Document of

The World Bank

FOR OFFICIAL USE ONLY

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Report No. 5319-IN

STAFF APPRAISAL REPORT

INDIA

CHANDRAPUR THERMAL POWER PROJECT

April 24, 1985

Power and Transportation DivisionSouth Asia Projects Department

This document has a restricted distribution wand may be used by recipients only in the performance oftheir of ficial duties. Its contents may not - therwise be disclosed without World Bankc authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Rupees (Rs)Rs 1.00 = Paise 100US$1.00 = Rs 11.00 1/Rs 1.00 US$0.0909 l/Rs 1,000,000 US$90,909.10

MEASURES AND EQUIVALENT

1 Kilometer (km) 1,000 meters (m) = 0.6214 miles (mi)1 Meter (m) = 39.37 inches (in)I Cubic Meter (m3) = 1.31 cubic yard (cu yd) = 35.35 cubic feet (cu ft)1 Hectare (ha) = 10,000 m = 2.471 acres (ac)1 Kilogram (kg) 2.2046 pounds (lb)I Ton (t) 1 metric ton = 2,200 lbs.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 wattsI Kilowatt-hour (kWh) = 1,000 watt-hours1 Megawatt-hour (MWh) = 1,000 kilowatt-hours1 Gigawatt-hour (GWh) 1,000,000 kilowatt-hours (kWh)I Mega voLt ampere (MVA) = 1,000 kilovolt ampere (kVA)1 Mega volt ampere reactive

(MVar) 1,000 kilovolt ampere reactive (kVar)1 Mega volt ampere reactive

hour (MVarh) = 1,000 kilovolt ampere reactive hour (kVarh)

1/ The US$/Rs exchange rate is subject to change. Conversions in thisreport have been made at US$1 to Rs 11.0(.

FOR OCIAL USE ONLY

ABBREVIATIONS AND ACRONYMS

CEA - Central Electricity AuthorityCHP - Coal Handling PlantCIF - Cost, Insurance, FreightDC - Direct CurrentESP - Electrostatic PrecipitatorGOI - Government of IndiaGOM - Government of MaharashtraST - High Tension1CB - Internacional Competitive BiddingLCB - Local Competitive BiddingLOLP - Loss of Load ProbabilityLRMC - Long Range Marginal CostLT - Low TensionMSEB - Maharashtra State Electricity BoardNHPC - National Hydro Electric Power CorporationNPP - National Power PlanNTPC - National Thermal Power CorporationREB - Regional Electricity BoardREC - Rural Electrification CorporationSEB - State Electricity BoardTOE - Ton of Oil Equivalent

MSEB's FISCAL YEAR (FY)

April 1 - March 31

-omuna rutrie d_ rbuio °and may be used by rcipin only s intperfon |ofdu*~ olrikia dutieIs. aounftes may not otheirwis be discosd withot World Bank autborization.

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INDIA

CHANDRAPUR THERMAL POWER PROJECT

Loan and Project Summary

Borrower : India, acting by its President.

Beneficiary : Maharasthra State Electricity Board (MSEB).

Amount : US$300.0 million.

Terms : Repayment over 20 years, including five years'grace, at the applicable rate of interest.

Relending Terms : Government of India (GOI) to the Govern-ment of Maharasthra (COM): As part of Centralassistance to States for development projects onterms and conditions applicable at the time.

COM to MSEB: (a) Bank loan: Repayment over 20years, including five years' grace, at the currentBank interest rate of 9.29Z per annum; (b) COMloan: Repayment over 30 years, including sixyears' grace, at COM's current applicable rate ofinterest.

COI will bear the foreign exchange and interestrate risks.

Project Description : The Project's main objective is to assist inmeeting the electricity demand in the WesternRegion of India through the addition of 1,000 MWof thermal capacity at the Chandrapur thermalpower plant in Maharashtra. The Project comprisesthe installation of two 500 NW generating units--including boilers, turbo generator sets, electricaland mechanical auxiliary equipment, associatedcivil works and common services and facilities.The Project also includes a thermal plantrehabilitation program designed to provide for moreefficient use of MSEB's thermal stations. There areno risks other than those normally associated withthis type of project. All the major equipmentcomponents are manufactured in India, and there isadequate understanding of and experience with theirinstallation.

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Estimated Cost: 1/ ------ US$ million -Local Foreign Total

Preliminary Works 9.9 - 9.9Civil Works 138.1 3.8 141.9Steam Generators, TurboGenerator, Control and 187.6 200.5 388.1Auxiliaries

Other Mechanical and ElectricalEquipment 93.1 81.1 174.2

Transportation, Erection,Insurance and Testing 47.6 2.5 50.1

Consultancy and Training 3.8 1.5 5.3Engineering and Adrinistration 50.0 - 50.0Thermal Plant Rehabilitation 32.4 8.4 40.8Total Base Cost 562.5 297.X 860.3

Physical Contingencies 25.4 14.5 39.9Price Contingencies 113.1 102.9 216.0Total Project Cost 701.0 415.2 1,116.2

Interest During Construction 100.0 80.5 180.5Total Financing Required 801.0 495.7 1,296.7

Financing Plan: Local Foreign Total

IBRD Loan - 300.0 300.0GOM Loans 476.0 195.7 671.7MSEB Internal Resources 325.0 - 325.0Total 801.0 495.7 1,296.7

Estimated Disbursements:

Bank FY FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93

Annual 37.0 17.0 40.0 75.0 75.0 32.0 21.0 3.0Cumulative 37.0 54.0 94.0 169.0 244.0 276.0 297.0 300.0

Rate of Return: About 11l

1/ Includes taxes and duties of about US$117.6 million.

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INDIA

CHANDRAPUR THERMAL POWER PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

Loan and Project Summary .................. i - ii

I. SECTORAL CONTEXT .......... **.....**.... o.........*. .. 1

A. Commercial Energy Resources .......................... 1B. Supply and Demand of Electricity - India ............. 2C. Organization of the Power Subsector .................. 2D. Pricing and Resource Mobilization .................... 3E. Power Subsector Planning ............................. 4F. Kanagement and Operations .... ........................ 4C. Bank Croup Participation in the Past ................. 5H. Bank Group Strategy in the Power Subsector ......... ... 6I. Electricity Supply and Demand - Western Region ....... 7J. Electricity Supply and Demand - Maharashtra .......... 8

II. THE BENEFICIARY - MAHARASHTRA STATE ELECTRICITY BOARD (MSEB) 8

A. Organization and Management .......................... 8B. Staffing ........ ...... *** .......... 9C. Training 9............................................ 9D. Transmission and Distribution Losses ....e......o....... 10E. Insurance **.**........****............................ 10

III. THE PROJECT ............................ *.................... 10

A. Background ......... ......*. .... ......... ............ 10B. Project Objectives ................................... 11C. Project Description .... eso ........... e..* ..... *.. 12D. Estimated Cost ........................................ 13E. Project Financing ............0.......0.o*0.*........... 14F. Project Engineering and Implementation .. .............. 15G. Procurement *.............. ...... ............ 16H. Disbursement .................. *............... 18I. Ecology ............................................. 18J. Project Risks ....... ................................... 19K. Project Monitoring .. ......... ............... **... 19

This report has been prepared by Messrs. L. Gazoni (Power Engineer),M. El-Menshawy (Financial Analyst) and W. Jones (Economist).

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Page No.

IV. FINANCIAL ANALYSIS ...... .................................. 19

A. MSEB's Accounts ...................................... 19B. MSEB's Financial Performance ..... .................... 21

V. JUSTIFICATION ...................... ...................... 26

k. Least Cost Alternative ............................... 26B. Internal Economic Rate of Return ..................... 26C. Justification for Bank Involvement ................... 28

VI. SUMMARY OF AGREEMENTS .................... ................. 28

ANNEXES

Annex 1 - Energy Generation, Sale and Pattern of EnergyConsumption - All India ............... .............. 30

Annex 2 - Forecast of Power Demand in India ... .................. 31Annex 3 - Energy Generation, Sale and Pattern of Energy

Consumption -Western Region ..... ................... 32Annex 4 - Western Region - Installed Capacity ................... 33Annex 5 - Western Region - Inter-state/Inter-regional Transfers.. 34Annex 6 - Western Region - Power Supply Position ................ 35Annex 7 - Maharashtra State Electricity Board - Power Cut

position ........................................................... 36Annex 8 - Western Region - Commissioning Programe of On-going

Schemes ............................................. 38Annex 9 - Power Supply Position of Maharashtra .................. 40Annex 10 - Growth and Pattern of Electricity Consumption in

;laharashtra ......................................................... 41Annex 11 - MSEB Pattern of Consumption ............................ 42Annex 12 - MSEB Category-wise Number of Consumers ............ ..... 43Annex 13 - MSEB Head Office Set-Up ................................ 44Annex 14 - MSEB Staff Strength as of March 31, 1984 ............... 45Annex 15 - MSEB In-house Training ................. ........ ........ 46Annex 16 - MSEB Energy, Generation, Sales and Losses .............. 48Annex 17 - MSEB Program of System Improvement Schemes.............. 49Annex 18 - Project Description ............................. ........... . 50Annex 19 - Project Cost Estimates ................................ 55Annex 20 - Estimated Schedule of Disbursement .................... 56Annex 21 - Implementation Schedule ............................... 57

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Page No.

Annex 22 - Average Rate Realized .. ............... . . . . . . . . . . . . . . . . 59Annex 23 - MSEB Comparison Between Actual Tariffs and LRMC ........ 60Annex 24 - HSEB Financial Projections - Assumptions ............... 61Annex 25 - MSEB Financial Projections ............................. 64Annex 26 - MSEB Investment Program ...... . 71Annex 27 - CEA Norms for Calculating Peaking Capacity and Energy

Availability ........................................ 72Annex 28 - Internal Economic Rate of Return ...................... . 73Annex 29 - Related Documents in Project File ...................... 76

MAPS

No. 18391No. 18387

INDIA

CHANDRAPUR THERMAL POWER PROJECT

I. SECTORAL CONTEXT

A. Commercial Energy Resources

1.01 India's commercially exploitable energy resources consist of coal,oil, gas, hydro, uranium, and thorium. Of the nonrenewable resources, coalis the most abundant. Reserves of thermal coal have been estimated atslightly higher than 100 billion tons, of which 25 billion tons are proven.Although reserves are ample, the quality of coal produced is generally lowand is deteriorating. Proven and probable petroleum reserves compriseapproximately 530 million tons of oil and 390 million toe of natural gas.Despite recent increases in domestic production, India still imports 35Z ofits oil requirements, which in 1983/84 cost the equivalent of 40Z of itsmerchandise exports. Consequently, the Government of India has encouragedexploration while attempting to contain the demand for petroleum and naturalgas, in particular through limiting the use of naturaL gas to high-value usessuch as petrochemicals and fertilizer. Because it is taking time to developpremium uses of natural gas, substantial volumes of associated gas are beingflared. India's hydroelectric potential is about 100,000 MW. At present,only 13,000 MW have been developed, 4,700 MW are under construction, and afurther 23,000 NW are being studied for future development. The prominentrole of hydro in regional least-cost development plans prepared in 1982 hasled GOI to emphasize the need to accelerate its development; however,progress has been slow because limited resources are available for thesimultaneous preparation of a large number of schemes and because it alsotakes time to resolve water rights and environmental issues. The country'suranium reserves could support a modest nuclear program (8,000-10,000 MW),and its thorium reserves are enough for a large breeder program.

1.02 Planning the best use of India's indigenous energy resources forpower generation raises a number of issues and highlights several needs.First, the high ash content of coal, which can reach 59%, tends to. increasetransport costs, as well as power station capital and operating costs. Thedevelopment of minemouth stations, which is constrained by pollutionlimitations and the availability of cooLing water, helps to solve only thetransport problem, and thus priority should still be given to more selectivemining and improved coal preparation. Even though a lower ash content mighthelp to alleviate transport problems, they would still persist. Two studiesincluded in the Dudhichua Coal Project (Loan 2393-IN) are designed to helpformulate a strategy to deal with these problems: one study will examineways of improving the linkages between the sources of supply and the demand,

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and the other will concentrate on methods of improving handling andtransportation facilities. Second, with the recent increases in the suppliesof both associated and free gas, there is a greater need for a coherentpolicy on the exploitation of gas. A Bank study planned for 1985 will focus,among other things, on the potential for the economic use of gas in powergeneration. Third, if hydro development is to accelerate, further resources,including consultants if necessary, need to be deployed to prepare hydroschemes. Furthermore, if water rights and environmental issues cannot beresolved quickly, COI should initiate appropriate procedures to en ure thatan adequate number of schemes are available for development.

B. Supply and Demand of Electricity - India

1.03 Approximately 50Z of India's electricity is generated from coal, 40%from hydro, and the rest from oil, nuclear power, and natural gas. Althougha number of large thermal projects are planned for the short term, the shareof hydro is expected to increase in the long run. Electricity losses haverisen slowly but steadily over the last few years and now exceed 26% of grossgeneration. The lack of high-quality coal has been at least partlyresponsible for this trend, and even coal stations themselves now consumeclose to 10% of gross generation against a desirabLe 5% or 6%. Distributionnetworks have been overloaded because inadequate attention has been given tosystematic analysis and planning of this part of the system. As a result,distribution losses are high by generally accepted standards and, althoughthey are lower than in severaL countries in the region, they need to bereduced. Under its lending program, the Bank has supported pilot studies toreduce system losses, and it will continue to follow this approach in itsfuture lending. Such losses can only be reduced on a State-by-State basis,however, with loss reduction targets reflecting the particular circumstancesof each State.

1.04 Over the past two decades, the consumption of electricity has grownapproximately twice as fast as total commercial energy consumption and nowaccounts for more than 30% of the latter. As a result, shortages haveprevailed throughout the country and, during the last five years, averaged anestimated 13% of electricity requirements. The principal sectoral shares oftotal electricity consumption are: industrial, 56%; agricultural, 19%; anddomestic, 12%. Agriculture's share has grown steadily owing to increasedelectrical irrigation pumping made possible by rural electrification andencouraged by heavy subsidies. Total consumption has grown at an averagerate of 10% per annum during the past two decades, and the CentralElectricity Authority (CEA) has forecast growth of 9% per annum between1984/85 and 1989/90. Whether such growth can take place will depend on theutilities' success in installing new capacity.

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C. Organization of the Power Subseccor

1.05 Responsibility for the supply of electricity is shared between theCentraL and State Governments. The State Electricity Boards (SEBs) and theRegional Electricity Boards (REBs) are controlled by States; the CentralElectricity Authority, the National Thermal Power Corporation (NTPC), theNational Hydro-Electric Power Corporation (NHPC), and the RuralElectrification Corporation (REC) are controlled by the Central Government.SEBs were instituted under the Electricity Supply Act of 1948 (the Act) topromote the development of the power subsector and to regulate privatelicensees. Although, in principle, SEBs are supposed to be autonomous inmanaging their day-to-day operations, in practice they are under the controlof State Governments in such matters as capitaL investmenc, tariffs,borrowings, pay, and personnel policies. As a first step toward nationalintegration, the SEBs have been grouped into five regional systems, eachcoordinated by an REB. Coordination responsibilities include overhaul andmaintenance programs and determination of generation schedules, inter-Statepower transfers, and concomitant tariffs. CEA was created in 1950 to developnational power policy and to coordinate the various agencies involved insupplying electricity. It is responsible for the formulation of countrywideinvestment plans for approval by the Central Government, the development ofan integrated system operation, the training of personnel, and research anddevelopment. It maintains operational, economic, and financial data at boththe Central and State levels, and provides consulting support to SEBs. NTPCand NHPC were incorporated in 1975 by COI to construct and operate largepower stations and associated transmission facilities. They sell bulk powerto the SEBs for distribution. NTPC has had marked success and has grownrapidly. In contrast, NHPC is still struggling to establish a role foritself. The States own most hydro sites and are reluctant to relinquishthese sources of comparatively inexpensive energy to the Central Government.REC was established in 1969 to coordinate rural electrification and providefinancial and technical expertise for SEB schemes. At present, REC financesmore than half of total rural electrification investment.

D. Pricing and Resource Mobilization

1.06 GOI has, through the 1983 amendments to the Act set a financialobjective for the SEBs to produce an annual return of at least 3% on theirhistorically valued net fixed assets after meeting operating expenses, taxes,depreciation and interest. Generally the minimum 3% requirement wouldrepresent a rate of return calcuLated according to Bank methodology onhistorically valued assets in the range of 10X-13Z. The Bank considers thisobjective to be a reasonable minimum but believes that a number of SEBs, dueto investment requirements, need to achieve returns higher than this minimum.Some higher returns are possible through tariff restructuring, including theuse of block tariff aLlowing a lifeline rate affordable to low incomeconsumers. Additional returns are achievable through tariff increases.Present tariffs are in most -cases inadequate not only in economic but also in

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financial terms, and most SEBs are unable to finance a reasonable share oftheir investment programs. On average, SEB tariffs are equivalent to onlyabout 50Z of long run marginal cost (LRMC), in contrast NTPC's tariffapproximates LRMC. Industrial tariffs are almost 902 of LRMC butagricultural and domestic tariffs, which are considered politically sensitiveand have been consistently subsidized, are only 272 and 36%, respectively.State-specific programs, which provide both an increased return on investmentand simpler, efficient and affordable tariff structures are needed. Theseprograms will be addressed through the Bank's lending to individual SEB's.

E. Power Subsector PLanning

1.07 Because the demand for electricity has increased rapidly, GOI atpresent allocates about 20% of public investment to power development. Toensure that the subsector would be developed in the most economic manner, theBank encouraged GOI to prepare a comprehensive least-cost National Power Plan(NPP), which was completed in September 1982. Although this plan representssubstantial progress, further refinement is needed. To assist GOI in thistask, the Bank has planned a study for FY85 that will review the assumptionsand methodology employed in formulating the least-cost plan. There appearsto be a need for further national integration and greater coordinationbetween power and other sectors, especially coal and gas. Since it will notbe possible to achieve full national integration immediately, the Bank willcontinue to ensure that each Bank-financed project forms a part of anup-to-date regional least-cost development plan. In due course, the sourcesof supply considered in the formulation of each regional least-cost planshould be widened to include the option of importing from neighboringregions. This approach would eventually lead to integrated planning at anational level. A further problem has arisen in the coordination of thelong-term NPP with the national five-year plan and shorter-term budgets.Because of inadequate resources, fewer projects have been included in thefive-year plan than in the NPP and, as a result of underestimation of projectcosts and delays in project implementation, still fewer have been executed.Consequently, the shortage of power has become more and more acute, and overthe next decade, India expects its power deficit to increase severalfold.This deficit will tend to undermine rational planning because emphasis islikely to be placed on rapid expansion of supply rather than on least-costdevelopment. Furthermore, it may prompt overinvestment in captive plant andexcessive use of high-value energy products in the generation of power. Inaddition to supporting GOI's efforts to increase the supply, the Bank willcontinue to stress to GOI the role of pricing in eliminating the deficit andthe importance of integrating planning and pricing.

F. Management and Operations

1.08 SEBs' organization and management practices have become outmoded assupply has expanded. The quality of service, reliability, and financialperformance are the principal areas of concern. In general, SEBs have

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high-quality engineering staff, but lack experienced personnel in the areasof financial planning and control. The relatively poor status and pay ofthese personnel compared with those in the private sector makes it difficultto recruit competent staff. At present, accounts are maintained principallyto track cash receipts and expenditures, and accounting information is seldomused for managerial purposes. GOI has decided that a new and uniformaccounting system should be installed in all SEBs. After initiaL delays,preparations are now proceeding and implementation was expected to begin inApril 1985.

1.09 In the area of operations, one of the main concerns has been the poorperformance of thermal plant. Factors that have contributed to thissituation are inadequate maintenance (due to capacity shortages),deficiencies in plant manufacture, lack of spares, and the poor quality ofcoal; in general, these problems have been recognized by the relevantauthorities and corrective steps are being taken. GOI is currently preparinga rehabilitation program for thermal plant that may be financed by the Bank.Until this program is compiled, the Bank will, whenever appropriate, includea thermal rehabilitation component under each of the loans made to the SEBs.

G. Bank Group Participation in the Past

1.10 The Bank has made 18 loans for Indian power projects amounting toUS$1,983 million, and 17 IDA credits totaling US$2,409 million. Seventeenprojects financed under the following loans and credits have been completed:ten generating projects, the Beas Project (Credit 98-IN), the first fourtransmission projects (Loan 416-IN, Credits 242-IN, 377-IN and 604-IN), andthe First and Second Rural Electrification Projects (Credits 572-IN and911-IN). The Fourth Transmission Project (Credit 604-IN) was completed in1983, and the Second Rural Electrification Project in 1984. The Singrauli(Credit 685-IN), Korba (Credit 793-IN), and Ramagundam (Credit 874-IN andLoan 1648-IN) Thermal Power Projects are in advanced stages ofimplementation. The credit for the Second Singrauli Thermal Power Project(Credit 1027-IN) and the credit/loan for the first stage of the FarakkaThermal Power Project (Credit 1053-IN and Loan 1887-IN) were approved in Mayand June 1980. Korba II (Credit 1172-IN) was approved in July 1981,Ramagundam II (Loan 2076-IN) in December 1981, and the Third RuralElectrification Project (Loan 2165-IN) in June 1982. The Upper IndravatiHydro Project (Credit 1356-IN and Loan 2278-IN) and the Central PowerTransmission Project (Loan 2283-IN) were approved in May 1983, and theBodhghat Hydroelectric Power Project in May 1984. The Second Farakka ThermalPower Project (Loan 2442-IN) was approved in June 1984, and the Trombay IVThermal Power Project (Loan 2452-IN) in June of the same year. The ThirdRural Electrification Project is about a year behind schedule. The firstfive units of the Singrauli Project and the first two units of the Korbaproject were commissioned on schedule. The Farakka and Ramagundam projectsare proceeding satisfactorily, the first unit at Ramagundam having beencommissioned four months ahead of schedule. The Third Trombay Project

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(Unit 5) (Loan 1549-IN) was first synchronized in January 1984, about a yearbehind schedule; time was lost mainly because parts for the boiler were notdelivered on time, and because of delays in its construction.

1.11 A performance audit conducted in 1980 for the Second PowerTransmission Project (Credit 242-IN) concluded that the project has succeededin helping the nine beneficiary SEBs extend their transmission systems andmeet their growing power requirements. Utilization of generating capacity inthese SEBs has exceeded the appraisal forecast. The upgrading of the SEBs'financial management practices that began under this project will continueunder subsequent projects. The audit highlighted the difficulties ofadequately supervising this project (because it consisted of many widelyscattered subprojects), and of effecting institutional improvements in theabsence of a close working relationship between the Bank Group and thebeneficiary SEBs. The Bank has therefore sought more direct involvement withthe SEBs through State-specific projects.

H. Bank Group Strategy in the Power Subsector

1.12 Over the last ten years the Bank Group has assisted GOI insubstantially expanding its centrally-owned generation capacity, which iscurrently being run relatively efficiently. In the past two years, however,the emphasis of Bank Group lending has begun to shift from supportingprojects owned and operated by the Central Government to projects owned andoperated by the SEBs. This gradual shift has come about in support of GOI'sdesire to accelerate the development of India's hydroelectric power resources(most of which are owned by the State Governments), and because of theconsiderable need to improve the operational and project implementationefficiency and the financial viability of the State-owned power sectorinstitutions. In parallel with this shift *n Bank Group lending, sector-wideobjectives for power system operation at both Center and State levels-suchas improving efficiency in the use of existing power generation, transmissionand distribution systems, strengthening Central and State level sectorinstitutions, improving country-wide power system planning, and increasingresource mobilization within the sector--will continue to be pursued by theBank Group. More specifically, the principal objectives of the Bank Group'sassistance in the subsector are:

(a) the better use of existing facilities--through transmissionprojects improving regional interconnections and throughrehabilitation of plant, particularly of thermal power stationsand distribution networks: these measures will improve theefficiency of energy use and reduce system losses, and therebyhelp to minimize system capital and operating costs;

(b) institution building-although the Bank will continue to maintainan interest in Central institutions, its efforts will bebroadened to encompass individual SEBs, where substantialefforts are needed to strengthen management, operations, andfinances;

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(c) improved planning-particularly by extending the scope ofplanning from the State through the regional to the nationallevel and through greater integration of planning with othersectors in the economy, both those that consume electricity andthose that supply other forms of energy; and

(d) improved resource mobilization from electricity consumers - theprincipal vehicle for this has been and will continue to befinancial covenants in relation to beneficiaries; however, theBank will also continue to stress the importance of relatingtariffs to the economic costs of supply.

1. Electricity Supply and Demand - Western Region

1.13 The Western Region, in which the proposed Project would be located,comprises the states of Maharashtra, Gujarat and Madhya Pradesh and the UnionTerritories of Goa, Daman and Diu and Dadra and Nagar Haveli. The importanceof industry in the Region is reflected in this sector's share (62%) ofelectricity consumption, compared to 56% nationally. In contrast, the shareof agricultural consumption is below average at 14%, compared with 19%nationally. However, the dominance of industrial consumption is being erodedas agricultural consumption is growing more than twice as fast as industrial.During 1975-1983, overall consumption grew by 8Z per annum and theconcomitant sectoral growth rates were: industrial 6Z, agriculture 14% anddomestic 12%. Maharashtra accounts for the largest share of the Region'sconsumption (54%) followed by Gujarat (28%) and Hadhya Pradesh (18%).

1.14 Close to 2,000 MW of thermal capacity commissioned in FY84 hasbrought the Region's totaL installed capacity to almost 12,000 MW (exclusiveof an estimated 660 MW of captive plant). Over 80% of capacity is owned andoperated by the three SEBs, the rest is the responsibility of NTPC, theDepartment of Atomic Energy and the Tata Electric Companies. Althoughinstalled capacity has grown by almost 13Z per year during 1975-1984,available capacity has grown by less than 9% per year, indicating asubstantial deterioration in plant availability. Causes of this include thepoor quality of coal and overloading of plants due to capacity shortages.Although the Region's SEBs are interconnected, full integration of theiroperations has not yet been established. The pooling and dispatchingarrangements are coordinated through the REB and are expected to improvesubstantially with the commissioning of a new load dispatch facility basedon real time computer facilities. This is currently under construction(Annex 5).

1.15 Annex 6 shows the past and projected power supply for the Region andthe expected capacity additions during 1985-1993. Maximum demand and energyrequirements are based on the forecast prepared for the NPP, adjusted toreflect the Latest demand observed in the Region. Currently, the power

shortage in the Region is critical, resulting in severe supply restrictionsin all three States, especially in Maharashtra and Madhya Pradesh (Annex 7).Regulatory measures involving consumption restrictions and load shedding areimposed throughout the year and affect all classes of consumers. Due to theexisting shortage of capacity, the constrained peak demand has grown at anaverage rate of 7.8% during the last five years. Demand for peak capacity isexpected to grow at an average annual rate of 8.5% until 1993. The capacityshortage, presently estimated at about 1,280 MW or 16% of potential demand,will be eliminated around 1992, according to current plans. New additions tocapacity during the 1980s will be predominantly thermal (Annex 8), butbetween FY89 and FY93, 2,400 MW of hydroelectric capacity is expected to becommissioned, including Bank-financed projects in the Narmada valley andBodhghat.

J. Electricity Supply and Demand - Maharashtra

-1.16 The total installed capacity in Maharashtra is about 5,900 MWconsisting of 77Z thermal, mostly coal-fired, and 23% hydro. During the lastsix years the installed capacity grew at an average annual rate of 10.5%,while the peak load has increased under restricted supply conditions at theslightly lower rate of 9.2% (Annex 9). Electricity sales also grew at9.2% p.a. during FY79-83, reaching 15,346 GWh in FY83 (Annex 10). Accordingto the demand forecast prepared by CEA, the unconstrained peak load inMaharashtra will reach 7,644 MW in FY93 at an average annual growth rate ofabout 8Z. Energy requirements are also expected to increase at an averageannual rate of about 8% between FY86-93, and the existing deficit in energyavailability will increase to 7500 GWh in FY93 if only committed schemes areimplemented. Of total electricity sales in FY83, 82% was for productive uses(industry 57%, agriculture 14%, commerce 7% and traction 4%), 14% fordomestic consumption and 4% was supplied in bulk to other states (Annex 11).While the share of industrial consumption decreased from 60% in FY79 to 57%in FY83, the agricultural share has increased from just under 11% to justover 14%. The total number of MSEB's consumers is about 4.2 million, ofwhich 2.7 million are domestic, 0.8 million agricultural, 0.5 millioncommercial and 0.14 million industrial (Annex 12). In FY83, per capitaconsumption in Maharashtra was 250 kWh compared to 135 kWh for the wholecountry.

II. THE BENEFICIARY - MAHARASETRA STATE ELECTRICITY BOARD (MSEB)

A. Organization and Management

2.01 MSEB was constituted in 1954 under the Electricity Supply Act of1948, and is responsible for generation, transmission and distribution ofelectricity throughout the State. It constructs and operates generating

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stations and transmission and distribution networks to supply ultimateconsumers and licencees with electric power. However, MSEB is not fullyautonomous in executing these responsibilities since it is controlled,according to statutory power, by the State Government, especially in mattersof staffing, borrowing, and tariff-setting. MSEB's capital investmentprogram is determined within the overall State and national planningframework.

2.02 MSEB is a corporate body consisting of a full-time chairman and threefull-time members for accounts, administration, and generation. Twotechnical directors are directly accountable to the chairman; one fortransmission and distribution operations and the other for generationprojects. MSEB's organizational charts reveal well-defined responsibilitiesfor its operating units in its headquarters, regional divisions and projectsites (Annex 13). Transmission and distribution responsibilities, includingcomercial activities, are carried out by six regional chief engineers whosupervise twenty-four districts, each headed by a superintending engineer.NSEB executes a considerable part of its development program, especiallytransmission lines and substations, with its departmental organization andthe development works are carried out by six units organized on functionallines each headed by a chief engineer.

B. Staffing

2.03 At the end of FY84, MSEB had about 91,800 regular employees and about18,000 skilled workers employed on a daily basis (Annex 14). About 6,127 ofthe regular labor force and all the daily wage workers are engaged inconstruction activities. Operation and maintenance staff - totalling about85,000 employees - yields a ratio of about 49 consumers per employee which,although high, is acceptable when compared to other SEBs in India. All thesanctioned positions at the top and aiddle management levels are filled andvacancies at lower levels are around 3Z of the sanctioned posts.

C. Training

2.04 MSEB has established an active Training Department headed by a chiefengineer, at Nasik (a site of a thermal plant of 870 MW). Eight trainingcenters have been established, four for generation and four for transmissionand distribution. In addition to the training of engineers and technicians,training programs are also conducted in finance and administration. Duringthe last three years, 204 training courses have been provided to 3,920employees in eight areas of training (Annex 15). Beside these in-housetraining arrangements, the Board has been sending its personnel to attendvarious courses organized by other Indian institutions on managerial andengineering aspects related to its activities. During negotiations the Indiandelegation indicated that the training arrangements for its plant operatorsin 500 NW plant operation will be provided to the Bank by Pay 31, 1985,

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including number of staff to be trained annually and the location and timingfor training (para 6.03(b)).

D. Transmission and Distribution Losses

2.05 MSEB has been able to reduce transmission and distribution lossesfrom 17.4Z of the available energy in 1978/9 to 15.14% in FY83 as a result ofintroducing a number of system improvement measures during that period (Annex16). Moreover, a program for system improvement has been prepared with theobjective of achieving gradually a system loss level of 14% by FY93 (Annex17). This program, which was found satisfactory to the Bank, includesspecific and quantified measures to be taken annually with an appropriateinvestment allocated for each fiscal year. Although an earlier achievementof this target would be preferable, the Bank recognized the limited scope fora rapid reduction in system losses in Maharashtra and considers that theobjective is also reasonable. During negotiations it was agreed thatMaharashtra shall cause MSEB to implement a plan, satisfactory to the Bank,for the reduction of the losses incurred by the Board on account of itstransmission and distribution activities to 14% of the energy available tothe Board commencing fiscal year 1992/93 and thereafter (para 6.03(c)).

2.06 Under the Bodhghat Hydro Power Project, GOI agreed to carry out andcompLete by May 1986, a study of metering practices in a number of selectedStates. Because of the relatively high number of unmetered connections inMaharashtra (458,000 connections representing 11% of the total number ofconsumers) and the present practice of giving an option of unmeteredconnection to all agricultural consumers every three years, duringnegotiations, the Indian delegation confirmed that MSEB would be includedamong the selected SEBs in which the metering study will be carried out (para6.01(c)).

E. Insurance

2.07 MSEB follows the standard practice for insuring works underconstruction and equipment procured for ongoing projects against total orpartial loss. For permanent installations MSEB holds policies which conformto the acceptable utility practice in India in terms of the nature and amountof coverage.

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III. THE PROJECT

A. Background

3.01 One of the main elements of India's energy plan involves thedevelopment of its presently proven reserves of non-tradeable low-qualitycoal for the generation of electricity (para 1.01). This has resulted inthe construction of a number of power plants built at or near the coal minesto reduce the cost of transportation and handling. The reserves in theChanda-Wardha Valley are an important source of coal in India and,consequently, a number of power plants are currently either underconstruction or being planned to exploit these reserves in that area. TheChandrapur power plant, located in the State of Maharashtra, is beingdeveloped with a view to using the coal provided by the reserves ofChanda-Wardha. The current plan is for the power plant to reach an ultimatecapacity of 2,340 MW, implemented in four phases. The first phase, involving2x210 MW, was commissioned in 1984; the second phase, also consisting of2x210 MW, would come on stream by 1986; and the third phase, comprising 2x500MW, which constitutes the proposed Project, is planned for commissioning in1991. The date for initiation and completion of the fourth phase has not yetbeen established.

3.02 Despite the commendable efforts by the authorities in acceleratingdevelopment of the power subsector to meet the future demand for electricity,shortages in both capacity and energy continue to result in frequent loadshedding, disruption of services and increased reLiance by the industrialconsumers on captive plants based on liquid hydrocarbons. The shortages areprimarily due to the scarcity of financial resources which limits the numberof projects under implementation. Furthermore, the operation of existingpower plants at low levels of capacity utilization, which are caused by thefrequent outages resulting from their overloading to meet demand, alsocontributes to the shortages. The situation is further aggravated by theinefficiency of the old power plants utilizing outdated technology. Theincrease of MSEB's operating cost due to these inefficiencies, together withthe control of tariffs exercised by the Government of Maharashtra, haslimited the resource mobilization capabilities of MSEB and its self-financingcapabilities. The sustained efforts of GOI and the State Governments in theWestern Region would reduce the extent of power shortages in the Region,including Maharashtra. However, deficits in electricity will continue untilthe mid-1990's, when the major investments currently under consideration orimplementation, including the proposed Project, come on stream. Until then,the options for meeting the demand for electricity at least cost to theeconomy would include to rationalize the pricing of electricity to stem thegrowth of demand, and to improve the efficiency of the facilities for thegeneration, transmission and distribution (paras 2.05 and 3.07).

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B. Project Objectives

3.03 The proposed Project would:

(a) assist in the timely implementation of the third phase (2x500 UW)of the Chandrapur power plant to contribute to GOM's effort inin meeting the future demand for electricity at least cost to theeconomy;

(b) improve the efficiency of the power plants currently in operation byretrofitting to maximize their contribution to the future supply ofpower;

(c) contribute to the transfer of new technology to MSEB's system bytraining its personnel in the construction and operation of 500 NWunits which would enhance the efficiency of the electricity board;and

(d) assist in the movement of MSEB towards financial viability andoperational standards consistent with internationally-acceptedutility practices.

C. Project Description

3.04 The proposed Project would include the following components:

(a) two 500 MW turbo-generator sets complete with auxiliaries;

(b) two steam generators with electrostatic precipitators andauxiliaries;

Cc) a circulating water system with cooling towers;

Cd) a coal-handling plant;

(e) a fuel oil plant;

(f) an extension to the existing 200-kV and 400-kV switchyard;

(g) buildings for the turbo generator sets and auxiliary plant;

(h) a water conductor system;.

(i) miscellaneous electrical and mechanical equipment;

(j) other associated civil works;

(k) consulting services; and

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(1) the execution of a thermal plant rehabilitation program,including the purchase and installation of equipment andmaterial.

A more detailed description of the project is found in Annex 18.

D. Estimated Cost

3.05 The estimated cost of the Project, excluding interest duringconstruction, duties and taxes of Rs 1,294 million, is about Rs 10,984million (US$998 million). These estimates reflect experience with contractsrecently awarded in India for equipment, material and civil works. Theforeign exchange cost of the proposed Project, both direct and indirect, isestimated at about Rs 5,460 million (US$496 million) and represents about 38Zof the total cost. Physical contingencies of about 10% on civil works and 5%on equipment have been allowed which, on the basis of experience in Indiawith similar projects, are considered adequate. Price contingencies forlocal costs for equipment and erection are assumed to be 7Z for FY85, 8% forFY86 and FY87, and 6% thereafter. Price contingencies for foreign costs areassumed to be 8.0% for 1985, 9.0% for each year between 1986 and 1988, 7.5%for 1989, and 6.0% thereafter. Details of the estimated cost of the Projectare presented in Annex 19 and summarized in Table 3.1 below:

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Table 3.1

ESTIMATED COST 1/

-------Rs million-------- ------US$ million-Local Foreign Total Local Foreign Total

Preliminary Works 108.7 - 108.7 9.9 - 9.9Civil Works 1,519.3 42.0 1,561.3 138.1 3.8 141.9Steam Generators, Turbo-Generator, Control andAuxiliaries 2,064.8 2.205.0 4,269.8 187.6 200.5 388.1Mechanical and ElectricalEquipment 1,024.2 892.0 1,916.2 93.1 81.1 174.2

Transportation, Erection,Insurance and Testing 524.0 27.0 551.0 47.6 2.5 50.1

Consultancy and Training 42.0 16.0 58.0 3.8 1.5 5.3Engineering and Administration 550.0 - 550.0 50.0 - 50.0ThermallPLant Rehabilitation 357.0 92.0 449.0 32.4 8.4 40.8

Total Base Cost 6,190.0 3,274.0 9,464.0 562.5 297.8 860.3PhysicaL Contingencies 278.6 160.5 439.1 25.4 14.5 39.9Price Contingencies 1,244.0 1,131.5 2,375.5 113.1 102.9 216.0

Total Project Cost 7,712.6 4,566.0 12,278.6 701.0 415.2 1,116.2Interest During Construction 1,100.2 886.1 1,986.3 100.0 80.5 180.5

Total Financing Required 8,812.8 5,452.1 14,264.9 801.0 495.7 1,296.7

I/ Includes US$117.6 million of taxes and duties.

E. Project Financing

3.06 The proposed Bank loan of US$300.0 million, would finance 60Z of thetotal foreign exchange financing requirement of about US$496 million, andwould cover about 30X of the total project cost net of taxes and duties. Thebalance of the funds required, amounting to about US$997 million equivalent,including about US$196 million in foreign exchange, of which about US$81million represents interest during construction, would be covered by loansfrom GOM (US$672 million), and MSEB's internalLy generated funds (US$325million). Additional financing from external sources up to US$ 250 million,could be secured if the successful bidder or other agency provides anacceptable financing proposal for the package proposed for Bank financing.In this case, the Bank would seek to reallocate its loan proceeds to othercomponents of the proposed Project. GOI, GOM and MSEB agreed duringnegotiations that all financial resources needed for the Project will be madeavailable in a timely manner (para 6.02(b).

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F. Project Engineering and Implementation

3.07 MSEB has adequate expertise in the engineering and construction ofthermal power plants of up to 200 MW. However, since the Project wouldintroduce units of 500 MW for the first time in MSEB's System, the Boardwould require assistance in the engineering of the proposed Project. Aconsulting service contract has been awarded to a joint venture betweenDevelopment Consultants Pvt. Ltd. (India) and United Engineers andConstructors Inc., (USA). It would provide assitance to MSEB in basicengineering review, optimization studies, preparation of technicalspecifications, bid evaluation, review of civil design, inspection ofequipment, planning of erection and review of plant operation and maintenancepractices. This would require an estimated 500 man-days of foreignconsultants and 1,500 man-days of local consultants. The specifications forthe main package proposed for Bank finance have been prepared and reviewed bythe Bank. Moreover, a detailed program for rehabilitation of thermal powerstations, including cost estimates, was prepared by MSEB. This was reviewedby the Bank and found satisfactory. A summary of the scope of the workinvolved in rehabilitation is presented in Annex 18. The implementationschedule for the proposed Project is shown in Annex 21. Project completionis expected by the end of 1992 with the commissioning of the first 500 MWunit in August 1990 and the second 500 MW in January 1991.

3.08 Coal for the Chandrapur power plant would be supplied from thedeposits in the Chanda-Wardha valley which has recoverable reserves in theChandrapur district of about 847 million tonnes, of which 223 milLion tonnesare recoverable by open cast mining, and the remaining 624 million tonnes areexploitable by underground mining. At the projected annual production ofcoal, the reserves would be sufficient to meet the primary energy needs ofthe 2,340 MW power plant for over 100 years. Annual coal production isforecast to increase gradually from 1.125 million tonnes/year in 1984 tomillion 6.355 million tonnes/year in 1990 which is sufficient to fully coverthe needs of the Chandrapur power plant. Coal will be transported from themines by a unit train system and aerial ropeway. An implementation programfor the development of the Chanda-Wardha mines has been prepared, which willallow the Bank to monitor implementation. GOI will ensure that adequate coalsupplies will be provided for the efficient operation of the units. Theprincipal features of the contract that will govern the sales of coal byWestern Coalfields Limited to MSEB were reviewed and discussed duringnegotiations (para 6.01(a)).

3.09 Cooling water for the first two phases of the power plant and thefirst unit of 500 MW of the proposed Project will be provided from the Eraireservoir which has been constructed by the MSEB. However, in order tosupply the second unit of 500 MW of the Project and the fourth phase of thepower plant, an additional supply of water to the Erai reservoir would beneeded. This would be provided by pumping 120 million cubic meters of waterfrom the Human project currently under construction by the Irrigation

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Department of CON. The Department of Irrigation has given an undertaking tosupply the needed 120 m3 per year to the MSEB. As the Human reservoir isessential for the reliable supply of the cooling water to the second unit,CON and GOI confirmed that the reservoir will be constructed in a timelymanner. In addition, GOM agreed to provide to the Bank by June 30, 1985 acopy of the implementation schedule for the construction of the reservoir sothat progress towards its completion can be monitored (para 6.02(c)).

3.10 MSEB has already acquired 973.0 hectares of land for the main powerstation complex which could accommodate all the units envisaged for the site.In addition, MSEB has also acquired about 336 hectares for the residentialcolony for the construction, operation and maintenance staff. An additional1,800 hectares are in the process of being acquired for ash disposal, thewater conductor system and the unit train system. GOM will ensure that thisadditional land will be acquired in a timely manner and that any populationdisplaced by this process will be resettled in accordance with principles,objectives, and institutional arrangements satisfactory to the Bank (para6.03(a)).

G. Procurement

3.11 Procurement arrangements are summarized in Table 3.3. Procurement ofthe equipment to be financed under the proposed loan would be on the basis ofinternational competitive bidding (ICB) in accordance with the Bank'sCuidelines. The items relating to the thermal rehabilitation program wouldbe subject to ICB, however, part of these items would be procured through LCBprocedures acceptable to the Bank if the amounts involved are small or thenumber of suppliers is limited. MSEB will furnish in advance for Bankapproval lists of the items to be processed under LCB. The Bank would notfinance items of a proprietary nature that would be acquired through directpurchase. All contracts worth more than US$200,000 would be subject to priorreview. The main contract to be financed by the Bank involves the steamgenerators, the turbo-generator sets, power cycle equipment, instrumentationand control equipment, a data acquisition system and coordination andsupervision services. For this contract, MSEB would prequalify bidders. Thebidding documents have already been reviewed by the Bank and foundsatisfactory. Local manufacturers are expected to bid for the contracts. Adomestic preference of 15Z or the import duty, whichever is less, would beapplied in bid comparison. For consultancy services, MSEB has alreadyentered into a contract with consulting group formed by DevelopmentConsultant Pvt. Ltd. (India) and United Engineers and Constructors, Inc.(USA)(para 3.07). The planned schedule for procurement of the main equipmentis:

(a) invitation for prequalification: September 30, 1984;

(b) hid invitation to prequalified bidders: March 15, 1985;

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(c) bid opening: July 1, 1985:

(d) award decision: September 30, 1985;

(e) contract signature: October 30, 1985.

Table 3.3

PROCUREMENT ARRANGEMENTS(US$ million) /a

Project Element Procurement Method TotaLICB LCB Other N.A. /c Cost

I. Civil Works1. Preliminary Works - 2.0 - 8.9 10.92. Foundations and Structurals - 50.5 - - 50.53. Chimney and Auxiliary Works - 42.9 - - 42.94. Raw Water System - 81.1 - - 81.15. Buildings and Township - 19.7 - - 19.7

Subtotal 196.2 - 8.9 205.1

II. Electrical andMechanical Works1. Steam Generators,

Turbine-Generators,Control and Auxiliaries 403.6 - - - 403.6

(284.0)/b - - - (284.0)2. Other Mechanical and

Electrical Works - 223.3 - - 223.33. Transportation, Erection

Insurance and Testing - 70.5 - - 70.5

III. Consultancy Services - - 5.3 - 5.3IV. Engineering and Administration - - - 50.0 50.0V. Thermal Plant Rehabilitation 1.5 28.8 10.5 /d - 40.8

(1.5) (14.5) (16.0)Subtotal (II to V) 405.1 322.6 15.8 50.0 793.5

(285.5) (14.5) (300.0)TOTAL 405.1 518.8 15.8 58.9 998.6

(285.5) (14.5) (300.0)a= s:=s=__ == =s=s===

/a Figures are net of duties and taxes.7i Figures in parentheses indicate Bank financed portion.T7 Not subject to comercial procurement.7T Items of proprietary nature.

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H. Disbursement

3.12 Disbursement from the proposed loan would be made against 100% of theex-factory cost of equipment and materials manufactured in India, 100% of theCIF price of imported goods, and 50% of local expenditures of other itemsprocured locally. Estimated disbursements, as provided in Annex 20, weredetermined on the basis of the project implementation schedule (Annex 21).The disbursement profile, although faster than the Bank standard for powerprojects in India, is considered realistic because of the advanced stage ofproject engineering and procurement.

I. Ecology

3.13 The Department of Environment, GOI and the Pollution Board, State ofMaharashtra have approved the construction of the four phases of theChandrapur power plant. MSEB continues to comply with all environmentalquality standards prescribed by the Indian authorities in the design,construction and operation of the power plant. The expected concentrationlevels for sulphur dioxide, nitrogen oxides and dust are well below theBank's acceptable standards. (A report on Environmental Impact is availablein the project file.) Appropriate action would be taken during the detaileddesign of the third stage to deal with the principal environmental problemsrelating to:

(a) Location. The Chandrapur power plant is a mouth of mine type stationfar from any urban area. Accordingly, there is need to ensure thehealth and environment safety of nearby villages and the operatingstaff who would be housed in a residential area some 4-5 km from thepower plant;

(b) Stack Emission. As in the case of the first and second stagesprecipitators with an efficiency higher than 99Z would be installedto take care of the high ash content of the coal. Stacks of 250 mwould ensure that particulate matter is dispersed in the atmosphereto reduce the pollutant fall-out concentrations tointernationally-acceptable levels. The coal is of low sulfur content(0.3%-1.OZ) and sulfur dioxide levels in the gas will be well withinthe limits acceptable to the Bank;

(c) Water. Closed cycle cooling would be used. Hot water from thecondenser and other equipment wouLtd be cooled in induced draftcooling towers and cold water would be recycled. The cooling towersblown down is the main source of waste water generated within thepower plant. This water would be used to convey both fly and bottomash to the disposal area. The effluents from the demineralizing

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plant will be treated before discharging into the drainage system;and

(d) Ash Disposal. The ash would be pumped as slurry through a pipelineto an ash dump area located some 7 km from the power station.Provision of ash water recovery system would be installed to ensurerelatively ash-free water before disposal in the natural drainage.

(e) Safety. As for the safety and occupational health of employees,safety regulations for power stations, to which all operatingpersonnel must conform, would be strictly enforced. The turbine hallwould have a sound pressure level of less than 90 decibels which iswell below the maximum acceptable threshold for the normaleight-hour/day shift worker.

J. Project Risks

3.14 No risks, other than those normally associated with this type ofproject, are foreseen. All the major equipment components are manufacturedin India and there is adequate understanding of, and experience with, theirinstallation and ultimate operation.

K. Project Monitoring

3.15 MSEB will submit quarterly reports covering physical progress,consultants' work, costs, disbursements and administrative aspects of theProject. In addition, there will be annual reports on the financial positionand management situation of the Board. Progress on the system loss reductionprogram will be reported quarterly and evaluated against the agreed program.The monitoring of the rehabilitation program, including the evaluation ofresults, will be made through the quarterly report and periodic inspections.

IV. FINANCIAL ANALYSIS

A. MSEB's Accounts

Background

4.01 The financial operations of SEBs are regulated by the Electricity(Supply) Act, 1948. In 1978, several amendments were introduced to enableSEBs to reorganize their finances along commercial lines; however, theseamendments had serious shortcomings; for example, they would allow SEBs toavoid losses by charging less than full depreciacion on assets in operation,and would allow SEBs not to capitalize interest during construction whichunderstates the value of assets by not reflecting the full cost of

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construction. In 1981, following discussion with the Bank Group, GOIproposed new amendments to the Act, to address these shortcomings. Theseamendments, which were approved by Parliament in 1983, called for theintroduction of a unified accounting system for SEBs, including proceduresfor handling debt service and capitalization of interest during construction.Moreoever, a rate of return on unrevalued assets of 3Z was set as a minimummeasure of financial performance; this return is determined after deductingthe interest expense from operating income. This translates approximately toa return of 12Z when calculated using the Bank's formula.I/ Implementation ofthese amendments has not taken place because of the delay in the developmentof the new system of accounts. However,-under the loan for the IndiraSarovar Hydroelectric project (Credit SF-20-IN/Loan 2416-IN) GOI agreed toput the new amendments into force not later than April 1, 1985 (para 4.03).

4.02 In order to qualify for the use of proceeds from the Bank loan forthe Third Rural Electrification (Loan 2165-IN), fourteen SEBs, includingMSEB, agreed, with their State Governments, to introduce measures that wouldimprove their financial performance. These include:

(a) the introduction of commercial accounting system by April 1, 1984;

(b) the realization of a net cash generation of not less than 20Zof their average annual investment of three years, startingFY83; and

Cc) the Limitation of rural electrification subsidies paid by the Statesto their SEBs to a proportion of their sales revenues, acceptable tothe Bank Group. However, compliance with all the requirements byMSEB was delayed until 1984.

4.03 MSEB's system of accounts is not fully consistent with the acceptedcommercial accounting practices. Delay in preparing the _.v accountingsystem was the main reason for the inability of the SEBs to meet the agreedtarget date for the adoption of this system. As a result, GOI has set a newtarget date of April 1, 1985 for the introduction of the new accountingsystem and outlined a schedule for monitoring its implementation by the SEBs.MSEB has indicated that the new unified system of accounts will beimplemented soon after its ratification. A consultant will be recruited toprovide training and guidance to the MSEB staff during implementation.During negotiations, it was agreed that GOM shall cause MSEB, cofhencingApril 1, 1985, to introduce the uniform accounting system developed by GOI(para 6.03(d)). Meanwhile, the Indian delegation provided a copy of the termsof reference, which was found satisfactory to the Bank, for the consultant

I/ Rate of return calculated as a ratio of operating income before deductinginterest payments, and net assets in operation.

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required for the introduction of the new accounting system. Also, it wasagreed that GON shall provide to the Bank details of MSEB's accountingprocedures and formats for the proposed Project by May 31, 1985 (para6.03(e)).

Audit

4.04 The audit of MSEB's accounts is undertaken by the Comptroller andAuditor General of India. The audit report for FY83 was completed recently,reviewed by the Bank and found satisfactory. The audit report paidparticular attention to the inadequacy of MSEB's financial practices in lightof the proposed changes to reorient the SEBs towards internationally-acceptedutility practices. Although the audit reports should be used as a managementtool, MSEB's accounting staff are not currently able to make full use ofthem. The technical assistance associated with implementation of the newaccounting system should enhance MSEB's ability to make good use of thereports. Notwithstanding this, the existing audit arrangements, per se, aresatisfactory and should be continued. During negotiations, COM agreed tocause MSEB to furnish the Bank, by not Later than nine months after eachfiscal year, with its financial statements for such year as certified by anindependent auditor, and by not later than twelve months after the end ofsuch year the report of such audit by said auditor (para 6.03(g)).

B. MSEB's Financial Performance

The Rate of Return

4.05 According to the eligibility criteria under the Second RuralElectrification Project (Credit 911-IN), MSEB was required to achieve a rateof return of at least 9.5% on its net fixed assets in operation based ontheir historical value. KSEB was able to meet this requirement in FY80-82.Under the Third Rural Electrification Project (Loan 2165-IN), MSEB wascommitted to realize, starting FY83, an annual net cash generation equal toat least 20% of its three year average annual investment based upon theprevious year, the current year and the succeeding year. MSEB has steadilyimproved its financial performance from FY81, and achieved that level inFY84. In fact, its cash generation doubled in the period FY81-FY84, from alow 10% in FY81 to 20% in FY84. During negotiations, the Indian delegationargued that, with the introduction of a rate of return requirement in theAugust 1983 amendments to the Electricity (Supply) Act, scheduled to becomeeffective in April 1985, it would be preferablU to link the financialperformance of the SEBs with the provisions of the Act. These provisionsrequire that an SEB's total revenues produce a surplus of not less than 3% ofthe SEB's net fixed assets in service at the beginning of the fiscal year,after meeting all expenses properly chargeable to revenues, includingoperating, maintenance, and management expenses, taxes on income and profits,depreciation, and interest payable on all debentures, bonds and loans. Basedon the minimum level of rate of return and the methodology of calculation

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specified by the Act and according to agreed definitions of the termsinvolved, the provisions of the Act would yield acceptable financialperformance for MSEB (para 4.06). Consequently, it was agreed duringnegotiations that MSEB's revenues shalL produce, starting FY86, a surplus ofat least 3X of its net fixed assets in service at the beginning of the fiscalyear after covering all the expenses as specified in the Electricity (Supply)Act and based on the agreed definitions of the terms involved (para 6.03(h)).

4.06 Table 4.1 presents MSEB's profitability indicators which are expectedas a result of meeting, starting from FY86, the 3Z rate of return requirementas agreed during negotiations.

Table 4.1

MSEB's EXPECTED FINANCE PERFORMANCE

AverageNet Cash /a Tariff Tariff Operating

FY Generation PslkWh Increases Ratio Rate of Return /b

z z z Z

86 28 58.9 8.9 80 1187 31 65.4 11.0 80 1288 31 72.4 10.7 80 1289 31 79.1 9.2 80 1390 31 87.7 10.9 80 1391 35 96.0 9.5 79 1392 36 104.2 8.6 79 1293 40 111.0 6.5 78 13

la Calculated as agreed under RE III Project.T7 On historically-valued assets (about 7.5Z on revalued

assets).

MSEB's Tariffs

4.07 Since 1980, MSEB's tariffs have been increased in July 1981 andDecember 1982. These increases raised MSEB's average revenue from Ps. 28 kWhin FY81 to Ps. 48 kWh in FY84, representing an average annual rate ofincrease in nominal terms of almost 20%. The average revenue for the periodFY79-FY83 is shown in Annex 22. Tariff increases in the past have favoredagricultural and household consumers and, as a result, industrial and bulktariffs increased between FY79 and FY83 at an average annual rate of 11% inreal terms, while low-voltage tariffs fell in real terms. In FY83, theaverage rate for buLk and industrial consumers, representing about 67Z of

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total consumption, was at levels ranging between 55% and 75Z of LRMC, whilethat for low-voltage consumers, accounting for 33Z of total consumption, wasat 25Z of LRMC (Annex 23). The projected regular increases in tariffsbetween FY85 and FY90 would offer the opportunity for correction of some ofthe distortion in the low-voltage tariff; however, further work is needed todecide how to restructure these tariffs. This should be addressed in a studyto achieve low voltage LRMC levels by allowing for a lifeLine consumptionblock at the prevailing tariff level and applying higher tariffs toconsumption in excess of the lifeline level. This would enable GOM and MSEBto overcome some of the existing difficulties involved in closing the gapbetween LRMC and the average rate applicable for low voltage consumers byfocusing the subsidy on the lifeline supply. During negotiations GOM agreedthat MSEB would start, in January 1986, a study on the restructuring oflow-voltage tariffs, and to provide the Bank with the results of the studyfollowing its completion in June 1986. CON's views and decisions on therecommendations of the study will be provided to the Bank by September 1986(para 6.03(i). It was also agreed that GOI shall provide the Bank, by June1985, its views on the uniform methodology for calculating LRMC in SEBs asproposed by the Bank Group as a necessary input to defining the scope of thestudy (para 6.01(b)).

Billing and Collection

4.08 At the end of FY83, MSEB had about 4.165 million consumers, of which657,000 (16Z) were industrial and commercial consumers, 2,702,000 (65Z)domestic, 770,000 (19Z) irrigation pumps and 36,000 general consumers (Annex12). Meter reading and billing are carried out monthly for bulk andindustrial consumers who account for about 86% of MSEB's total revenues.Residential and commercial consumers, accounting for 9% of total revenues,are also billed monthly, with the exception of some rural areas, where metersare read every two months. Bills for irrigation consumption, which accountsfor only 5Z of NSEB's total revenues, are prepared every three months in thecase of metered connections, and every six months for the unmetered.Computerized billing applies to about 102 of NSEB's customers and plans arebeing considered to expand the computerized processing. In FY83, about 95Zof MSEB's consumers were billed regularly and, in the last three years,collections represented an average of 95.5Z of the annual revenues. Based onMSEB's information, its accounts receivable have been less than theequivalent of 2.5 months of sales during the last three years, which isconsidered an acceptable level in India. During negotiations, GON agreed thatMSEB's accounts receivable, at any time, will not exceed the aggregate amountof electricity sales during the preceding 2.5 months (para 6.30(f)).

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MSEB's Financial Projections

4.09 CEA prepared financial projections covering the period between1984/85 and 1992/93 based on the available information provided by MSEB.Assumptions underlying CEA's financial projections are presented in Annex 24and the Bank's financial projections are presented in Annex 25. These arederived from CEA's after adjustment to reflect:

(a) the rate of return targets; and

(b) the Bank's estimates of inflation.

The poor quality of the underlying data on which the projections arenecessarily based - particularly those related to current assets and currentliabilities - emphasizes the need for MSEB's new accounting system but thesedata cannot practicably be improved until the new system is operational.Despite this caveat the Bank is confident that any revision of theprojections to reflect improved data would not fundamentally undermine theconclusions of the financial analysis.

Financing Plan

4.10 MSEB's projected financial requirements for the period FY85 throughFY92, the period of construction of the proposed project, and the sourcesof funds are summarized in Table 4.2. Internally generated funds, includingcapital contribution (1) and security deposits from customers (3%) areexpected to provide about 31% of MSEB's requirements for funds during theproject period (Table 4.2). MSEB will depend on borrowings from GOM andothers to meet the rest of its requirements during the period. The only firmforeign contribution is from KFW to finance four generating gas turbines of108 MW each with a total cost of about Rs 920 million. The financing plan issubject to uncertainty since no arrangements have been made for most of theborrowings. However, the plan is realistic since GOI and GOM have alwaysensured in the past that funds for approved investment programs are madeavaiLable to MSEB.

-25-

Table 4.2

HSEB's FINANCING PLAN FOR 1984/85-1991/92

Rupees US$ Million PercentageMillion (Equivalent) Z

Requirements

Capital Expenditureon Projects 72,053 6,550.2 84

Interest duringConstruction 7,529 684.5 9

Total Capital Expenditure 79,582 7,234.7 93

Other Investments 80 7.3 -Increase inWorking Capital 6,739 612.6 7Total Requirements 86,401 7,854.6 100

Sources of Funds

Net Internal Cash Generation

Gross InternalCash Generation 50,087 4,553.3 58

Security Deposits 2,532 234.7 3Capital Contributions 1,435 140.5 1

Sub-Total 54,104 4,918.5 62Less: Debt Service (27,108) (2,464.4) (31)

Net InternalCash Generation 26,995 2,454.1 31

Borrowings 59,406 5,400.5 6986,401 7,854.6 100

Lending Arrangements

4.11 GOI would be the borrower and recipient of the loan and credit, andwould channel the proceeds to GON, in accordance with its standardarrangements for development assistance to the States. CON, in turn, willmake available these funds to MSED as a part of its contribution to thelatter's investment program. During negotiations, it was agreed thatrepayment of the Bank loan by MSEB will be over 20 years, including five

-26-

years' grace, at the current Bank interest rate of 9.29% per annum (para6.02(a)).

Taxes

4.12 SEBs are liable to income tax. However, because of the nature andsize of the investment program, they are not charged tax payments. Due tothe intensive capital expenditure of MSEB between FY85 and FY93, no incometax liability will arise in the foreseeable future and accordingly, a taxequalization reserve is not necessary. Besides, GOI is now considering arecommendation of the Committee on Power to exempt SEBs from income tax.

V. JUSTIFICATION

A. Least Cost Alternative

5.01 An up-to-date least-cost system expansion plan has been prepared byCEA on the basis of the load forecast referred to in Chapter 1, using theoptimization model WASP-III. The assumptions used, including the loadforecast, the methodology and the results have been reviewed and foundsatisfactory by the Bank. The results indicate that the earliest feasibleimplementation of the Project forms an integral part of the least-costdevelopment plan.

B. Internal Economic Rate of Return

5.02 Although the project is crucial to the development of the powersystem in the Western Region its benefit to consumers cannot be separatedfrom that of other necessary investments in transmission and distribution.Therefore, having established that the project forms part of the least-costexpansion plan it is appropriate to carry out a cost-benefit analysis on theentire plan in order to ensure that the expansion envisaged is desirable.For this purpose a 'time-slice' of the Western Region's investment program,covering the period 1984-1995, has been analyzed. Capital costs of theinvestment program (covering generation, transmission and distribution)together with incremental operating and fuel costs are given in Annex 28.The benefits of the investment program relate mainly to the incremental

-27-

consumption which it makes possible 1/. An initial measure ofbenefit, which ignores consumer surplus, can be derived from the revenuegenerated by the incremental sales. In the absence of adequate classspecific consumption conversion factors, the standard conversion factor(estimated to be 0.8) has been applied to convert financial revenue to ameasure of economic benefit. On this basis the minimum internal economicrate of return achieved by the program is 7%.

5.03 The nature of this type of estimate is such that it is frequentlymore useful as a measure of the adequacy of tariffs than of the economicmerit of the investment program which includes the proposed project. Theestimated minimum economic rate of return, 7Z, is less than the establishedopportunity cost of capital, and this is indicative of the fact that tariffsare presently less than long run marginal costs. However, in reality theprogram will confer benefits in excess of those described above. There willbe consumer surplus associated with the incremental consumption and typicallythere will be other external benefits. The severe shortages of powerexperienced at present, and expected for the foreseeable future, suggeststhat consumers' willingness to pay substantially exceeds present tarifflevels.

5.04 In order to derive a more realistic, although still lower bound,estimate for the internal economic rate of return of the program it is usefulto impute a measure of consumer surplus at least for industrial consumers.Their willingness to pay must bear some relation to the costs ofautogeneration which many industrial firms are observed to find economicduring periods of load shedding on the public supply system. Annex 28presents an estimate of diesel autogeneration costs at Rs. 1.12/kWh. Itwould, however, be unreasonable to assume that all industrial consumers wouldbe willing to pay this price for the whole of their consumption from thepublic supply system. Therefore, as a conservative measure, it has beenassumed that the consumer surplus attributable to incremental industrialsales can be derived from an average of the cost of autogeneration and theprevailing industrial tariff. This measure of the benefit of industrialconsumption, together with revenue estimates of benefits to other consumers,results in an internal economic rate of return for the program of 11%.However, it must again be stressed that this still represents a lower bound

1/ The program may also lead to benefits in terms of a reduction in thecost of meeting existing demand, particularly through fuel savings.However, the energy deficit is such that by far the greater part ofthe output available from plants in the program will lead to increasedsales. Furthermore, none of the existing plants have particularlyhigh fuel costs (being either coal or gas fired). Therefore, fuelsavings resulting from the program are likely to be small and thiselement of the 6enefits has therefore been ignored.

-28-

estimate, as domestic and agricultural consumer surpluses, together withexternal benefits, have still not been included.

C. Justification for Bank InvoLvement

5.05 In addition to providing additional capacity at minimum cost, whichwill help to alleviate the chronic power shortages presently experienced bythe Western Region, the project will, through Bank involvement:

(a) improve the level of self-financing achieved by MSEB, representingprogress towards financial viability and greater autonomy forthe Board;

(b) result in improvements in the efficiency of KSEB, for example,by ensuring the earliest possible implementation of the newSEB accounting system; and

(c) bring about improved utilization and efficiency of existingplants through rehabilitation, which is an element of thewider rehabilitation program that the Bank has encouragedGOI to undertake.

VI. SUMMARY OF AGREEMENTS

6.01 During negotiations GOt agreed to:

(a) ensure that adequate coal supplies will be provided for theefficient operation of the plant (para 3.08);

(b) provide the Bank, by June 1985, its views on the uniform methodologyfor calculating LRNC in SEBs, as proposed by the Bank Group(para 4.07); and

(c) include Maharashtra among the selected States in which the meteringstudy will be carried out (para 2.06).

6.02 During negotiations COI and CON agreed to:

(a) Onlend the Bank loan to MSEB for a term of 20 years, including fiveyears grace, and at an interest rate of 9.29Z per annum (para 4.11);

(b) make available, in a timely manner, all financial resources neededfor the Project (para 3.06); and

-29-

(c) construct, in a timely manner, the Human reservoir to supply coolingwater for unit 6, and provide the implementation schedule byJune 30, 1985 for the reservoir so that progress can bemonitored (para 3.09).

6.03 During negotiations GOM agreed to:

(a) undertake to carry out resettlement and rehabilitation of oustees inaccordance with principles, objectives, and institutional arrange-ments satisfactory to the Bank (para 3.10);

(b) provide to the Bank, by May 1985, the training arrangements forMSEB's plant operators in 500 MW plant (para 2.04);

(c) cause MSEB to implement a plan, satisfactory to the Bank, for thereduction of the losses incurred by [SEB on account of transmissionand distribution activities to 14% of the energy available,commencing fiscal year 1992/93 and thereafter (para 2.05);

(d) cause MSEB to inroduce, commencing April 1, 1985, the uniformaccounting system developed by GOI (para 4.03);

(e) provide to the Bank, by May 1, 1985, details of the MSEB'saccounting procedures and formats for the proposed Project (para4.03);

(f) cause MSEB to ensure that its accounts receivable will not, at anytime, exceed the aggregate amount of electricity sales during thepreceding 2.5 months (para 4.08);

(g) cause MSEB to furnish the Bank, by not later than nine months aftereach fiscal year, with its financial statements for such year ascertified by an independent auditor and by not later than twelvemonths after the end of such year the report of such audit by saidauditor (para 4.04);

(h) ensure that MSEB's revenues shall produce, starting FY86, a surplusof at least 3% of its net fixed assets in service at the beginningof the fiscal year after covering all the expenses as specified inthe Electricity (Supply) Act and based on the agreed definitions ofthe terms involved (para 4.05); and

(i) cause MSEB to start, in January 1986, a study on the restructuringof low-voltage tariffs, and to provide the Bank with the results ofthe study following its completion in June 1986. GOM's views anddecision on the recommendations of the study will be provided to theBank by September 1986 (para 4.07).

6.04 The proposed Project is suitable for a Bank Loan of US$300.0 million.

INDIA

CHANDRAPUR THERMAL POWER PROJECT

Energy Generation, Sale and Pattern of Energy Consumption - All India

82-83Description 1951 56-57 60-61 65-66 68-69 73-74 78-79 79-80 80-81 81-82 (Prov.) 83-84

Installed Capacity (MW) 1835 2886 4653 9027 12957 16664 26680 28448 30214 32344 35361 39360

Electricity Generated(GWh) 5858 9662 16937 32990 47433 66689 102523 104627 110821 122010 130211 139877

Electricity Consumption(GWh) (Utilities only) 4793 7959 13953 26735 37352 50246 77293 78124 82473 90237 95917 NA

Per Capita Generation(RMh) 20.80 30.90 43.90 73.81 97.82 126.26 159.60 160.00 166.20 182 183 NA

Per Capita Consumption(KWh) (Utilities only) 12.30 20.70 31.90 53.70 70.80 87.15 120.48 119.40 123.70 132 135 NA

Consu mption Pattern (Z)

Domestic Light &Small Power 12.40 11.70 10.70 8.80 8.50 9.20 9.80 10.76 11.28 11.50 12.48 NA

Commercial Light &Small Power 6.90 6.80 6.10 6.20 5.70 6.00 5.60 5.96 5.95 5.98 6.28 NA

Industrlal Power 63.70 66.90 69.40 70.60 69.30 64.60 61.35 58.86 58.60 58.75 55.80 NA

Railway/Traction 6.90 5.10 3.30 4.00 3.30 3.00 2.83 2.95 2.82 2.78 2.79 NA

Agriculture Pumps 4.30 4.00 6.00 7.10 9.30 12.60 15.56 17.23 17.48 16.71 18.55 NA

Public Water Works,Sewage Pumping, PublicLighting & Others 5.80 5.50 4.50 3.30 3.90 4.60 4.86 4.24 3.87 4.28 4.10 NA

Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

NA - Not Available

INDIA

CHANDRAPUR THERKAL POWER PROJECT

Forecast of Pover Demand in India

Peak Load in KWEnergy in Glb

190)-86 1986-8/ 1987-88 1988-89 1989-90 1990-91 1991-92Energy Peak Enegy Peak Energy Peak Energy Peak Energy Peak Energy Peak Energy Peak(NWh) Load (GWh) Load (Gwh) Load (Glih) Load (GWh) Load (Glh) Load CGWb) Load

(KU) (KW) (NW) (KW) (KW) (KW) (KW)

Northern 54549 1U642 bU(UO 11704 65824 12841 /1996 14045 76563 15331 85562 16692 93023 18147

Western 5309b. 9184. )8001. 10035. 63339 10961. 69045. 11953 75152. 13010. 81730. 14152. 8373b. 13b7.7 3 1 5 9 9 5 2 2 7 8

Southern 4/188 8558 51676 9359 56521 10221 61775 11158 67509 12175 73704 13276 80227 14431

Eastern 25869 4505 28274 4924 30827 5368 33517 5837 36323 6327 39279 6841 42380 7382

North-Eastern 1990.8 431.8 2261.1 491.4 2536 548.1 2825.1 609.8 3135.3 673.7 3486 747 3869 825

Andamn &NicobarIslands 23.33 6.92 26.36 7.68 29.55 8.45 32.93 9.26 36.53 10.1 41.0 11.14 45.27 12.22

Lakahadveep 2.73 1.36 3.11 1.53 3.5 1.71 3.95 1.91 4.43 2.13 4.86 2j36 5.38 2.53

All India 182720 33330 200242 36523 219080 39950 239199 43614 260744 47529 283807 51722 308286 56168(Total) *im .- ..... uwn.... UMM=. . . u .. ... . u... .... uM _ _m M _ , ,,_ ,M,, =mn..

Source: CKA

INDIA

CHANDRAPUR THlRiAL POWER PROJECT

Energy Generation. Sale and Pattera of Enery Consumution - Western Region

82-83 83-84Description 56-57 60-61 65-66 68-69 73-7L4 7879 79-80 80-81 81-82 (Prov.) (Prov.)

Installed Capacity(NV) ij 520 839 1360 2266 2999 3552 7373 7809 8335 W875 9869 11839

Electricity Generation(GYb) 26U8 3209 5016 9051 11176 17768 31243 32077 34953 37549 40185 45929

Slectricity ConsumptionUtilities (GYb) 1701 2776 4109 7548 10632 i5519 24210 24834 26437 28329 29966 VA

Consumption Pattern tZ)

Domstic Light aSmall Power 9.03 8.56 9.17 8.80 8.60 8.53 16.14 10.37 10.70 10.96 11.86 MA

Commercial Light ASmall Pover 6.23 6.29 6.10 5.82 5.2 5.51 9.91 5.64 5.56 5.85 5.79 MA

Industrial Power 64.98 6S.54 72.04 74.02 72.71 70.22 38.73 63.48 62.43 61.93 59.85 MA

Railvay Traction 16.82 13.43 9.33 6.51 4.65 4.65 8.79 4.23 4.86 3.53 - I/ EL

Agriculture Pumping os5 0.43 0.93 2.66 5.65 7.99 19.54 11.80 12.87 12.59 14.46 NA

Public Woter Works,Savage Pumping,Lighting a Others 0.69 2.7.5 2.43 2.19 2.J7 3.10 6.89 4.48 3,58 5.14 8.04 NAE

Total IUO.U0 100.00 1U0.0O 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

LA lNot Available

JJ Including capacity of Central Sector (720 NW at the end of 1183).

f/ for 1182163 RaLwvay Traction consumption is included in "Others".

Source: CM A

-33- ANE- 4

INDIA

CHANDRAPUR THAEAL POWER PROJECT

Western Region - Installed CapacityAs of 31/3/1984

IYDRO THERMALName of Installeed Name of InstalledScheme Capacity (MM) Scheme Capacity (KW)

1 2 1 2

GUJARATUkai 300 Ukai 640

Dhuvaran 588Candhinagar 240Uttran 67.5A.E. Company 327.5Wanakbori 630Small Thermal/Diesel 33.6

Sub-total 300 Sub-total 2526.6

MADHYA PRADESHChambai Complex 193 Korba West 960(MP's Share)

Satpura (MP's Share) 1017.5Amarkantak 300

Sub-total 193 Sub-total 2277.5

KAHARASETRAKoyna Complex 880 Chandrapur Unit I 210Puroa 22.5 Nasik 870Bhatgar-Vir 16 Koradi 1100Vaitarna 60 Bhusawal 478Radha Nagri 4.8 Uran Gas Turbine 240Tata 285 Trombay 850

Parli 268Others 112

Sub-total 1268.3 Sub-total 4128

CENTRAL SECTOR- Chola 96

Tarapur (Nuclear) 420Korba (S.T.P.S.) 630

Sub-total - Sub-total 1146Total (Hydro) 1810.3 Total 10078Total Installed Capacity as of 31/3/1984 = 11839

-34- ARMEX 5

INDIA

CHANDRAPUR THERMAL POWER PROJECT

Western Region - Inter-State/Inter Regional Transfers

Maximum power and the total energy transmitted over the Inter-State/Inter-regional lines during 1983-84

MW CWh

Gujarat to Maharashtra 289 145.54

Maharashtra to Gujarat 313 258.51

Maharashtra to Mahdya Pradesh 153 121.74

Madhya Pradesh to Maharashtra 145 153.34

Maharashtra to Karnataka 388 534.27

Karnataka to Maharashtra 225 68.29

Rajasthan to Madhya Pradesh - 146.42

-adhya Pradesh to Rajasthan - 81.70

Uttar Pradesh to Madhya Pradesh 56 62.47

Madhya Pradesh to Uttar Pradesh 54 24.89

Cujarat to Goa 3 11.97

Maharashtra to Goa 69 183.12

Andhra Pradesh to Madhya Pradesh 60 79.52

Madhya Pradesh to Andhra Pradesh 100 9.56

INDIA

CRANDRAPUR TIHZRUL POWIR PROJECT

Wes%ern ReaiOn - POver SupplV Position 1/

------------------------------------Actual ----------------------------- __Foecast1974175 1975/76 1976J/7 1977178 1978/79 1979/80 1280/81 L981U82 1982/83 1983184 1984/85 195/86 1986187 1987/8819 1988 -8i9 189/9Q 1990121 1991192

InstalledCapacity(NV) 4535 5525 5144 6190 7369 7809 8335 9975 10045 11839 12728 14387 15105 16795 18768 21797 23591 2731b

Peak Avail-ability(NW) 3213 3888 3897 434U 4114 4810 5308 5537 6200 6873 7389 8035 8514 9211 10351 11645 13454 15404

Peak Demand(N) - - - - - - - - 7481 8150 8652 9185 IU035 IU962 11953 13011 14153 15368

Surplus(Deficit)(KW) - - - - - - - (1281) (1277) 11410) 11150) (1521) 11751) (1602) (1366) 1 699) 36

Inergy Avail-ability(Gi) 20764 21984 24124 26929 29808 30273 33212 35494 38506 41380 52455 52887 57819 6205U 68547 75757 87898 IUU202

EnergyRequiremnt(GWh) - - - - - - - - 44545 44676 50295 53097 5bO01 63339 69046 75153 81730 8873b

Surplus(Deficit)(Gch) - - - - - - - - (6039) 3376 2160 ( 210) ( 182) (1289) ( 499) 604 61o8 11466

jJ Forecasted figures provided by CIA during Project Appraisal.

-36- ANNEX 7Page 1 of 2 pages

INDIA

CHANDRAPUR THERMAL POWER PROJECT

MAHABASUTRA STATE ELECTRICITY BOARD

Power Cut Position (Percent)

Category of As On As On As On As on OnwardsConsmers 31.7.77 31.3.79 31.3.80 31.3.81 1.5.83

ENERGY CUT

Domestic - - *20/30 *20/30 For basicmonthlyconsumptionexceeding300 units100z

Commercial 25 15 *20/30 20/30 Ceiling -do-General Industries 30 20 45 35 20Continuous ProcessIndustries 30 30 35 30 15Textile Industries 25 15 35 30 No Cut.Essential Consumers 15 10 15 15 10Service Industries 20 10 20 20 10Seasonal Consumers - - 30 30 15

DEMAND CUT

General Industries 40 25 30 30 30Continuous ProcessIndustries 30 20 22.5 22.5 22.5

Textile Industries 30 15 25 25 25Service Industries - - 20 20 20

* No cut upto 300 units per month.20Z cut upto 1000 units per month with minimum permissible quota of 300units.30Z cut above 1000 units per month with minimum permissible quota of 800units.

Notes: 1. There is no power cut for the industrial units outside Bombay andPune regions having their maximum demand upto 2500 kVA.

2. The L.T. Industrial units in Bombay and Pune have no power cutbut these are not allowed to use power between 5.00 p.m. to10.00 p.m.

3. There are no restrictions on use of power by agricultural consumersthroughout the State.

ANE 7-37- Page 2 of 2 pages

RANCE OF LOAD SHEDDINC IN MS

No. of Days inthe Month LS was

Month From To Carried Out

April 1983 6 414 16

May 1983 10 283 11

June 1983 79 99 3

July 1983 15 240 11

August 1983 51 355 16

September 1983 9 332 25

October 1983 2 593 26

November 1983 38 633 26

December 1983 10 628 24

January 1984 36 366 16

February 1984 5 537 24

March 1984 25 444 11

April 1984 25 569 19

DIA

CHUNDRAPUR THURHAL POWLR PROJECT

Western Region - Com_isioninL Proa sern of Ontoing schemes

InstalledCapacity 1983-84 1984-85 1985-86 198b-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93

A. IzAu

Ukai Lett Dank Conai 5 - - 2X2.5 - - - - - -

Radana 240 - - lbO lx6O - 1x60 1x60 -

Paitban 12 - 1s12 - - - - - -

bsira Tailrace so - - - lx40 140 - - --

Tillari 60 - - lx60 - - - - -

SIandardars 30 - - 1x1O - 120 - --PaVana 10 - - - 1.10 - - - -

*each 160 - - 2:60 - - - - -

Total lydro - 12 255 120 40 80 60 -

* . TIIJ1

Ukai (5th Unit) 210 - 1x210 - - - - - -

WVaakbori 630 1s210 - - - - - - -

Wanakbori Exto. 630 - - 2s210 lx210 - - - -

Kuteb (Lignite) 140 - - - 1l70 1x70 - - -

Sikka 120 - - - - l1120 - - -Sabearti 110 - 1xiO - - - - - -Gandbinaaar 2xto. 210 - - - - - lx21U - -

Satpura 8th * 9tb 420 1X210 - - - - - - -

Korba Went 420 2x210 - - - - - - -Korb& West sato. 420 - 1x210 lx210 - - - - -Iiraingpar 420 - - - - 1x210 1210 - -Coandrapur-I 210 lX210 - - - - - - -

Chandrapur Dxta. 420 - lx210 lx210 - - - - -

Coandrepur- IMIY 10u0 - - - - - - 1x500 1x500 -Parli - IV&V 420 - - 1210 - - lx210 - -Troubay bUO --)UO

Central lctor

Korb& B.T.P.S. St. 1 1130 2x210 - - - 1x500 - - -

Korba S.T.P.S. 9t. II 10U0 - - - - - l500 1s500 -Vindhyacbhl 1260 - - - - 2s210 2s210 2s210 -

Totel ThermI(tN) - 1970 740 100 280 1110 1550 920 500 SOO

C. CGa Turbine

Urbou Gas Turbine (3.106) 324 - - 3-

CHAIW TOCUL .1970 750 1659 400 1150 1630 980 500 .500 -Dww man mU . . . -.. ..- .

INDIA

CRANDRAPUR THENAL PWRZ PROJECT

Now Scheme to be coinssioned durlnoa1985-95 - Western Reslon

1985-66 1966-87 1967-66 1988-69 1969-90 1990-91 1991-92 1992-93 1991-94 1994-95 Total

HydraBodhghat

(OxUlS Kw) - - - - 250 250 - - - - -Sardar larovar R5PH

(6W200 Kw) - - - - - - 200 600 400 - -SBrder Sarovar CHPH

(5x50 Kw) - - - - 50 200 -hargt

(2:45 HW) 90 90 - - - - - - - - -

(3:40 Iw) - - - 40 s0 - - - - - -UanaagUa(3:105 + 2x15 + 3xl5 HW) - - - - 210 45 135 - - -

Thatsa(Ix15 KW) - - - IS - - - - - - -

fhadakwvala(2 KW) - - - 16 - - - - - - -

Pajghat(3xS KW) - - 30 Is

Nareadaaagar(6:12S KUW) - - - - - - - 250 175 375 -

Uhopalapatna.(7:55 NW) - - - - - - - ISO 225 150 -

Omikareshyar(6065 tw) - - - - - - - - 195 195 -

Klahshwar(6x40 NW) - 120 120 -

Total Hydra 10 9O - 101 355 433 445 1000 1315 840 4781

Thersal

Khapadkhera(MM210 KN) - - - 210 210 210 - - - - -

6andhinager(Ix210 NW) - - - - 210 - - - - - -

Peril Extension(Ix210 KW) - - - - 210 - - - - - -

Uc ran(I1:20 Kw) - - - 120 - - - - - - -

Itutch Lignite(Ix70 NW) - - - 70 - - - - - - -

PFnch(2X210 Kw) - - - - 420 - - - - -

Nand Raigarh(4x210 NW) - - - 210 420 210 - - - - -

Uandhav(3x210 NW) - - - - - 420 210 - - - -

Ihavanagarik(3x300 W) _- - - 1000 o00 _ _(Coastal Thermal) _ _ _ _ _ _ - - -

Total Thernal - - 610 1470 640 210 1000 500 S o

GRAND TOTAL 9O 90 - 711 2025 1275 655 2000 1615 840 4761Mass No. .65 . 0 .... no5.. ... .. E. ... a one "So

INDI

CHEAXRAlY' THEMHAL POWs PROJECT

Power SupIly Position of Kabharaebtra (On- oino Sche Ma Only)

Provi--------------Actual …--- onal ---------------------------forecat ----------------------78179 79l0 flLI 81/52 S211 U3 13 4 1 1485 15186 AIM1L lUll JA1M1 8910 92091 91/92 921/9

Installed CdpacLty (NW) 3206 3619 4289 4619 5159 5869 6351 7315 7315 7676 8178 8554 8S54 8554 8554

Peak Availability (NW) 1969 2213 2457 2660 3028 3440 3694 4004 4166 4224 4492 4754 4949 5200 5344

Peak Demand (NW) - - - - - - - 4464 4827 5219 5643 6092 6576 7093 7644

Surplus/Deficit (M) - - - - - - - (460) (661) (995) (1151) (1338) (1627) (1693) (2300)

Energy Availability (GUh) 14317 15880 17285 18365 18173 20808 26420 25869 26776 29217 30640 32254 34069 34064 37698

Energy Requireumt (GUh) - - - - - - - 26594 28755 31086 33612 36288 39171 42249 45533

Surplua/Deticit (Wh) - - - - - - - (725) (1979) (1869) (2979) (40314) (5102) (6185) (1835)

INDUA

CUANDOAUR THRMXAL VER PRWECT

Growth and Pattern of Electricity Consump ton ln Haharashtra

1981-82 1982-831960-61 1965-66 1968-69 1973-74 1978-79 1979-80 1980-81 (Provilaonal) (Provisional)

l. Energy Generation (GWh) 3268 5635 7665 9823 15491 15503 17664 18681 20138(Utilities only)

2. Electricity Consumption 2720 4717 6390 8812 10810 10994 13246 14225 15346(GWh)(Utilities only)

3. Pattern of Consumption(Percentage of TotalConsumption)

I) Doestic 9.56 9.50 9.44 9.42 11.04 12.53 12.67 13.02 13.51

It) Commercial 7.29 7.70 6.99 6.38 7.09 6.96 6.80 7.35 6.94

III) Industrial 68.12 69.91 70.25 69.00 60.44 59.15 57.92 57.35 56.57

1v) Railway Traction 12.47 8.78 6.09 5.73 6.10 6.28 5.46 4.85 4.27

v) Agricultural 0.54 1.90 3.70 5.54 10.71 10.40 12.28 12.53 14.44

vi) Inter States 2.02 2.21 3.53 3.93 4.62 4.68 4.86 4.90 4.27

TOTAL 100 100 100 100 100 100 100 100 100

o.

-42-. ANNEX 11

INDIA

CHANDRAPUR THERMAL POWER PROJECT

MAHARASHTRA STATE ELECTRICITY BOARD - HSEB

Pattern of Consumption for DifferentCategories for the Last Five Years

Category 1978/79 1979/80 1980/81 1981/82 1982/83

Industries 3500.02 3915.35 4872.67 5527.10 5513.19(32.38X) (35.61Z) (36.78%) (38.85%) (35.92%)

Agricultural 1299.69 1270.52 1618.00 1746.04 2202.00(12.02%) (11.56%) (12.12%) (12.27%) (14.34%)

Domestic 524.06 660.73 747.58 834.23 1006.98(4.85%) (6.00X) (5.64%) (5.86Z) (6.56%)

Commercial 282.00 285.31 302.80 372.91 361.90(2.6%) (2.6%) (2.29%) (2.62Z) (2.36%)

Public Lighting 76.45 98.80 98.21 100.44 108.27(0.71%) (0.90%) (0.74%) (0.70%) (0.70Z)

Licensees 4241.07 4092.55 4466.53 4486.98 4447.45(39.23%) (37.23%) (33.72%) (31.54%) (28.98%)

Traction 152.75 157.10 216.21 231.30 279.43(1.40%) (1.43%) (1.63%) (1.62%) (1.82%)

Miscellaneous 421.32 408.26 480.65 513.26 549.50(3.89%) (3.71%) (3.63%) (3.60%) (3.58Z)

Interstate 313.38 105.23 444.06 410.96 877.40(2.92%) (0.96Z) (3.35%) (2.88%) (5.71%)

Total 10810.75 10994.05 13246.73 14223.21 15346.12(100.00%) (100.00%) (100.00%) (100.001) (100.00%)

-43- ANNEX 12

INDIA

CHANDRAPUR THERMAL POWER PROJECT

Category Wise No. of Consumers for Last Five YearsM.S.E.B.

1977-78 1978-79 1979-80 1980-81 1981-82 1982-83Categories Nos. Nos. Nos. Nos. Nos. Nos.

Domestic 1505675 1718899 2028715 2299926 2478323 2702158

Commercial 6Miscellaneous 343574 386269 423389 459005 490976 519392

Public Lighting 14154 16309 18665 21150 22736 24453

Industrial

L.T. 78519 92436 104705 116137 124001 134040

H.T. 2390 2595 2715 3016 3247 3541

Sub-total 80909 95031 107420 119153 127248 137581

Railways 63 78 96 116 168 176

Agricultural 474923 523485 577720 646894 698107 769462

Public Water Works 3183 3682 4305 4888 5743 7040

Military 3961 3961 4200 4552 4631 4631

Licences 21 16 16 18 18 17

Total 2426463 2747730 3164526 3555702 3827950 4164940

p ;

CHANDRAPLIR DWM sPOWIR POJICThkKOt3MSbbCWbcoardNsadOlshUp

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F~~~~~~ta 1 I 1Ci mom wi ow s o mi oXvxm OMM~~~~~~~~~'~ LOP) =~~~~~~tl SI1 )S ̂AtC A),M1

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Ove I" LP so LM c o ore $mm eV L o C.LW in o -

MOIrE __ (C) CAjO 1W11OM(I~~~~~~~~~I)~Co M

0 Cal)~~~~~~~~~~~~~~~~~~~~~ .m

INDIA

CHANDRAPUR THERHAL POWER PROJECT

MHHARASHTRA STATR ELECTRICITY BOARD - HSEB

Analysis of Habarashtra State Electricity Board's Staff Strength As On31-3-1984

Staff carryingPROJECT out functions

common to act 1-Generation Tranniiasion Distribution Chill Engineertng Sub- vities _ ntioned

081 OH OH 6 Constn. OH & Constn Thermal Hydro Transmission Trannsiesion In previous col. Total

Top Management 14 - 11 1 2 - 4 - 50 82

Middle Hanageinnt 167 31 178 50 55 - 65 - 195 741

Engineers 1791 520 4928 1009 208 - 727 - 402 9589

Accounts/Audit &Adm. Pereonnel 882 528 9098 878 115 - 866 - 2441 14808

Chemist 121 - - - - - - - - 121

Computer Personnel - - - - - - - - 105 105

Technical 910 1280 3258 156 127 - 708 - 153 6592

Skilled 5221 980 7688 463 198 - 1447 - 612 16609

Unskilled 3756 1465 27105 150 77 - 927 - 413 33893

HMter Reader - - 2386 - - - - - - 2386

Support Staff 847 756 3121 518 77 - 524 - 1114 6857

Total 13709 5460 57773 3225 859 - 5268 - 5485 91779..... .... ... e. .... ... ... .... ... ma S.....

-46-ANNEX 15Page 1 of 2

INDIA

CHANDRAPUR THERMAL POWER PROJECT

MAHARASHTRA STATE ELECTRICITY WBARD - MSEB

In-House Training, Courses Organized by the Maharashtra StateElectricity Board's Institute During Last Three Years

(April 1981 to March 1984)

No. of Persons Projection forNo. of Programs Attended the the Next 3

Course Attended Program Years

A. Induction Courses forGeneration Wing

Graduate Engineers Indu- ) )ccion Training Course. ) 189 )

) k6 ) 500Diploma Engineers Induc- ) )tion Training Course. ) 279 )

Chemists InductionTraining Course. 1 18 30

B. Induction and RefresherCourses for Transmissionand Distribution Wing

Engineers Working inTesting Division andT.L. (O&W) Division. 8 186 200

Junior Engineers andAssistant Engineers. 28 558 1000

Sub-station Operators 8 149 300

Lineman 40 870 1000

C. Refresher Courses forSupporting Cadres

Accountants and Office 93 1653 2000Assistants.

Foot Note: In addition to the above, in house seminar on "Management byobjective" was conducted prior to 3 years period mentioned inthe statement, and about 150 top Management personnel andManagers vere exposed to the semiar.

-47- ANNEX 15Pagi 2 of 2 pages

No. of Persons Projection forNo. of Persons Attended the the Next 3

Course Attended Program Years

Thermal Stations Various India 67 386 500Aspects of O&K of Large Abroad 3 5Thermal Sets & Allied -Services Including Instru- 70 391mentation. PolLution Con-trol, Maintenance etc.(Including Pets).

Power Syscem Operation and India 17 25 50Control, Power System Pro- Abroad 2 2tection etc. - -

19 27

Transmission Related Subjects rndia 17 69 !00of O&M of Transmission Systems, Abroad 1 1Transformers, Switchgears, - -Control Panels, Hotline Main- 18 70tenance Techniques.

Electricity Distribution India 6 20 20Executive - Rural Electrifica- Abroad - -tLon. _

6 20

Energy Conservation Inida - - 10Aborad - -

Computer Application India 8 32 50Abroad - -

- '2

Telecommunication and India 6 15 50Electronics. Abroad - -

-6 B5

Project Formulation Implementa- India 9 23 200tion and Monitoring. Abroad - -

9 TS

Various Management DiscipLi- India 14 39 50nes like Stores Management, Abroad 1 1Purchasing Kanagement, Finan- - -cial and Personnel Managerient 15 40Industrial Relations Publicity,MIS, etc.

Foot Note: Duriag the year 1976 to 1980, a large number of executives andmanagers were trained in Project implementation, monitoring andevaluation Including PERT/CPMl.

-48- AUU= 16

INDIA

CHANDRAPUt THERMAL POWER PROJECT

JW*ARASUTRA STATE ELECTRICZTY BOARD - MSES

Energy, Generation, Sales and Losses

Description 1978-79 1979-80 1980-81 1981-82 1982-83

Power Generated(mus)(a) Hydro 5554.19 4640.51 4978.15 4991.37 4478.04(b) Therm 6104.26 7401.73 9199.94 10111.71 11182.66(c) Gas - - - 1.93 1061.67

Total 11658.45 12042.24 14178.09 15105.01 16722.37

Power used in 546.844 709.41 932.97 L193.05 1221.42Auxiliaries

(MUs)

Power Purchased 1976.47 1833.70 2548.62 2879.34 2582.76from otherAgencies (MUs)

Power Available 13088.08 13166.53 15793.74 16791.30 18083.71and Sales (MUs)

Power Sold (MUs) 10810.75 10994.00 13246.73 14223.22 15346.12

ZIncrease as 8.S3% l.7% 2.05% 7.40% 7.90%compared to

correspondingprevious year.

System Losses (X) 17.33% 16.50% 16.;2% 15.29% 15.14%

INDIA

CHANDRAPUR THERMAL POWER PROJECT

AHARASHA RA STATE ELECTRICITY BOARD - HSEB

Program of System Improvement Scheme. upto 1991-93

1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93Item Auount Item Amount tzem Amount item Amount Item Amount Item Amount Item Amount Item Amount [tem Amount

1. Ilstallatirn of HT/LT 144 5.1 155 7.5 160 5.8 162 6.7 170 6.4 178 10.9 176 8.9 179 7.9 182 9.9Capacities (tVAR)

2. IIT/LT Distributton System

A) NewN T Lines (KM) 700 15.0 800 17.1 650 14.5 650 14.5 800 18.0 1000 23.1 1200 28.0 1400 '33.0 1500 39.0

b) AddLtton DIC 135 74.0 141 77.5 140 82.1 143 77.9 140 83.6 150 84.6 155 96.9 150 116.0 265 123.9Addit ional Feeders (DI)

3* 33 KY SYSTEMS

a) 33/11 kV */s IMA Capacity 62.6 33.7 70.4 43.0 58.35 47.8 61.5 45.5 56.5 44.05 67.8 51.5 69.8 57.8 62.2 43.4 61.5 46.3(Including Switching s/s33 kV bays etc.)

b) 33 Kv Lines (10) 300 29.0 250 22.5 350 31.5 400 36.0 250 22.5 300 27.0 400 36.0 350 31.5 300 27.0

4. Renovation Works LS 25.2 LS 32.4 LS 27.8 LS 39.4 LS 76.5 LS 63.4 LS 41.4 LS 48.2 LS 53.9

TOTAL 182.05 200.0 209.5 220.0 251.0 260.5 269.0 280.0 300.0uu.... mu. . . ........... .uu... u.... . .... ..U ..... I"anwmnUII .....

Totals 1985 to 1993 - Rs. 2172.05 million

Say .... Rs. 2180 million

-50- ANNEX 18

Page 1 of 5 pages

INDIA

CHANDRAPUR THERMAL POWER PROJECT

Project Description

1. The Chandrapur development, located at a distance of 6 km fromChandrapur, a district headquarters in the Maharashtra State, is one of aseries of large coal fired power stations planned by MSEB to feed into itstransmission system and supply power to the State.

2. The final profile of the Chandrapur power plant totalling 2,340 MWincludes four units of 210 MW and three units of 500 MW each. The first210 MW unit was commissioned in August, 1983, the second in January, 1984.The planned commissioning dates for the third and fourth units, comprisingthe second stage, are February and August, 1985 respectively.

3. The Project consists of the third stage of the development com-prising two units of 500 MW each with associated mechanical and electricalfacilities and associated civil works. The fourth stage, consisting of athird 500 MW unit, would be installed at a later stage, under a separateproject.

4. The 500 MW turbine will be three cylinder reheat condensing typehaving one HP cylinder, one double flow IP cylinder and one double flow LPcylinder with initial steam parameters of 170 kg/cm2 and 537 C/537 C. Thegenerators will be water and hydrogen cooled, with a nominal output of500 MW. The boiler will be natural/assisted circulation, pulverised coalfixed, balanced draft type using the direct firing system. The boilerwill have a continuous evaporation rating of 1,730 ton/h with a super-heater outlet pressure of 179.9 kg/cm2 and temperature of 540 C. Eachgenerating unit will have 3 single phase 200 MVA 21/400 kV transformersand will feed power into the 400 kV system.

5. The salient features of the development are shown below:

Power Station

Final Capacity - 2,340 MW (4x210 MW + 3x500 MW).

Fuel - Coal from the Chanda-Wardha Valleycoalfields. Consumption of the 2x500 NWpower station at 5,500 hrs of operationper year is about 3.6 million t/year.The average calorific value of the coalis 3,700 kcal/kg; moisture 6-10Z;ash 24-40%; sulphur 0.3-1.0%.

-51- ~ANEX 18Page 2 of 5 pages

Transport of Coal - Unit train continuous system with bottomdischarging wagons.

Cooling System - The main source of water for the ChandrapurStation, up to the capacity of 1340 MW, isthe Erai reservoir which has been constructedby MSEB. The consumptive water requirement,on the basis of closed cycle cooling withcooling towers, is estimated to be 12,600 cubicmeter per hour for the four 210 MW units andthe first 500 MW unit. For the second 500 MWunit, as well as the future third, the Eraireservoir will be fed an additional 120 millioncubic meters per year from the Human reservoirwhich will be constructed by the IrrigationDepartment of COM. The two reservoirs will belinked through canals and pipelines, and pumpingwill be required. From Erai water flows throughpipelines to the power station raw waterreservoir.

Ash Disposal - The ash disposal area is available approximately7 km away from the power station site. Ashwill be pumped as a slurry through pipelines.Ash water recovery system will be provided sothat relatively ash free water flows tonatural drainage.

Land - All the land needed at Project site has alreadybeen acquired by MSEB. Additional 1600 hawill be acquired for ash disposal purposeswhich MSEB plans to acquire gradually. Also190 ha for the water conductor system is needed.

Transmission - The first 210 MW unit has its power evacuatedthrough the 220 kV lines Chandrapur-Warona andChandrapur-Sicom. For the other three 210 MWunits power will be evacuated by the single-circuit 400 kV lines Koradi-Chandrapur andChandrapur-Parli-Karad-Lonikand-Kalwa. The400 kV Koradi-Kalwa was commissionedin March 1984. The Chandrapur-Parli/seccionof the second line will be commisssioned inDecember 1984. The rest of the line will becompleted by June 1986. For the 2x500 MWunits of the Project the transmission arrange-ment comprises a double-circuit, 400 kV lineChandrapur-Parli-Lonikand and a single-circuit

-52- ANNEM 18Page 3 of 5 pages

400 kV line Lonikand-Bombay. Bids for thesetwo lines have already been received by theMSEB. The comissioning ef the lines isexpected before 1989, in advance of thecommissioning of the units (1990-91) (Seeattached map for details of the KaharashtraTransmission Grid).

6. Thermal Rehabilitation Component:

a) Koradi Thermal Power Station (4x120 MW)

- Renovation of ESP of Stage I & II.

- Procurement of four high capacity boiler feed water pumps.

- Modification of coal bunker mouth of Stage-I including stainlesssteel lining for all bunkers of Stage I & II.

- Replacement of reheater coils of Units 3 & 4.

- Procurement of Labyrinth seals of softer materials for HP andIP turbines.

- More powerful shunting locos - 2 units.

- Installation of HP/LP By-pass.

- Replacement instruments.

- Ash Handling Plant operation on automatic.

- Procurement of one spare H.P. Rotor.

- Procurement of one Generator Rotor.

- Procurement of stand for straightening of 120/210 MS h.P.Rotors.

- Provision of the additional ropeway section between points D & Ei.e., ropeway section D2 E2.

- Provision of additional ropeway for transportation of coal fromKamptee group of mines to Koradi Power Station.

- Augmentation of CHP at Koradi.

b) Khaperkheda Thermal Power Station (3x30 MW):

-53- ANNEX 18Page 4 of 5 pages

- Renovation of boilers.

- Renovation of H.P. heaters.

c) Shusawal Thermal Power Station (1x62.5 MW):

- Replacement of top three shells of Chimney.

- Renovation of primary superheater coil 'U' bends.

- Renovation of mechanical cyclones of boilers.

- Renovation of condenser tubes.

- Provision of rotary strainer on inlet CW Channel.

- Renovation of feed water heating steam spray pipes.

- Additional 6.6kV breakers for CHP panel (4 Nos.).

- Renovation of LT Switchgear for F.D. Fan Motors - replacementand relocation.

- Renovation of auto starter for D.C. lub oil motor.

d) Parli Thermal Power Station (2x30 Hi):

- Renovation of ash handling system.

e) Paras Thermal Power Station (30 M1+62.5 NW).

- Renovation of Power and Control Cables.

- Renovation of D.C. Lub oil pump motor switchgear.

- Renovation of 3.3kV breakers for river water pump.

- Renovation of Electrostatic Precipitators.

- Provision of additional soot blowers for boilers.

- Renovation of instrumentation.

- Renovation of instrumentation and recorder of turbine.

- Renovation of compressors for instrumentation.

-54-

ANNEX 18Page 5 of 5 pages

- Renovation of ash removal system.

- Renovation of secondary air fans.

- Renovation of air conditioning plant

- Renovation of HP valves in feed water and steam circuits.

- Renovation of Coal Handling Plant.

- Renovation of Coal Feeder Drive.

- Renovation of primary superheater and secondary superheatertubes alongwith boiler refractory work.

- Renovation of I.D. Fan motors and stoker motors.

- Modification work of front pedestal of turbine.

- Procurement of spare motor for 3.3kV, 600 KW, 745 RPM C.W.pumps.

f) Nasik Thermal Power Station (2x140 MW):

- Renovation of Ash Handling Plant.

- Renovation of 110 Volt Station Batteries.

- Renovation of the Hilling Plant Gear Box.

- Augmentation of existing oil storage capacity by providing oneadditional tank.

- Procurement of spare high pressure turbine rotor, spare mediumpressure turbine rotor and a set of spare blades for low pres-

- sure turbine.

- Augmentation of existing oil decanting capacity.

- Renovation of F.O. Heaters.

- Renovation of super heater and reheater.

-55- ANNEX 19

MIA

CHUDRAPUR THERKAL POWER PROJECT(2 x 500 KW)

Proiect Cost Estimates

Rs Million US$ MillionLocal ForeiRn Total Loca Foreign Total

1. Preliminary Works

Survey. Soil Investigation,Land, Land Development.Roads and Railway Siding 108.7 - 108.7 9.9 - 9.9

Physical Contingencies (10) 10.8 - 10.8 0.9 - 0.9Total 119.5 - 119.5 10.8 10.8

2. Clvil Works

Foundations and Structural. 393.8 12.2 406.0 35.8 1.1 36.9Chimney, A.H.P., C.H.P.,

W.T., Cooling Towers 334.8 10.3 345.1 30.4 0.9 31.3Raw Water System 632.8 19.5 652.3 57.5 1.8 59.3Uulldings 157.9 - 157.9 14.4 - 14.4

Subtotal T1,193 42. 1,5613 T TX1 I

Physical Contlngencies (10X) 151.9 4.2 156.1 13.8 0.4 14.2Price Contingencies 410.2 8.5 418.7 37.3 0.8 38.1

Total ' 2.081.4 54.7 2,136.1 189.2 5.0 194.2

3. Electrical and Mechanical Equipment

Stem Generator, T.C. Set andAuxillary Equipmnut 945.0 2,205.0 3,150.0 85.9 200.4 286.3

Coal Handling Plant and UnitTrain System 250.0 230.0 480.0 22.7 20.9 43.6

Ash Handllng Plant 75.0 50.0 125.0 6.9 4.5 11.4Water Treatment Plant 60.0 40.0 100.0 5.5 3.6 9.1Fuel Oil Randling Plant 24.0 16.0 40.0 2.1 1.5 3.6Other Mechanical Equipment 256.0 200.0 456.0 23.3 18.2 41.5Medlum Voltage and L.T. Switchgear 50.0 110.0 160.0 4.6 10.0 14.6Station and L.T. Transformers 47.0 60.0 107.0 4.2 5.5 9.7Other Electrical Equipment 88.0 186.0 274.0 8.0 16.9 24.9Erection, Transport, Insurance,

Testing 524.0 27.0 551.0 47.6 2.5 50.1Subtotal T T 3.124.0 3U44. -T5T 284. ZgR.-T

Physical Contingencies 115.9 156.3 272.2 10.6 14.2 24.8Price Contlngencies 833.8 1,123.0 1,956.8 75.8 102.1 177.9

Total 3.268.1 4,403.3 7,672.0 297.2 400.3 697.5

4. Consultancy 42.0 16.0 58.0 3.8 1.5 5.3

5. Engineering and tdainistration 550.0 - 550.0 50.0 - 50.0

6. Thermal Plant Rehablitation 357.0 92.0 449.0 32.4 8.4 40.8

7. Total Prolect Cost (beforetaxes and dutles) 6,418.6 4,566.0 10,984.6 583.4 415.2 998.6

8. Taxes and Duties 1,294.0 - 1,294.0 117.6 - 117.6

9. Total Project Cost 7,712.6 4,566.0 12,278.6 701.6 415.2 1.116.2

10. Interest During Construction 1,100.2 886.1 1.986.3 100.0 80.5 180.5

11. Total Financing Required 8,812.8 5.452.1 14,264.9 801.0 495.7 1,296.7

-56- ANNEX 20

1NDIA

CHANDRAPUR THERMAL POWER PROJECT(2x5O0 MH)

Estimated Schedule of Disbursmuent

IBRD Fiscal Year - ---- Disbursements -------and HaLf-Year Cumulative USS Hillion Equivalent Z Undisbursed

1985

June 1985 LLO

1986

December 1985 30 90June 1986 37 87

1987

December 1986 44 85June 1987 54 82

1988

December 1987 64 78June 1988 94 68

1989

December 1988 124 58June 1989 169 43

1990

December 1989 219 27June 1990 244 18

1991

December 1990 264 12June 1991 276 8

1992

December 1991 288 4June 1992 297 1

1993

December 1992 300.0

2 WnAK DnN OF WON ALM Ir a_-1 _ _ a _ 40 I 111 laI I6 II Isi I0 P n I3 I I I1 1 11 1 11 loz II II I III so ~a L1 O I I _ _ _tI I InII ' I IairIIwIo

14 CWhftiga tI L| |~W (.8 -wn IiII|III cw

2 BOW A f &a'tam,au, CY

A GMf j!||ilaTt A h Ak I 'c lo A UPOO w

I ~~~~~~~I'uAatr~~~~~~~~~~~~~lb MIIAA* tS.P.Fasaftxt6 TOIHAn a FmStOm

7 IGIhAftAS%kopD MC

S T G Ah ALahuMct,AIswvoi W NIIv

2tthstn9O" ChU cm _ C.§NCl

22 DRtz%m ent>ll U W*F o cCt

40 bnatad obslP{tbstttM t I i cC| l l l l ! ' l l l li2 AOWVIWdISSI.AcUCN CD

1 3 CWPirlhas go.Com

14 C WRkerp Ow W iI|

It i*wc %0 Cs

213N lC fodW (c=wv D C sI - CI

31~ ~ ~ ~ ~~~~~~3 CWS - Cke lltt(CM EC)-0

25CI Idit horho Mv"

Ml - NO s (6)C - O C

21 ko a kl(20 wmwS0 (wEA -fPw

(5) G - Ostytf 10

(3) CobidtnudWu M-0dolr Mr.

(26 MebwdM0br 2mnmd wst,L

2 1 w4 Am~ Ow Aih D4xW CA~~~~~~~~-2 °

INDIACHANDRAPUR THERMAL POWER PROJECT

Impl enwttlon Schedule

Nio| rraN CODE I aS23 9 1 1a1n 12 13 Tid Is It I I9 I I4 n Z| | 27 a P X 031 | 36Y|X| MO 39 A_ 41 A2 4|a4|45 |6 47 4| "9 |e|542 53W | 6 ;| 16 60 64 62 63 6|^!*

Jb I i raIls ED i iI I I I 1 1 I I I I I I v I I 32 Of,~~~~~~~~~~~~~~~W .C

tt~~~~~~~~~~~~~~W Cvos t. w( ES|+|!, | N|IIII Wt511L._ V I Itt tl: I |i |l; l j

34 taOtI&CwJvd&IldavPb.s 113~~~~~~~~~~~w. jCw

A Mw lCht~ Iu #.A TO4' Fmf;V CNtn 1, 1! I i!|Pt|j1a t&CaeirdCd E}l ! ' s 1 1 1 1 1 1 1 tt rtt I I II l,GX -F55I I IV I I I iII I I IW K j || , | I I ECW v l !l

36 Gw.% E& U, A., r- 4am 'ED j!g lvhW I I I i v1I;!l t;clI

3q Utli

J Ff #d K w ' . '' .i ii {| t i | | | |'iWZ511 !{ | I | i | || || tl V tit 0 ¢ i I II , Iv

30 10C1Cc.0

Al Prrc'vbA, E4 A |ogr| |ti W ! I I I i I

v 0. WDC 0 |

12 nfl Co"Nto -vt E t

51 UGISI EN Ml~~~~~~~~~~~~~~~~~~~~~~~~I g 0m m.sILr,

12) 0m n - t d t W11 t5 I rnta

44 ~ ~ ~ ~ ~ ~ ~ ~ 3 CWli A Conf Cdjat Di C c

S6 i h LIic

(I) MTb -tCI unbIfc ¶d .<) CCi - Ce&yorSc(2)0 -2,wWECdw ciflS -ketaifIal43 J) 501 - CMS 3d eI) IC - :i C !

As Ca'w a ir(4 C - :aCav#u () r%I*-Ca S,g

(2) Snai.ddadeamireww m 4-n EC

50 lr*wr41 ClTmwWn hvW OOEM - U aYYIt II Ski irvadCiIIDEVIIv C

ANNEX 22

INDIA

CHANDRAPUR THERMAL POWER PROJECT

MAHARASHTRA STATE ELECTRICITY BOARD - MSEB

Average Rate Realized Paise/Unit

Category 1978-79 1979-80 1980-81 1981-82 1982-83

Domestic 36.5 33.3 34.3 37.79 39.43

Conmercial 39.3 42.3 43.3 46.62 59.39

Industrial

a) LT 39.8 36.3 43.3 48.44 51.34

b) HT & Defence 28.1 2i.2 31.6 41.96 55.12

Traction 23.3 27.2 25.3 34.31 42.72

Public Lighting 38.4 32.3 33.3 36.23 35.37

Irrigation &Agricultural 16.9 17.00 16.00 15.58 12.72

Public Water Worksand Sewage Pumping 24.9 28.2 28.8 39.22 44.36

Supplies in BuLk

a) To M/S. Tata 21.0 22.2 25.8 33.32 42.91

b) Other Licensees - - - 24.65 42.91

c) Inter State - - - 26/56 43.19

Average 22.6 26.0 28.0 34.7 42.9

-60- ANNEX 23

INDIA

CHANDRAPUR THERMAL POWER PROJECT

KAHARASHTRA STATE ELECTRICITY BOARD - MSEB

Comparison Between Actual Tariffs in FY83 and LRMC 1/

Tariffs - Ps/KWh Revenues - Rs MiLLionSales

Actual LRMC CWh Actual LRMC

Domestic 37 196 1007 374.6 1977.4

LT Commercial 57 138 362 206.0 500.9

LT Industrial 49 III 768 377.1 851.3

Agricultural 13 106 2202 280.3 2330.6

IT Industrial 53 77 4746 2510.7 3672.5

Bulk SuppLy 41 77 6261 2559.0 4844.7

15346 6298.7 14177.4

Average Revenue Ps/KWh 41.04 1/ 92.38

I/ Based an investment considered for 6th Five-Year Plan (1980-1985)

2/ Average in FY84 has increased to Ps/KWh 45.92

-61- ANNEX 24Page 1 of 3

INDIA

CHANDRAPUR THERMAL POWER PROJECT

MAHARASHTRA STATE ELECTRICITY BOARD - MSEB

Financial Projections

Assumptions

1. Station Consumption

This is provided for on the following basis:

(i) Thermal Generation 9.65Z

(ii) Hydro Generation 0.5%

(iii) Gas Generation 2%

Based on current experience.

2. Operation & Maintenance Charges

-These include salaries and wages to employees, repairs andmaintenance and other establishment charges. In addition to providing forescalations according to inflation rates given by the World Bank, additionalexpenses relating to new generating stations and associate transmission anddistribution lines to be brought into operation have also been included inthe projections in the respective years.

3. Electricity Duties

The Central Electricity Duty is being abolished with effect from 1stOctober 1984. It is assumed that the State Electricity Duty will becorrespondingly increased with effect from that date. State ElectricityDuty, accordingly, is provided for at 3.50 paise per KWh with effect fromthat date.

4. Interest

Taking into account the trends already established interest rateshave been as follows.

-62- ANNEX 24Page 2 of 3

For the year Z For the year Zending 31st ending 31stMarch March

1984 6.9 1989 7.4

1985 7.0 1990 7.5

1986 7.1 1991 7.6

1987 7.2 1992 7.7

1988 7.3 1993 7.8

5. Interest on Capital Works Under Construction

This is apportioned in the ratio of average net fixed assets(excluding consumers' contributions) to average capital works in progresscomputed with reference to opening and closing figures of each year. Upto31st March 1985 (when the comercial system is expected to come into force)capitalization of interest on works in progress is not provided inprojections for purposes of Balance Sheet in accordance with currentpractice. With effect from 1st April 1985 this will be accounted for in thebooks also. Accordingly, that portion of capitalized interest relating tothe assets has been accounted for under the relevant heads, namely, the fixedassets in use and the capital works in progress, in the projected BalanceSheets also.

6. Net Income

With effect from 1st April 1985 the Board is expected to earn aminimum rate of return of 3Z after providing for all charges includinginterest in accordance with the amended Electricity (Supply) Act.Accordingly, the projections provide for a clear surplus of 3% from the yearcommencing from 1st April 1985.

7. Security Deposits from Consumers

It is proposed r- collect from the consumers in cash, deposit to theextent of 2 months' equivalent of previous year's sales by 31st March 1990providing gradual increases from the year comencing from 1st April 1985.

8. Average Tariff Rates

A minimum rate of return of 3% after providing for all chargesincluding interest in accordance with the amended Electricity (Supply) Actto be effective from FY 19985-86, yields more than 20X net cash generation

-63- ANNEX 24Page 3 of 3

computed in accordance with the agreed formula, in all the years FY 1985-86to 1992-93. The resulting average tariff rates for FY 1991-92 and 1992-93,however, are on the high side. The State Government may under thecircumstances opt for giving subsidy to the SEB not exceeding IOZ of theGross Sales to compensate for RE losses during these years and restrict thetariff rates to a more practical level.

9. Loan Repayments to State Government

The terms for most of the loans to the SEB from the Government ofMaharashtra are:

(i) Loans for Rural Electrification (RE) Schemes areperpetual and therefore not repayable.

(ii) Loans for major generation and transmission schemesare repayable in 24 installments after 6 years atthe rate of 6.25% compound on an equated annualinstallment basis.

10. Loan Repayment to Others

The Electricity Board Bonds have fixed maturity dates. No such bondsmature for payment during the years FY 1990-91 to 1992-93. This will explainthe low level of repayments schedule for those years.

-64- AMNEX 25Page 1 of 7

INDIA

CHANDRAPUR THERNAL POWER PROJECT

KAHARASHTRA STATE ELECTRICITY BOARD

Financial Projections

Notes On CEA Assumptions for the Financial Projections

1. Financial projections were prepared by CEA with assistance from MEBand are based on audited FY83 and provisional figures of FY84. The sixFive-Year Plan ending in FY85 has been taken as base for MEB investmentprogram and starting from FY86 preliminary figures for the seventh Five-YearPlan have been used.

2. The fuel cost has been considered by MEB on constant heat value. Incase of new units increased fuel consumption is considered. Price escalationhas been incorporated.

3. Depreciation has been calculated - on a straight line basis - at arate of 3.6% i/ of gross fixed assets in operation at the beginning of eachfiscal year.

4. Three changes have been considered by the appraisal team in thefinancial projections as prepared by CEA:

5. Assumptions prepared by CEA are attached.

a. consideration of the notional repayment of GOM perpetualloans (4X annually) in the calculation of the net cashgeneration;

b. using price escalations which are now considered by theBank; and

c. exclusion of electricity duty from electricity sales andthe average revenue per KWh sold.

1/ Between 3.2% and 3.5% of the average gross fixed assets in operationat the beginning and at the end of the fiscal year.

INDIAIARWASHTRA STATE ELECTRICITY BOARDCWANORAPUR THERWAL P R PROJECT

ACTUAL MM FORECAST BALANCE SNEETS... ....... .. .............................

IRUPEES NILLIWNI-------- ACTUAL ------ PROY.I ------------------------------ FORECASI----------------------------------1980/01 1981/82 1902/83 1983/84 1984165 1985/86 1986/87 1987/88 19M8GM8 1989/O I990/91 1991/92 I192/93

ASSETS

Gross Fixed Assets 12810 15095 18510 23955 29703 38469 41111 45763 49404 S9313 74209 87243 q3376Cumulative Depreciation 2141 2609 3143 3809 4671 5740 7125 8605 10252 12031 14166 1636 19979

.... ... ....... .......... ....... ...... .... ......... ------- -------. ------ ........ ------- ........ .. ...... ...... .. ...... ... ... ...

Not Fixed Assets in Operation 10669 12486 15367 20146 25032 32729 33q86 37158 39152 47292 60043 70405 73397Capital Works Under Consruct. 0393 9424 9962 8571 7901 5515 10046 14217 21507 24020 22423 24865 36531Investeents 6 7 7 7 7 7 7 7 7 7 7 7 7Working Capital 1/ -45 -357 -506 -599 -45 297 739 1442 2226 3280 4722 6140 8311Intangible/Obsolete Assets 44 60 102 110 120 130 140 150 160 170 180 I"9 200Cumulative Losses --- --- 17 33 --- --- --- -- -- ... - - --

TOTAL ASSETS 19067 21620 24949 29268 33015 38678 44918 52974 63052 74767 87375 101607 118446::::::: 8s3a23 33ssa338 38333s3 3s8 3s 338333 385a33 ::w::u:u 33 a 333S 3s3::: asms:.a 333338 1331333

LIABILITIES

Capital ContributionsFroe Consumers 444 530 629 740 860 qBO 111O 1250 1400 1560 l730 1910 2100Froe Others 73 1l 99 120 140 160 185 215 250 290 335 385 440

Total Capital Contributions 517 611 728 860 1000 i140 1295 1465 1650 1850 2065 2295 2540Reserve and Surplus 406 192 --- --- 549 1721 3188 4971 7220 q849 12754 16073 20180

BorrowingFrom 6overn nnt 13411 15458 19065 20506 23617 27000 30580 35605 42077 49641 57649 66656 77298Frau Others 4274 4919 5506 6111 6780 7458 8204 9024 9926 10919 12011 13212 14533

Total Borrowing 17685 20277 23571 26617 30397 34458 38784 44629 52003 60560 69660 79868 91831Staff Superannuation Fund I I I I I *--. ... .. --- ...- --- *--Security Dep. From Consumers 458 539 649 790 1069 1359 1651 1909 2179 2508 2896 3372 3895

._ __ _ __-- ------- ------- ------- .....----.. ------- ------- ------- ------- ....... ------- ......TOTAL LIABILITIES 29067 21620 24949 28268 33015 38678 44918 52974 63052 74767 87375 101607 118446

::::=:::W:w: ::g :33333::: 3:838:8 1533338 :3::::: :3:::::: :h8:::: :::::: :5:::3 ::::: 3333353

Debt to IDebt+Equityl 95 96 97 97 95 92 90 87 85 84 9 81 80°Equity to (Debt+Equity) 5 4 3 3 5 8 10 13 15 16 19 19 20 4

................................ ...................................................................in p... ..... ........ .......

I/ Details in page 7 of this annex

INDIAMAHARASHTRA STATE ELECTRICITY BOARDCHANDRAPUR THERMAL POWER PROJECT

ACTUAL AND FORECAST INCOME STATEMENTS.. . . .. . . .............. .. .

(RUPEES MILLION)........ ACTUAL -…- - PROV.1 -------------------------------FORECAST…------------------------------------1980161 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/86 1968/69 1989/90 1990/91 1991/92 1992/93

Energy Sales (6Wh) 13247 14223 15346 16960 19878 23046 25251 26358 27561 28598 30164 32347 35104Average Sales Revenue (Ps/kWh) 28.0 34.7 42.9 48.0 54.1 58.9 65.4 72.4 79.1 87.7 96.0 104.2 111.0Annual Increase (Xl 24.1 23.5 12.0 12.6 8.9 11.0 10.7 9.2 10.9 9.5 9.6 6.5

REYENUES

Electricity sales 3706 4940 6581 8149 10757 13583 16512 19086 21791 25082 28960 33715 38954Miscellaneous Income 155 147 190 135 153 160 176 195 220 250 285 325 370RE Subsidy 753 606 303 271 952 597 273 --- --- -- -State Electricity Duty 236 268 299 331 546 807 884 923 965 1001 1056 1132 1229

....- ---- ..... ......- --- ---- --- ....... ......... ....... ------ ...... ....

Total Revenues 4850 5961 7373 8886 12408 15147 17845 20204 22976 26333 30300 35173 40552 1

EXPENSES

Power Purchases 683 883 1043 1390 1795 2143 2409 2953 3598 4409 5171 5864 6485Fuel 1135 1439 2167 2527 3807 4081 5763 6378 7009 7534 9435 9765 11519Operation & Maintenance 1463 1624 1810 1993 2669 3220 3815 4439 5105 6257 7184 8233 9426Depreciation 313 468 534 666 862 1069 1385 1480 1647 1779 2135 2672 3141Central Excise Duty 204 217 238 264 150 --- --- --- --- --- ...State Electricity Duty 236 268 299 331 546 807 884 923 965 1001 1056 1132 1229

Total Expenses 4034 4899 6091 7171 9829 12120 14256 16173 18324 20980 23981 27666 31802

Operating Income 816 1062 1282 1715 2579 3027 3589 4031 4652 5354 6320 7506 8751LessiInterest Expense 1042 1260 1491 1731 1997 1855 2123 2248 2403 2725 3415 4187 4644

Previous Year Adjustment --- -16 --- --- --- --- --- --- --- --- --- --- ---....... -------....... .......------------ .__._.__.... _ .. *_____________.... __._-----_ ------- ....... ....... ------ O Ln

Net Incoee -226 -214 -209 -16 582 1172 1466 1783 2249 2629 2905 3319 4107232233 . : .: : ::::::::… ……:2: ::::. :::.::: :_3333 33233:: : 33za31 3:::::: ::3::33

INDIAMNARASHTRA STATE ELECTRICITY UARDCHAIDAPUR THERMAL POVER PROJECT

ACITUAL AND FORECAST SOURCES AND APPLICAIIONS SIAERENITS

IRUPEES IILLION)----- ACTUAL------- IPRO1. ..-................................ FORECAST …-----------------------------------1981/82 1912/93 1983/84 1984/15 1985/86 1986187 1917/86 1988/89 IS89/90 1990/91 1991/92 1992/93........ ......... ------------------------ ----......... ....... .......

SOURCES

Internal SourctsOperating Incose 1062 1282 1715 2579 3027 3589 4031 4652 5354 6320 7506 8751Other Revenues --- -- --- -- --- --- .-- --- .. .Depreciation 468 534 666 862 1069 1385 1480 1647 1779 2135 2672 3141

~~~~~~~... ..... ... .... ....... .. .... .. ....... ---- ........ .......... .. ..... ....... ......... .. .....

Total Internal sources 1530 1816 2381 3441 406 4974 5511 6299 7133 8455 10178 11092

External SourcesConsuer Security Deposit 91 110 141 279 290 293 257 270 329 388 476 524Consumer Contributiom 86 99 111 120 120 130 140 150 160 170 580 190Other's Contribution a 18 21 20 20 25 30 35 40 45 50 55

BorrovingFrom 60verneent 2091 2662 2519 3222 3534 3778 5256 6754 7895 8395 9471 11193Froo Others 879 1033 1032 1274 1270 1380 1349 1460 1599 1290 1483 1682

~~~~~~. .. ... ....... ....... ...... . ....... .... ... ....... ....... -----....... .... ... .. .....

Total BorroNing 2970 3695 3551 4496 4904 5159 6605 8214 9490 9685 10954 12875.... .. ... ~~~~~..... ....... ....... .... ....... ....... ...... ....... ...... ...... .....

Total External Sources 3145 3922 3924 4914 5234 5606 7032 8669 10019 10288 11660 13644,~~~~~~~~.. ....... . ...... ... .... ..... ... .... ... -- --- --- ---* a

TOTAL SOURCES 4675 5738 6205 9355 9330 10580 12544 14969 17152 18742 21838 25536 |_:u:zSS 99383X 3:3X::.: u.u.JSX 2:u:332 tXSX:9X :SS:_:: ::::::: ::g3::9: SS3SSSs 315:399

APPLICATIONS..........

Capital Assets 3316 3953 4054 5078 6380 7173 8823 10931 12430 13291 15476 17799Investoent &intingibles 17 42 8 10 10 10 10 10 10 10 10 10Previous Year's Adjustment 16 --- --- --- --- .-- --- --- ... ...

Debt ServiceAsortization 378 401 505 716 743 832 760 841 933 585 746 912Interest 1260 1491 1731 1997 2302 2637 3045 3575 4221 4948 5757 6696Lessilnt. during Cons. --- --- --- --- 447 554 797 1172 1496 1533 1570 2052Interest Expense 1260 1491 1731 1997 1855 2123 2248 2403 2725 3415 4187 4644

----....... .... ...... . . .... .... .... .... .... ....... ...

Total Debt Service 1638 1892 2236 2713 2598 2955 3008 3244 3658 4000 4933 5556

Variation in Working Capital -312 -149 -93 554 341 442 703 784 1054 1441 1419 2171 5Superannuation Fund --- --- --- --- I --- --- --- --- --- -

------. - -------.. .. .. . . .. .. .. . . .. .. .. . . ... . .. .. . . . . . . . . o t

TOTAL APPLICATIONS 4675 5738 6205 8355 9330 10580 12544 14969 17152 18742 21838 25536::::::: :::::::_:::s::.axc .:aszza: xx-_-_X _ SZ 2 , 2. 2 . :::::::

INDIAMAHARASHTRA STATE ELECTRICITY BOARDCHMNDRAPUR THERMAL POWER PROJECT

CALCULATION OF RATE OF RETURN AND REQUIRED TARIFFS

1985/86 19t6/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93

Not Fixed Assets at thehqinning of FY 1j 24172 31749 32876 35908 37752 45722 58313 68495

Total Operating Expenses 12120 14256 16173 18324 20980 23981 2764 31802nterest Expense 1855 2123 2248 2403 2725 3415 4187 4644Interest during Construction 447 514 797 1172 1496 1533 1570 2052

....-- ......... ........ ....... ........... ....... ........... ... ........ .. ... ....

TOTAL 14422 16893 19211 21899 25201 28929 33423 3849837 Rate of Return 725 952 984 1077 1133 1372 1749 2055

Total Revenums Required 15147 17845 20204 22976 26333 30300 35173 40552Ninasv c

RE Subsidy 597 273 --- --- -- --- --- --

State Electricity Duty 907 814 923 965 1001 1056 1132 1229NiKellaneous Incaee 160 176 195 220 250 285 325 370

.,... ......... ........... .. ...... . ---- -... -....... ------- -------... - - ---- - --- _-

Total 1564 1333 1118 1185 1251 1341 1457 1598Revees f roe

Sales of Electricity 13583 16512 1986 21791 25002 28960 33715 36954Energy Salls I6uh) 23044 25251 26358 27561 28" 30164 32347 35104

Average Sales Revenue IPsikuh 58.9 65.4 72.4 79.1 87.7 96.0 104.2 111.0Tariff Increase Rquired 1 8.9 11.0 10.7 9.2 10.9 9.5 9.4 6.5

... .f...e.. d ....ti....s.er.c........ .

1,1 Aft r deducting consw ocrs'contribution, .

INDIAAIIHRASHTRA STATE ELECTRICITY HUIRDCHAMIRAPUR THERML PWER PROJECT

ACTUAL AND FORECAST INTERNAL CASh GENERAl ION FOR INVESTENT.....................................

(RUPEES MILLION)----- ACTUAL------- (PROV.1 ----......--- FO..................FORECASS----------------------------T-------1981/B2 1992/83 1983/84 1984/85 19B5/96 1986/87 1907/B8 1981819 191/90 1990/91 191/92 1992/93

.... .... .. ..... ---- ....... ...... ---- ---- ---- ........ ...... ..... v. . .....

INVESTNENT

Annual Investtent 3877 4580 4663 5626 6390 7173 8823 10831 12430 13291 15476 17799Average Investsent (3 Yr. Ave) 4163 4373 4956 5556 6393 7459 8942 10695 12184 13732 15522 17074

ANNUAL CASH OUTFLOW.. ...... ....

Cash Expenses 4431 5557 6505 9967 11051 12871 14693 16677 19201 21146 24994 28661tebt Service 1077 1265 1627 2165 2599 2955 3009 3244 3658 4000 4933 5556

National Repayent --- 96 104 li1 132 149 167 187 209 233 260 2B9

TOTAL CASH OUTFLOW 5508 6918 8236 11250 13781 15975 17868 20108 23068 26079 30197 34506

ANIUAL CASH INFLOW 1/. ...........

Consueer Contributions 86 99 III 120 120 130 140 150 160 170 190 190Security Deposits e1 110 141 278 290 293 257 270 329 388 476 524Other Revenues 1021 792 737 1651 1564 1333 1118 1195 1251 1341 1457 1598

0TAL CASH INFLOW 1/ 1188 1001 989 2049 1974 1756 1515 1605 1740 1699 2113 2312

ENER6Y SALES

Energy Sates (61Uhl 14223 15346 16960 19878 23046 25251 26358 27561 28598 30164 32347 35104

INTERNAL CASH GENERATION.......... .. .. .

Cash Available for Investeent --- -.- --- 1556 1776 2293 2734 3289 3755 4779 5641 6761Investeent Financed by ICG(Vl --- --- --- 28.0 27.8 30.7 30.6 30.8 30.9 34.8 36.3 39.6Revenue From Sales 4940 6581 8149 10757 13583 16512 19096 21791 25092 29960 33715 39954Average Tariff(Ps/Klh. -- --- .. 54.1 58.9 65,4 72.4 79,1 87.7 96.0 104.2 111.0Annual Tariff Increase(%l -- - --- --- 8.9 11.0 10.7 9.2 10.9 9.5 9.6 6.5

0 %S

I/ Etcluding Sales Revenue,

INDIANAHARASHTRA STATE ELECTRICITY BORDCHANDRAPUR 1HERNAL POMER PROJECT

FORECAST VORKINS CAPITAL 1/. ..... .............. . . ...... ...........

(RUPEES HILLIUNI-- ------ ACTUAL -------- (PROV.I ---------------- E------------C-------F CAST--- ---- - -1990/81 1991182 1982/93 163/94 1994/65 1985/86 1996/87 1987/88 19881/8 I99/90 1990/91 1t91/92 1992m93....... -------... ------- ------- ........ ....... ........... . ....... .. .... .... ....... ....... ........... ............... _

CURRENT ASSETSC a 133 74 134 192 138 202 441 1643ACCIUTS RECEIVAKES 290 3440 3976 4540 5226 6033 7024 9115INVENTORY

SPARE PARTS 327 680 743 783 1418 2402 3168 3670FUEL 407 480 532 584 942 1054 1221 1440

OTHER DEtTORS 638 717 882 1093 1243 1329 1548 1780

TOTAL CURRENT ASSETS 4335 5391 6267 7192 8966 11021 13401 1664o

CURRENT LIABILITIESCCOUNTS PAYABLE 2763 321t 3061 2779 3200 3641 416 4777OTHER CREDITORS 1276 1435 1765 2186 248 2658 3095 3560

lOTAL CURRENT LIAILITIES 4039 4652 626 4966 568 6219 7261 8337

NET NORKIN6 CAPITAL -45 -357 -506 -599 -45 297 739 1442 2226 3280 4722 6140 8311 I,

........ ............... .. .................. .. .. .......... .................. .. .......... ... .... .. ...... ........ .... .... .

1/ The available historical data is neither reliable norcceprehensive.As a result, the forecast presented aboveis not derived froe actual figures.

-71-AMN 26

cairnn aDuX oaRMP UNFL cOUPOEr

N*AESKR SUTA UnL CCT Amm - Hsu

Sector

Total hxp. Defer. PT FT FT FT FT Pn FT n F FTCnsert ion Project Cont ft 1984 84 83 86 37 33 89 90 91 92 93 84/93

a) Ibral

Koradi 7 (210 NW) 867 673 194 - - - - - - - - - 194

aandrapur 1 (210 NM) 1344 1194 ISO - - - - - - - - - IS0CbOadrapmr 2 (210 NW) 1344 S64 90 390 - - - - - - - - 480aandrapur 3 (210 NW) 1479 600 380 270 229 - - - - - - - S79ChQndrapar 4 (210 IMW) 1479 402 379 270 428 - - - - - - - 1077

Parll 4 (210 NV) 1601 504 290 345 462 - - - - - - - 1097Parli 5 (210 NW) 1890 - 100 116 455 630 283 150 156 - - - 1890

Thaperkhed-(new) 1 (210 NW) 1890 - 125 30 200 620 400 313 202 - - - 1890(new) 2 (210 NW) 1890 - 125 29 93 565 356 295 240 137 - - 1890

Oeamdrapar 5 (500 NW) 4510 48 23 250 250 430 1000 12S0 770 489 - - 4462Ctandrapar 6 (500 MU) 4510 47 23 250 250 420 977 1206 684 323 330 - 4463

Thaperkheda(new) 3 (210 MU) 1890 - - - - 125 90 200 620 400 313 142 1890apaerkhueda(new) 4 (210 NW) 1890 - - 125 80 141 565 356 295 253 1815

Ctandrapor 7 (500 NW) 4500 - - - - - 225 315 405 990 1440 900 4275

Nhusaral l1 (300 NW) 4500 - - - - - - 225 315 405 990 1460 3375Ubhual 52 (500 tIr) 4500 - 225 315 405 990 1935tusawal 53 (00 NW) 4500 - - - - - - - - 225 315 405 945Bhusawal 4 (500 MU) 4500 - - - - - - _ - - 225 315 540

UJ05i I (300 NW) 4500 - - - - - - - - 225 315 405 945Ujeni 2 (500 NW) 4500 - - 2 - - - - - 225 315 405 945

Debbol 1 (210 mm) 1890 - - - - - - - - - - 125 125Dabbol 2 (210 NW) 1890 - - - - 123 125

R-novat Ion, Sarvey. t1metiption U9 - 49 40 45 35 45 45 45 45 45 45 49

Total Therml 61864 4332 1928 1990 2412 2960 3456 4140 4227 4185 4938 5550 35836

b) CGa - Cran S to 8(4xI8M M) 920 - 40 450 430 - - - - - - - 920

Total Caneration 62784 4332 1966 2640 2842 2960 3456 4140 4227 4185 4938 5550 36756

Tranauision andDietrtlbut Ion

c) Traneniesion400 kV 6705 1131 373 425 400 460 480 580 680 825 300 A00 5523

d) Transmission33-220 kV 11625 1652 683 735 00 850 1000 1030 120C 1200 1250 1500 10268

e) Dietribution 14160 1637 1030 1102 1090 1117 1131 1191 1246 1251 1289 1442 11889

Total TransmissionL DistrIbution 32490 4420 2086 2262 2290 2427 2611 2821 3126 3276 3339 3342 27580

Total Inveetmot -before PriceContingencies 95274 3752 4054 4702 3132 5387 6067 6961 7353 7461 8327 892 64336

Price Coot ingancn- - - 376 801 1272 1959 2793 3581 4297 5579 6855 27318

Total Including PriceCon ctingncies - - 4054 5076 5933 6659 3026 9759 10934 11758 13906 15747 91854

2.celation Factor - - - 1.08 1.156 1.236 1.323 1.420 1.487 1.576 1.670 1.771

-72- ANNEX 27

INDIA

CHANDRAPUR THERMAL POWUE PROJECT

CEA Norms for Calculation of PeakingCapacity and Energy Availability

Type of Plants Norms

I. Peaking Availabilityi} Thermal Plants

(a) Boiler and Capital Maintenance-% 5.0(b) Forced outage rate-% 17.0(c) PartiaL outage rate-% 15.0(d) Auxiliary consumption-% 10.0(e) Spinning reserve-? 5.0

Note:- Forced oucage rate would be higher by S5for Eastern and North Eastern Regions.

ii) Hydro Plants(a) CapitaL Maintenance-? 5.0(b) Forced outage rate-%

including spinning reserve 9.5(c) Auxiliary consumption-% L.0

II. Gross Energy Generationi) Thermal Plants

(a) Existing Units - Less than 200 MW 5000 kWhtkv (PLF 57.07%)- 200/210 KW &

above units 5350 kWh/kw (PLF 61.07%)

ii) New UnitsTa) Energy:

1 year of operation-kWh/kw 2500 (PLF 28.53)2nd year of operation-kWh/kw 4000 (PLF 45.66)3rd year of operation-kWh/ky 5000 (PLF 57.07)4th year of operation-kWh/kw 5350 (PLF 61.07)

(b) Peaking Availability:During firsc three months - NilNext nine months - 50ZAfter one year - 100?

iii) Hydra Plants (Energy and Peaking Capability)Based on hydrology and head computed on the basis of 90? dependability.

-73- ANNEX 28Page 1 of 3

INDIA

CHANDRAPUR THERMAL POWER PROJECT

Internal Economic Rate of Return

As described in Chapter 5, the proposed Project forms an integralpart of the expansion plan for the Western Region and, therefore,cost-benefit analysis needs to be carried out on the whole program ratherthan on the Project in isolation. The Western Region's investment programduring the period 1984-1995 has, therefore, been analyzed. Capital cost,incremental operation and maintenance, incremental fuel cost and benefitstreams are all shown in Table 1. Assumptions underlying these figures aredetailed below.

Capital Costs

Anticipated capital expenditure on generation, transmission anddistribution at financial prices has been converted to economic prices byi) expressing the imported content at cif prices; (ii) valuing unskilledlocal labor at 0.75 of the market wage rate; and (iii) applying the estimatedstandard conversion factor, 0.8, to local costs.

Operation and Maintenance Costs

Incremental annual operating and maintenance costs have beenestimated as the following percentages of capital value: thermal generatingplant 2.5%, hydroelectric 2.0%, and transmission and disribution 1.0%

Fuel Costs

Incremental fuel costs arise only from coal-fired thermal plantincluded in the Region's investment program. Average fuel consumption ofnew coal-fired plant has been estimated at 0.7 kg of coal/kWh plus 5 ml/kWhof fuel oil, the latter being required for flame stabilization. The economiccost of coal at the pit head has been estimated at Rs 152/ton (based on anIndustry Department estimate in 1982 prices, adjusted for succeeding infla-tion). It has been estimated that 65% of incremental thermal generation willbe in minemouth stations and 35% will be in load center stations. Theaverage economic cost of coal delivered to load center stations has beenestimated at Rs 330/ton. These estimates result in an average fuel cost forthermal generation of Rs 0.161/kWh.

Case 1. Benefits

Case 1. benefits are based solely on incremental revenue at existingtariff levels. Incremental sales attributable to the investment program areshown in Table 1. These allow for system losses which are assumed to remainconstant at 16.5% of net generation. Averages of existing tariffs, togetherwith the State shares of Regional consumption are as follows:

-74- ANNEX 28'age 2 of 3

Average Tariff Share of Regional(Paise/kWh Consumption (Z)

Madhya Pradesh 53.7 28Gujarat 55.9 26Maharashtra 48.0 46

Weighted average financial tariff - 51.7 paise/kWh. Applying thestandard conversion factor of 0.8 results in an economic value of revenue41.3 paise/kWh.

Case 2. Benefits

Case 2 benefits are equal to Case 1 benefits for all, exceptindustrial consumption. In Case 2, the benefits of incremental industrialconsumption include an element of consumers' surplus imputed at haLf of thedifference between the average industrial tariff, Rs 0.632/kWh, and thealternative cost of autogeneration. The latter, which has been assumed tobe diesel, has been costed on the following basis:

Purchase price (incl. installation) Rs 4,300/kWLife of set 15 yearsAverage utilization 30%Discount rate 12%0 & M cost Rs 215/kW per annumFuel and lubricant Rs 0.80/kWhAverage cost Rs 1.12/kWh

The benefit of incremental industrial sales is taken to be theaverage of Rs 0.632 and Rs 1.12/kWh, i.e. Rs 0.88/kWh at financial prices,or Rs 0.704/kWh in economic terms.

Industrial consumption accounts for 62% of total consumption in theRegion. Therefore, with this Case 2 measure of the benefit of industrialconsumption, the average benefit of incremental sales becomes Rs 0.54/kWh.

-75- ANNE 28Page 3 of 3

CHANDRAPUR THERMAL PoWER PROJECT

Table 1: Western Region Least Cost ExRDansion Program and Economic Rate of Return

BenefitsCapital Total Incremental

Y&.r Ex2gnd iure QOM EuL Cost Sas (O)h Case 1 Case 2

FY85 6051 6051FY86 8760 8760FY87 14124 6 43 14173 203 83 99FY88 19041 153 69 19263 725 297 355FY89 16893 219 114 17226 1890 775 926FY90 12412 583 832 13827 5322 2182 2608FY91 9058 782 1713 11553 10054 4122 4926FY92 6594 1370 3306 11270 20510 8409 10050FY93 3700 1730 4784 10214 31527 12926 15448FY94 2112 1783 5623 9518 37923 15548 18582FY95 712 1798 6009 8519 42708 17510 20927FY96 1798 6093 7891 43103 17672 21120FY97 - 1798 6093 7891 43103 17672 21120FY2019

Internal Economic Rate of Return 7% 11%

-76- ANNEX 29

INDIA

CHANDRAPUR THERMAL POWER PROJECT

Related Documnts in the Project File

1. Chandrapur ThermaL Power Station - Project Report. ChiefEngineer, Generation Projects and Planning, Maharasthra State ElectricityBoard, Bombay. December, 1983.

2. Renovation Schemes - Maharashtra State Electricity Board - SeniorPower Station Superintendent (GeneraL Works), Bombav. February, 1984.

3. Chandrapur Thermal Power Station. Report on Ambient Air Qualityand Environmental Impact Studies. Associated Tndustrial Consultants,Bombay. December, 1982.

4. Chandrapur Thermal Paoer Station - Sectoral Data for World BankAppraisal - Central Electricity Authority - CEA, DeLhi. May 1984.

5. Chandrapur Thermal Power Station. Stage IIl. Units 5 and 6.Pre-qualification Documents (for the main plant equioment). MaharasthraState Electricity Board, Bombay. October 1984.

6. Chandrapur Thermal Power Station. Stage III: Units 5 and 6.Draft Bidding Documencs. Vol. I to X. Kaharasthra State EleccricityBoard, Bombay. June 1984.

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