World Bank Document

-%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 administered 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 certain 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 irrigation 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 estimated 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 project, 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-transmission 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 irrigation. 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) before 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 supply 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.

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