 1962 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 50-.96 1963 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 59-39 ;964 32.01 -.54 32.55 11.79 20-76 7.68 4.65 12.33 8.43 67.82 1965 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 76.25 1966 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.143 84.68 1967 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.4-3 93.11 1968 32.01 .54 32.55 11.79 20.76 7.68 4.65 12.33 8.43 101.54 1969 32.01 .54 32.55 11.79 20.76 7.68 4.65 12*33 8.43 109.97 1970 32.01 .54 3-2.55 11.79 20.76 3.84 4.65 8.49 12.27 122.224 Totals 552142 9.72 562.14 211.79 350-35 134.05 94.06 228.11 122.24 122.24 / Based on a dollar loan of $18,500,000 for 20 years with interest including commission at 4% per annum; amortization to start with the first interest payment in 1955. / Before taxes. The Corporation is subject to Central Government income taxes levied on corporations; as the rate of such is subject to change from time to time and is now before the Legislature for revision, taxes payable were omitted from the table, but the net income is sufficient to pay taxes at existing rates (the maximum rate is about 40%) and cover all carrying charges also. 3/ After 1256 annual depreciation on a 3% siyting fund basis amboupting toRs 4 million will be covered 2.1 imes after interest and amortization; on a stralght line depreciatioqi asis, annuaL depreclation amountilig to ts. million wauld be covered 1.3 times. The DVC proposes to use the sinking fund basis. fe4,a* KDARMA SL

U ~~~~KONARI 1 ~ \_ 10, 500 KW GOMI

)~~~~~~~~~~OA KON BIHAR -. BENGAL

~LPAHARI w/////llll\\\\\\\l\SEEBPORE -? i 2 ,!m X

MAITHON "'NSOL / \ / ROADKLT KUMU81 0 DISHERGARH DHANBAD * RANIGA II 4_ DURGAPUR BARRA

PANCHET HILL '-- A RA

60~000 KWy \_\~ ~ ~ ~ UHIOE/ ~ ~ ~ 1 / . .__

pGAMAR~~~IA,

KHARAGPUR

GHATSILLA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

x. .41~~~Af BHAGIRA,;-~

* DRAINAGE AREA

URDWAN~~~~~~~~~~~~

- *KANCHRAPARA = BAY OF

. 6 1.MULAJORE

B *~~~~*'OUEPRN GA L <; 0 t

COSSIPORE EY N

/, ~CALCUTTA INDIAN OCEAN0

Total Hydra Capacity proposed to b( Total Thermal Capacity proposed to Total Arec, proposed to be irrigated I~~ I ,.

UNIFIED

!AG PUR N

1.B.RD. DRAF cO5 Reservoirs proposed Area to be irrigated +I-*| Railways ===c= Roads -* - Provincial boundary IllIllll Drainage area Irrigation with Navigation Canal proposed

A _ Irrigation Canal and Distributaries proposed

132 KV Transmission Line proposed (First staqe) 132 KV Transmission Line (Future) 66 KV Transmission Line proposed 33 KV Transmission Line proposed

Hydro - Power Stations proposed BOKARO Thermal Power Station (OV.C)

1L111 Thermal Power Stations (Local Licencees Etc.)

E) Sub-Stations proposed 0 Switching Stations proposed roposed to be installed = 198,950 KW proposed to be installed = 200,000 KW be irrigated = 900,000 Acres

DAMODAR RIVER NIFIED SCHEME OF DEVELOPMENT INITIAL STAGE

MILES 0 10 20 30 40 I I., -. I I I I SCALE

.R.D. DRAFTING SECTION JANUARY 1950