Document of The World Bank FOR OFFICIAL USE ONLY ZL-w, l l Public Disclosure Authorized Report No. 7383-IN STAFF APPRAISAL REPORT Public Disclosure Authorized I,)A NATHPA JHAKRI POWER PROJECT JANUARY 25, 1989 Public Disclosure Authorized Asia Country Department 1V (India) Public Disclosure Authorized Transport and Energy Operations Division Thisdocument has a restricted distribudon and may be used by recipients only in theperforanmce of their official duties. Its contents may not otberwise be discosed without World Bank authofitdion. CURRENCY EOUIVALENTS Currency Unit - Rupees (Rs) Rs 1.00 - Paise 100 US$1.00 - Rs 13.30 Rs 1,000,000 - US$76,923 MEASURES AND EOUIVALENTS 1 Kilometer (km) - 1,000 meters (m) - 0.6214 miles (mi) 1 Meter (m) - 39.37 inches (in) 1 Cubic Meter (m3) - 1.31 cubic yard (cu yd) - 35.35 c.ft. 1 Thousand Cubic Meter (MCM)- 1,000 cubic meters 1 Barrel (Bbl) - 0.159 cubic meter 1 Normal Cubic Meter - 37.32 Standard Cubic Feet (SCF) of Natural Gas (Nm3) 1 Ton (t) - 1,000 kilogiams (kg) - 2,200 pds. (lbs) 1 Metric Ton (39 API) - 7.60 barrels 1 Kilocalorie (kcal) - 3.97 British ThermalUnits (BTU) 1 Kilovolt (kV) - 1,000 volts (v) 1 Kilovolt ampere (kVa) - 1,000 volt-amperes(VA) 1 Megawatt (MW) - 1,000 kilowatts (kW) - 1 million watts 1 Kilowatt-hour(kWh) - 1,000 watt-hours 1 Megawatt-hour(MWh) - 1,000 kilowatt-hours 1 Gigawatt-hour(GWh) - 1,000,000kilowatt-hours 1 Ton of Oil Equivalent (toe)- 10 million kilocalories ABBREVIATIONSAND ACRONYMS CEA - Central ElectricityAuthority CWC - Central Water Commission GOHP - Governmentof Himachal Pradesh GOI - Government of India GSI - Geological Survey of India HPSEB - Himachal Pradesh State ElectricityBoard ICB - InternationalCompetitive Bidding LCB - Local Competitive Bidding LRMC - Long Run Marginal Cost MMCMD - Million Cubic Meter per day MOU - Memorandum of Understanding MPPD - MultipurposeProjects and Power Department NHPC - National HydroelectricPower Corporation,Ltd. NJPC - Nathpa Jhakri Power Corporation NPP - National Power Plan NREB - Northern Region ElectricityBoard NTPC - National Thermal Power Corporation,Ltd. PIB - Public Investment Board REB - Regional Electricity Board REC - Rural ElectrificationCorporation SEB - State Electricity Board Fiscal Year April 1 - March 31 INDI FOR OMCIL USEONLY WATHPA JHKRI POWER PROJECT STAFF PPRAISAL REPORT Table of Contents Page No. Loan and Project Sumery ...................................... i-iii I. SECTORALCONTEXT .............................................. 1 Overview........................................... 1 Commercial Energy Resources ......... ............. 2 Electricity Supply and Demand ...... ............... 3 Organization of the Power Subsector ..... .......... 4 Financial Performance and Tariff Structure......... 5 Power Subsector Planning .......................... 7 Management and Operations ......................... 8 GOI's Strategy in the Power Subsector .... ......... 8 Bank Group Strategy in the Power Subsector .... .... 11 Bank Gr;.ipParticipation .......................... 12 II. THE BENEFICIARIES ............................................. 13 Introduction ...................................... 13 Nathpa Jhakri Power Corporation ..... ..............14 - Background .................................... 14 - NJPC Management and Organization .... ..........15 - Field Organization ............................ 15 - Financial Organization ........................ 15 - Audit ......................................... 16 Himachal Pradesh State Electricity Board .... ...... 16 - HPSEB Background .............................. 16 - HPSEB Management and Organization .... ......... 17 - Personnel Staffing and Training .... ...........17 - Planning ...................................... 18 - Engineering, Design and Construction .... ...... 19 - Operations and Maintenance .................... 19 - Materials and Stores Management .... ...........20 - Organization and Methods ...................... 20 - Financial Organization ........................ 20 - Accounting System ............................. 21 - Fixed Asset Accounting ........................ 21 - Audit .... .. 22 - Billing and Collections ...... .................22 - Income Taxes .......... ........................23 - Electricity Tariff ........ ....................23 This report is based on the findings of an appraisal mission to India in November 1987. Mission members were Messrs. A. Sanchez (Principal Engineer), P. Hubbard (Financial Analyst), W. Jones (Senior Economist). Mr. R. Goodland assisted with environmental and resettlement aspects of the project on a separate mission. The economic and financial sectiors of the report were completed by Messrs. M. Tomlinson (Economist) and C.K. Teng (Financial Analyst) respectively. This document has a restricteddistribution and may be used by recipientsonly in the performance of their officialdaties. Its contents may not otherwisebe disclosedwithout World Bank authorizadon. Pag2 No. III. THE PROJECI ..................................................23 Project Setting .................................... 23 POrojectObjectives ................................. 25 Project Description ................................ 25 Project Engineering ................................ 27 Project Implementation and Construction Schedule ... 28 Water Rights ....................................... 29 Resettlement....................................... 29 Environmental Aspects ............................... 30 Project Cost ....................................... 32 Project Financing .................................. 33 On-Lending Arrangements ........................... 34 Procurement........................................ 34 Disbursements...................................... 35 Project Operation .................................. 36 Project Monitoring ................................. 36 Project Risks...................................... 37 IV. FINANCE ....................................................... 37 Nathpa Jhakri Power Corporation ........ .. ......... 37 - Introduction.................................. 37 - NJPC Financing Plan ........................... 38 - NJPC Financial Projections .................... 38 - NJPC Bulk Supply Tariffs ...................... 40 Himachal Pradesh State Electricity Board .......... 41 - Introduction.................................. 41 - Past and Present Financial Performance .... .... 41 - HPSEB-Proposed Financial Recovery Program ...... 43 - Financing Plan ................................. 46 V. PROJECT ECONOMIC ANALYSIS AND JUSTIFICATION ................... 47 Least Cost and Demand Analyses .................... 47 Internal Economic Rate of Return of Program Analysis ................................... 48 Project Analysis .............. 50 VI. AGREEMENTS AND RECON E ATIONS ................................ 51 Agreements ........................................ 51 Recommendation .................................... 53 Page No.- ANNEXES 1.1 National ElectricitySupply and Demand from Public Utilities 54 1.2 Forecast of Regional Power Demand in india, 1987/88-1996/97 55 1.3 Previous Loans and Credits to Indian Power Subsector (June 30, 1988) ............................................56 2.1 NJPC OrganizationChart .......................................57 2.2 HPSEB Orga..izationChart ......................................58 2.3 Avorage Tariff by ConsumerCategory ........................... 59 3.1 Detailed ProjectDescription .60 * 3.2 ImplementationSchedule for Physical Works .65 3.3 SummaryAcq:unts by Year .66 3.4 ProcurementArrangements .73 3.5 Procurement3chedule fcr MaJor Contracts.76 3.6 Sched&jleof EstimatedDisbursements .79 3.7 SuggestedTerms of Reference for Various Studies and ConsultancyAssignments: .80 (I) Terms of Referencefor ConsultancyServices for the Power Plant .80 (II) SuggestedScope for a Training Program for CEA, CWC, GSI and Ocher Institutions.84 (III) Scope of Work for Utility Management Study .87 (IV) T'ermsof Refe:encefor the Panel of Experts.89 (V) SuggestedScope of the Bulk Supply Tariff Study .91 (VI) SuggestedScope of Work for Accounting and Management InformationSystem (MIS) Study for HPSEB 93 3.8 Field Organizationfor Implementationof Nathpa Jhakri Scheme.. 95 4.1 NJPC Forecast FinancialStatements and Assumptions for Forecast.96 4.2 HPSEB Historical and StatementsForecast FinancialStatements with Assumptionsfor Forecast............ 104 5.1 ElectricityDemand and Supply - NorthernRegion ................ 114 5.2 Internal EconomicRate of Return............................... 115 6.1 Documents in Project File...................................... 127 NAP IBRD No. 20515 -i- nm NATIPA JHARRI POWER PROJECT Loan and Proiect Summary Borrower : India, Acting by its President. Beneficiaries : 1. Nathpa Jhakri Pow'r Corporation,Ltd (NJPC) 2. Himachal Pradesh State ElectricityBoard (HPSEB) 3. Central ElectricityAuthority (CEA), CentralWater Commission (CWC), and other agencies of the Governmentof India (GOI) Amount : US$485 Million Equivalent Terms : Twenty years, includinga 5-year grace period. OnlendingTerms : Governmentof India (GOI) to Nathpa Jhakri Power Corporation(NJPC): about US$437 million equivalent with repaymentover 20 years including5 years grace period at an interest rate of not less than 14.5% per annum. GOI to Governmentof Himachal Pradesh (GOHP): about US$43 million as part of Central assistanceto Himachal Pradesh for developmentprojects on terms and conditionsapplicable at the time. GOHP to Himachal Pradesh State ElectricityBoard (HESEB):