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Report No. 6253

PROJECT COMPLETION REPORT

INDIA

THIRD TROMBAY THERMAL POWER PROJECT

(LOAN 1549-IN)

June 6, 1986

Power and Transportation DivisionSouth Asia Projects Department

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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INDIA

THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN


Measures and 'Vquivalents

1 Ton (t) = 1 metric ton = 2,200 lbs1 Kilovolt (kV) = 1,000 volts (V)1 Kilovolt-ampere (kVA) = 1,000 volt-amperes (VA)1 Megavolt-ampere (MVA) = 1,000 kVA1 Megawatt (MW) = 1,000 kilowatts (kW) = 1 million watts

Abbreviations and Acronyms

BEST - Bombay Electric Supply & TransportBHEL - Bharat Heavy Electricals Ltd.BSES - Rombay Suburban Electric SupplyCEA - Central Electricity AuthorityFGD - Flue Gas DesulphurizationcOI - Government of IndiaGOM - Government of MaharashtraIBRD - International Bank for Reconstruction and DevelopmentICB - Titernational Competitive BiddingIERR - ±nternal Economic Rate of ReturnKFW - Kreditanstalt Fuer WiederaufbanMSEB - Maharashtra State Electricity Board-NTPC - National Thermal Power CorporationPCR - Project Completion ReportSO2 - Sulphur DioxideSPCB - State Pollution Control BoardTCE - Tata Consulting EngineersTEC - Tata Electric Companies

*Ka OFFICAL USE ONLYTNt WORLO BANKWeohm1ion. ODC. Z033

U.S.A.

Olke M Duwim.Gomu

June 6, 1986

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on India - Third TrombayThermal Power Project (Loan 1549-IN)

Attached, for information, is a copy of a report entitled 'ProjectCompletion Report on India - Third Trombay Thermal Power Project (Loan1549-IN)" prepared by the South Asia Regional Office. Further evaluation ofthis project by the Operations Evaluation Department has not been made.

Attachment

This document has a rstricted distribution and may be ued by rvcpients only in the perfonmnceof their official duties. Its contenus may not otherwise be disclosed without World Bank authorintion.

FOR OFFICUAL USE ONLY

INDIA



Table of Contents

Page No.

Preface*................ . ............................... .. iKey Project Data .............. iiHighlights........... iv

I. INTRODUCTION ......... ... .. ..... ** * ..a. a................ 1

Maharashtra State Power Subsector...sector........... 1Bank Group Involvemento... 0.***......... * ........... 3

II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL....... 3

Project Origin, Preparation, Appraisal, Negotiationsand Approval....oo....... o...... o ...... o......... 3

Project Objective......e ctoi v e o....... oo......oo... 4Project Descriptione..................*.*............. 4

III. IMPLEMENTATIONP L E M E U T A T I ON. $** **............. 4

Loan Effectiveness........ .. *.. o.. o. ... .. ,. 4Project Execution....oe. c uoti. ......... ono... .. o .. 5Reportingoooeo&oooo*o*eo*oooo** 7Pro'ect Coso..s0t0*9000000**0000*0 7Procuremento*oootoooo*****oeoo,o 8Disbursements .......* * > ........ oooooo*o**o 9Performance of Consultants, Contractors and Suppliers 9

IV. OPERATING PERRKAC F...O R......A N CE**#*** 10

Vo FINANCIAL PERR FAC. O RM..A N CEo.o#oe#*#000 11

VI. INSTITUTIONAL DEVELOPMENToo.. .o*o**qo*oo* 14

VII. ECONOMIC REVALUATION ...........o.o..,o.o.... o.... ; ..oo 14

VII-I. PERFORMANCE OF THE BORROWER AND THE BANKN K.oo... 15

IXo CONCLUSIONSoooo-.o...ooo*o*ooo*oo* 16

This docunwt has a testicted distdbution and may be used by nsipintB only in the pWomancueof their ollAc duties Its contents may not odhewise be dbcbsod without World Bank autboodon.

Page No.

1 - Organization of the Power Subsector in India .......... 172 - NSEB's Generation Developments not Approved by 1977

but Scheduled for Commissioning by 1983/84 .... G....... 183 - Implementation and Construction Schedule .............. 194 - Estimated anid Actual Project Cost ..................... 215 - Schedule of DLsbursements **o****o..................... 226 - Combined Forecast and Actual Source and Application

Statements, FY78 - FY84 * ....................... ,*... * 267 - Internal Economic Rate of %turn (Ex-Post) ............ 31

ATTACHMENT A - Comments from the Government ... ............... 33

ATTACHMENT B - Comments from the Borrower ................... 35.

INDIA



Preface

The Project involved the construction at Trombay (Bombay) of a 500MW unit with triple fiLed boiler (coal, oil or gas), A1lectrical andmechanical plant including pollution control equipment and associatedcivil works. A Bank loan of US$105 million was made to the Tata ElectricCompanies (TEC) on February 8, 1979. The Project was to be completed byDecember 31, 1982. However, because of substantial delays in the deliveryof equipment and materials, precipitated largely by deveLopments beyondthe control of the borrower, the Project was not completed untilJanuary 1, 1984, and the Loan was not closed until December 31, 1984.

The Project, though successfully completed, was implemented at ahigher cost than was originally estimated, US$241.2 millionl/ compared toUS$209.3 million, largely because of higher than anticipated increases inthe cost of equipment and materials and custom duties, the need to replacecontractors whose performance was inadequate, the acquisition of morespare parts than specified and an underestimation of the quantities ofcable required. The cost overruns were financed by TEC from its ownresources, additional borrowing from local financial institutions,suppliers' credit and debentures.

The Project Completion Report (PCR) was prepared jointly by theborrower and the South Asia Region on the basis of the Staff AppraisalReport No. 1788b-IN, dated March 28, 1978 and the Loan and ProjectAgreements, both dated June 19, 1978. The PCR has been amended in lightof the comments of GOI and TEC which are reproduced in Annex 8.

In accordance with the revised procedures for project performanceaudit reporting, this Project Conpletion Report was read by the OperationsEvaluation Department (OED), but the project was not audited by OED staff.

Following standard procedutes, OED sent copies of the draft PCR tothe Government and the Borrower. Comments received from them have beenreproduced as Attachments A and B to the report.

1/ Amended in light of comments of the borrower.

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INDIA



Key Project DataOriginalPlan Actual

Project Cost (US$M) 209.3 241.2Loan Amount (US$M) 105.0 105.0Disbursed 105.0 105.0

Date for completion of physical components 12/31/82 1/1/84Proportion completed by targec date (2) 100 89Economic Rate of Return (X) 14 30.5Institutional Performances Satisfactory Satisfactory

Cumulative Estimated and Actual Disbursements(US$M1)

FY79 FY80 FY81 FY82 FY83 FY84 FY85

Appraisal Estimate 11.0 35.0 80.0 100.0 105.0 105.0 105.0Actual 9.0 15.0 42.0 75.0 93.0 101.0 105.0Actual as a X of Estimate 82 43 52 75 89 96 100

Other Project Data

OriginalItem Plan Revisions Actual

Concept in Bank 1973 - -Negotiations 2/78 - 2/78Board/Credit Signing 6/78 - 6/19/78Effectiveness 9/78 - 2/08/79Closing Date 3/31/84 - 12/31/84Borrower Tata Electric CompaniesExecuting Agency Tata Electric CompaniesFiscal Year of Borrower April 1 - March 31Follow-up Project Fourth Trombay Thermal Unit, Ln. 2452-IN

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Mission Data

Month/ No. of No. of Man- Date ofItem Year Weeks Persons Weeks Report

Appraisal 7/77 2 3 6 3/28/78Supervision 1 1/79 1/2 3 1-1/2 2/01/79Supervision 2 6/79 1/2 3 1-1/2 1/18/80Supervision 3 3/80 1/2 2 1 7/17/80Supervision 4 10/80 1/2 4 2 12/23/80Supervision 5 9/81 1 2 2 11/05/81Supervision 6 10/82 1 2 2 12/21/82Supervision 7 3/83 1/2 3 1 7/22/83Supervision 8 2/84 1/2 1 1/2 2/29/84Supervision 9 6/84 1/2 1 1/2 8/18184

Country Exchange Rates

Name of Currency - RupeeAppraisal year (1977) average - US$l = Rs 8.6Intervening years average - US$1 = Rs 9.6Completion year (1984) average - US$1 Rs 10.0

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INDIA

THIRD TROMBAY THERMAL POWER PROJECT - UMAN 1549-IN


Highlights

Loan 1549-IN was for the construction of a 500 MW unit with a triplefired boiler (coal, oil or gas), electrical and mechanical plant includingpollution control equipment and associated civil works at Trombay (Bombay).It was to be implemented by the Tata Electric Companies (TEC), the borrowerof the loan. As per the Staff Appraisal Report estimates, the Project was tobe completed by December 31, 1982 and the loan was to be closed on Mar-h 31,1984. However, because of delays in the delivery of equipment and materials,precipitated mostly by developments beyond the control of the borrower, theProject was not completed until January 1, 1984 and the loan was not closeduntil December 31, 1984. In fact, the completion of the Project would havebeen delayed further had the borrower not increased its work force and im'ple-mented numerous tasks concurrently. For this, the borrower needs to becommended.

In addition to being commissioned one year behind schedule, theProject was implemented at a higher cost than was estimated by the AppraisalReport, US$241.2 million compared to US$209.3 million.l/ The actual costexceeded the appraisal estimate largely because of higher than anticipatedincreases in the price of the turbogenerator, labor and material for civilworks and custom duties, replacement of contractors for civil works, acquisi-tion of more spare parts than envisaged at appraisal to take advantage offavorable internaticnal prices, provision for an additional electrostaticprecipitator, and underestimation of cable quantities required.

Despite these setbacks, the Project was successfully completed andits objectives were fully achieved. Specifically, the Project assisted inthe transfer of technology for the design, construction and operation oflarge thermal power plants whose role in the country's power subsector isexpected to increase substantially over the forseeable future. Moreover,with the installation of the computerized analogue simulator, the Project hasprovided the facilities needed to train local personnel in the operation ofthe 500 MW power plants. Finally, the Project has been instrumental inaugmenting the generating capability of TEC, a critical private sector ele-ment in the country's power subsector.l/

I/ Amended in light of the comments of the Borrower.

INDIA



I. INTRODUCTION

1.01 Power shortages were widespread throughout India between 1970 and1976, and several states including Maharashtra were experiencing power cutsof up to 30%. These shortages, though likely to continue, were expected tobecome less acute as the states generation development programs wereimplemented and the large thermal power plants, as well as the associatedtransmission network, were brought into operation by the Center to augmentthe states generating capacity. The Project was to assist in alleviating thepower shortages in the State of Maharashtra and was an integral part of itsgeneration development program for FY80-FY84.

Maharashtra State Power Subsector

1.02 As in other Indian States,l/ the responsibility for the operationand development of the power subsector in Maharashtra, including theregulation of licensees, is assigned to tie State's electricity board. TheMaharashtra State Electricity Board (MSEB) ge.ierates and distributeselectricity throughout the state except in concession areas served by fourprivate licensees, the Tata Electric Companies (TEC), the Bombay SuburbanElectric Supply Undertaking (BSES), the Bombay Electric Supply and TransportUndertaking (BEST) and the Thana Electric Supply Company (TESCO). Theselicensees, except TEC, are involved solely in the distribution of electricitywhich they purchase from MSEB and TEC, the borrower of the loan.

1.03 As of March 31, 1977, TEC, the largest private licensee inMaharashtra, was operating four power stations, three hydro and one thermal,with a total installed capacity of 622 MW. About 54% of the generatingcapacity was thermal and the rest hydro. A 40 MW power station at Chola,which is owned by the Indian Railways, was also connected to the TEC system.TEC's transmission network, consisting of medium and high voltage lines(110-kV and 132-kV)2/ was about 2,200 circuit km. It was tied in withMSEB's 220-kV network at three points with an aggregate step-down capacity of1,250 MVA. The aggregate transformer capacity of TEC's system was about3,500 MVA. Losses in the network were relatively low, amounting to about

1/ The organization of the Indian power subsector is described briefly inAnnex 1.

2/ Amended in light of the comments of the Borrower.

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about 3% of sales. TEC wss also operating a modern load despatch center atTrombay.

1.04 TEC was supplying energy in bulk to textile mills and other largeindustries, distributing licensees and local authorities in Bombay andsurrounding areas. It was also supplying about 60 MW of power to the IndianRailways. The Chola station, which was connected to the TEC system atKalyan, provided about 25 MW of power to the Indian Railways. The remaining15 MW was sold to a group of consumers, mainly textile manufacturers, who,because of the power restrictions, were prepared to pay.a higher price forChola power which was wheeled over TEC's system. Charges were collected bythe Mill Owners' Association and passed to Indian Railways via TEC whichapplied a "wheeling charge" of 6%. In 1977, TEC was serving a total of 214customers. The maximum demand on the TEC system was about 1,000 MW, whichnecessitated purchases of about 500 MW of power from MSEB.

1.05 TEC consists of three companies: the Tata Hydroelectric Power SupplyCompany Limited, formed in 1910; the Andhra Valley Power Supply CompanyLimited, formed in 1916; and the Tata Power Company Limited, formed in 1919.These companies are a part of the Tata group of enterprises which havesubstantial financial resources, an excellent credit rating and a long andsuccessful history of operations in many industrial and other fields. Thethree companies are independent publicly-owned entities in the privatesector; however, they operate as a group under the same management. TheBoard of Directors of the three companies, though separate, have four commonmembers: the Chairman, the Managing Director and two other directorsincluding the Director of Finance. Other members of each Board includerepresentatives of the Government of India (GOI), the State Government andleading industrial and banking institutions. The companies are well managedutilities, operated in accordance with sound commercial principles. In 1977the companies together had a staff of 2,645.

1.06 The three companies comprising TEC function as an interconnectedgrid. The hydroelect'ic power stations (para 1.03) are owned individuallyand the Trombay thermal power station together with the transmission systemand substations are owned jointly in the ratio of 20:30:50 by Tata Hydro,Andhra Valley and Tata Power, respectively. Although each company operatesunder a separate license, a joint license was granted to all three forTrombay.

1.07 TEC's licenses had been the subject of a series of meetings betweenTEC, MSEB and Government of Maharashtra (GOM) during 1977. A satisfactorysettlement of the whole question of license extension and rationalization ofdistribution facilities was reached in principle, in September 1977. Thissettlement, which had to be formalized, provided for an extension of TEC'slicenses and franchise for a period coterminous with the last repayment ofthe Bank loan. In order to ensure that no action would be taken which wouldinterfere with TEC's performance or adversely affect its financial posicion,

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including delimiting TEC's area of suApply, the formal extension of TEC'slicenses was set as a condition of disbursement of the loan.

Bank Group Involvement

1.08 The Bank Group's involvement with TEC began in 1954 when a Bank loanof US$16.2 million (Loan 106-IN) was made to finance the construction of two62.5 MW thermal generating units at Trombay. A second loan of US$9.8 million(Loan 164-IN) was made in 1957 to expand the generating capacity at Trombayby another 62.5 MW. The Project was the Bank's third lending operation withTEC.

II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL

Project Origin, Preparation, Appraisal, Negotiations and Approval

2.01 COM had given high priority to eliminating restrictions on powersupply by the end of the 1970s and had proposed an investment program ofabout US$1.5 billion for the period FY75-FY79 to increase the State'sinstalled generating capacity to 4,730 MW. However, as less than one halfof the proposed expenditures were approved, the installed generating capacitywas not expected to exceed 3,610 MW by the ene of FY79, implying that loadrestrictions, which were increasingly becoming a constraint to the State'sindustrial base, would continue into the early 1980s. The generationdevelopments that were either under implementation or had been approved andwere expected to be commissioned by FY84 are shown below:

MSEB's Generation Developments Scheduled for Commissioning by FY84

Scheduled ScheduledCommissioning Commissioning

Hydro MW Date Thermal MW Date

Koyna III 160 1982 Gas Turbines 4x60MW 240 December 1978(nos.3&4) Koradi III No. 1 210 January 1978

Nasik Ext. 1 210 Decemoer 1978Bhusawal No. 2 210 February 1979

Koyna Dam 40 January 1980 Nasik Ext. II 420 February 1980Pench 52 June 1981 Parli 210 March 1980Tillari 60 June 1981 Koradi III No. 2 210 February 1981Bhira Chandrapur No. 2 210 December 1981Tailrace 80 October 1982 Koradi III No. 3 210 June 1981

Chandrapur No. 2 210 February 1982Trombay 500 June 1982

TOTAL 392 2,840

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Additional generation development investments which were also expected tocome on stream by FY84 but had not been approved are shown in Annex 2.

2.02 The Project, which was an integral part of MSEB's generationdevelopment program, was to be implemented by TEC. It was assigned to TECmainly because the demand on its system had for some years exceeded its firmgenerating capacity and had necessitated bulk purchase of power from MSEB,which by FY77 was in excess of 500 MW (para 1.04). Since MSEB was alsoexperiencing capacity shortages, implementation of the Project by TEC wasexpected to release MSEB's capacity to meet its own demand. Accordingly, theProject was prepared by TEC with the assistance of its consultant. TheProject was appraised in July and August of 1977, and negotiations were heldin Washington, D.C. in February/March 1978.

Project Objective

2.03 The objective of the Project was to assist in alleviating powershortages in Maharashtra through the expansion of the generating capacity atTrombay. In addition, it was to promote institution building by assisting inthe transfer of technology for the design, construction and operation oflarge thermal power plants.

Project Description

2.04 The Project consisted of a 500 MW unit with triple fired boiler(coal, gas or oil), electrical and mechanical plant including pollutioncontrol equipment and associated civil work. It was to be erected onreclaimed land (ash disposal area) owned by TEC, adjacent to the existingTrombay power stations. Basic infrastructure facilities for coal handlingand water supply were available at the site and were to be extended to meetthe requirements of the Project.

III. IMPLEMENTATION

Loan Effectiveness

3.01 As one of the conditions of loan effectiveness, TEC was required tocomplete security arrangements satisfactory to the Bank involving:

(a) a first specific mortgage on the properties provided under theProject and those subsequently added, pari passu with Indianfinancial institutions in respect of their share of co-financing;

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(b) a first floating charge on all existing immovable and movable assetsheld under the Trombay Thermal License pari passu with otherlenders; and

(c) assignment to the Bank by way of mortgage of the Trombay ThermalLicense including extensions and/or renewals thereof.

The other conditions of loan effectiveness required TEC to furnish lettersof unqualified commitment from local financial institutions for loans ofRs 550 million and secure permission from the Government of Maharashtra forspecial appropriation, as may be necessary, to meet the cash shortfall fordebt redemption.

3.02 Following compliance with the conditions of effectiveness, the Loanwas made effective on February 8, 1979, about four months later than the datespecified in the Loan Agreement. This was largely because of delays in thecreation of a valid security in favor of the Bank. Originally, as acondition of effectiveness, TEC were required to secure the Loan by a writtenmortgage in favor of the Bank in the form of a Trust Deed. Due to delays inobtaining GOM's approval of TEC's exemption from stamp duty on theregistration of the Trust Deed, TEC proposed to the Bank (letter datedJanuary 5, 1979) to make the Loan effective upon creation of an equitablemortgage by deposit of title deeds (an instrument free of stamp duty). TECcould then execute the Trust Deed within 90 days after effectiveness of theLoan. The Bank agreed on this arrangement and the Loan was declaredeffective after equitable mortgage was created. Subsequently, security bythe Trust Deed dated May 14, 1979, was completed. The postponement of Loaneffectiveness, however, did not delay the implementation of the Project.

Project Execution

3.03 The Project was executed satisfactorily, but because of substantialdelays in the delivery of equipment and materials, the plant was commissionedabout one year later than originally planned, January 1984 instead ofDecember 1982. Most of this delay was due to developments beyond the controlof the borrower.l/ First, as the steam generator was the first of its size tobe produced in India, local manufacturers took more time than anticipated inpreparing the engineering information needed to design the foundations. Asthis information was not made available until the end of 1979, pile drivinghad to be postponed by one full year.

3.04 Second, delivery of critical sections of the high pressure pipingsystem was delayed due to a fire on board the ship M.V. 'ARIS'. The pipingsystem, which was shipped in January 1982, arrived at site in September 1982


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after protracted negotiations between the salvors, charterers, owners of thevessel and hull and cargo insurers.l/ Consequently, the hydro tests, whichwere scheduled for mid-1982 were delayed by seven months.

3.05 Third, critical bent pipe sections of the cold reheat line had to beremanufactured because the thickness of the bends provided by themanufacturer in late 1981 was less than statutorily admissible. Theremanufactured pipe sections were received in October 1982. Most of thejoints in the main steam and reheat piping, which had to be weldedsequentially from terminal points, were therefore available for erection onlyafter October 1982, when the pipes aboard the 'ARIS' and the remanufacturedpipe sections were received. Erection took eight months and was completed inJune 1983.

3.06 Fourth, the delivery of valves and reheaters for steam generator wasdelayed by eight months, August 1982 instead of January 1982, because of thetakeover of the European supplier by another company.2/

3.07 Finally, pressure parts for the steam generator were not received inthe correct sequence. For example, links and headers above the boiler roofwere received in early 1982 instead of in mid-1981, delaying the erection ofthe boiler roof and the superheater and reheater coils. Erection of thesteam generator had therefore to be rushed through in 1982 to meet the hydrotest target date, and the items delivered late had to be erected afterSeptember 1982.

3.08 Largely because of these developments the hydro test of the steamgenerator water walls and superheater could not be completed before February1983, and that of the reheater before June 1983. The original schedule,which envisaged seven months from hydro test to synchronization wasmaintained, resulting in synchronization on January 25, 1984. The projectpercentage completion curves and bar charts, actual and scheduled, arepresented in Annex 3. It is estimated by the borrower that thesedevelopments would have resulted in a delay of about two years in thecommissioning of the Project had TEC's management not decided to employdouble shifts and implement a variety of tasks concurrently. For this, theborrower needs to be commended.

3.09 During implementation, TEC changed the scope of the Project with theapproval of the Bank. Instead of modifying the existing 150 MW analogue

1/ The ship was abandoned at sea and given up to salvage. It was towed toSingapore, the salvage vessel's principal port, from where TEC reclaimedthe piping and shipped it to India, causing a delay of eight months.


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simulator at Trombay to simulate the dynamic responses, interlocks andoperational sequences of the 500 MW unit as was originally planned, TECinstalled a computerized 500 MW simulator for which rhe main frame computerand the associated hardware and software were imported. Additional softwarepackages, input/output systems, etc., were developed mostly by TataConsulting Engineers and TEC's operational staff and its Research andDevelopment Department. The simulator, which was installed at a cost ofabout US$3 million 1/, is now in operation and is being used to train TEC'sstaff. This facility is also available for the training of operatorsemployed by NTPC, SEBs and foreign utilities.

3.10 At the request of GOM, the appraisal report had made provision forspace to be left for the installation, if necessary, of flue gasdesulphurization (FGD) equipment because the power plant was expected to burncoal. The installation of this equipment was contingent upon the findingsof a study to be conducted by TEC's consultant (para 2.02) to determine ifsuch equipment was necessary to meet environmental quality standards. Thestudy c-.ncluded that the power plant posed no significant environmentalproblems because, for some years, it was expected to burn sulphur free gasrather than coal. In view of these findings, the State Pollution ControlBoard (SPCB) was requested to waive its requirement for the installation offlue gas desulphurization equipment. SPCB acceded to this request, butrecommended the installation of a pilot FGD unit following the commissioningof the plant. Accordingly, TEC is now installing a pilot plant using newtechnology for removing sulphur dioxide. It is estimated to cost Rs 88millionl/ which is expected to be met by special appropriation of twopaise/khh for which GOM's approval would be sought. The plant is expectedto be commissioned by the end of 1986.

Reporting

3.11 TEC met all of the Bank's reporting requirements, submitting on aregular basis quarterly progress and annual reports.

Project Cost

3.12 The Project was completed at a cost of US$241.2 million,l/ which isabout 15% higher than the appraisal estimate of US$209.3 million. This wasdue to:

(a) negotiated increase in the price of the turbogenerator andassociated equipment which, as stipulated by GOI, was orderedwithout competitive bidding on a single tender basis from BHELunder Kreditanstalt Fuer Wiederaufban (KFW) financing;


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(b) higher than anticipated increases in custom duties and prices oflabor and materials for civil works including cemeut steel, form workmaterials, sand, etc.;

(c) replacement of civil work contractors whose work was inadequate;

(d) acquisition of more spare parts than envisaged at the appraisalto take advantage of favorable international prices;

(e) provision for an additional electrostatic precipitator; and

(f) underestimation of the quantities of cable required because of TEC'sinexperience in implementing a unit of this size.

A detailed comparison of the appraisal estimate and actual Project costs ispresented in Annex 4. The actual cost exceeded the appraisal estimate byabout 36% for civil works, 20% for turbogenerator and associated equipment,9% for the steam generator, 47% for electrical equipment, 49% formiscellaneous electrical and mechanical equipment, 10% for coal and ashhandling, 28% for switchyard equipment and 122% for engineering andadministration. The cost overruns were financed by TEC from its ownresources, additional borrowing from local financial institutions, suppliers'credit and debentures.

Procurement

3.13 All procurement requiring international competitive bidding (ICB)was done according to Bank guidelines. In only one case was there somedisagreement about the award of contract. The lowest bidder for concretepumps submitted a bid bond which failed to arrive on time because of abanking delay. At the Bank's insistence the contract was awarded to anotherbidder from the same country; the impact on project cost was, however,negligible.

3.14 The Bank accepted all the other recommendations of the borrower.There was one representation by an Indian manufacturer of a water treatmentplant who did not meet the qualification requirements, and whose evaluatedprice was higher than that of the successful Indian manufacturer. Afteradditional details had been furnished the Bank accepted the borrower'srecommendations.

3.15 The contract for the electrostatic precipitator was awarded for threefields plus the S03 conditioning equipment, to achieve the 99.5% efficiencyrecommended by the TEC and the review consultants, Ebasco Services, Inc.However, after reviewing the import proposal, OI insisted on the addition of

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a fourth field instead of the S03 conditioning equipment which would haverequired imports of sulphur throughout the life of the plant. The fourthfield was procured from the same vendor at an additional cost of US$3million.

3.16 The foreign component identified in the SAR cost estimate of Rs 1,800million was Rs 780 million, including the Rs 204 million foreign componentfor the steam generator. The contract for the sLeam generator was won by anIndian manufacturer and was denominated in rupees; the contractor arrangedhis own imports amounting to Rs 150 million. The Bank's ICB requirementsensured competitive prices, particularly from local manufacturers, who arepermitted by GOI to treat such orders as deemed exports, and hence to importthe required raw materials free of duty. TEC has estimated that the cost ofindigeno : equipment was about 30% less under ICB than it would otherwisehave been.

Disbursements

3.17 The appraisal estimate of disbursements and actual disbursements arepresented in Annex 5. Cumulative disbursements were slower than theappraisal estimate and as a result the loan amount was not disbursed fullyuntil December 31, 1984, about nine months later than was originallyplanned.l/ Factors contributing to this delay include the postponement of theaward of contracts until 1982 for the coal and ash handling systems whoseimplementation was deferred because the generating unit was to be firedinitially by oil or gas; and the decision by TEC to make payments under caseI procedures to local vendors from internal sources and claim reimbursementfrom the Bank at a later date. In addition, to enable payment withheld oncontracts pending the completion of performance tests on the entire unit, theclosing date was extended by nine months upon Bank approval from March 31,1984 to December 31, 1984.

Performance of Consultants, Contractors and Suppliers

3.18 The performance of Projec. consultants was satisfactory. They heldregular coordination meeting with TEC's staff throughout the projectimplementation period and seconded construction engineers to the Project'smanagement and supervisory team. The consultants also assisted TEC inexpediting project implementation, monitoring quality control at vendor'sworks and in issuing clearance for shipment after inspection. Likewise, theconsultants' associatesl/ ass5sted in reviewing the specifications of themore sophisticated equipment, instrumentation and controls.


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3.19 The contractors, all of whom were prequalified, also performedsatisfactorily except for the ones listed below:

(a) A Rs 25 million contract was awarded in mid-1981 for miscellaneouscivil works including switchyard foundations, raw water and fuel oilpump houses, demineralization plant building and ash waterpumphouses. The company, however, was unable to mobilize itsresources adequately to achieve an average monthly billing of Rs 1million. Hence, work amounting to Rs 10 million had to be awardedto other smaller contractors in 1982 at a slightly higher rate.

(b) A contract of Rs 3 million for cement mortar lining of circulatingwater pipes was awarded to a contractor who was unable to mobilizethe equipment for the contracted work because of legal disputes withthe owners of the equipment. This work, therefore, had to becompleted with the assistance of the borrower which took eight monthsinstead of the normal three months.l/

(c) Fabrication of 3,500 tons of structural steel for the turbogeneratorbuilding and bunker bays was given to local contractors. However,their resources for erection of the structural steel at site wereinadequate and they were unwilling to mobilize more forces as theirquoted contract rates had become unremunerative. Consequently, over350 tons of erection work had to be deleted from the contract anddone by others.

3.20 As can be expected in a project of this magnitude where equipmentmust be manufactured to specifications, problems did arise during erectionand commissioning. Ihese problems were addressed expeditiously by theappropriate manufacturers. The only exception to this were the localmanufacturers of the relatively small equipment packages such as sump pumps,low pressure valves, etc. The selected vendors did not have the requiredresources/quality control and alternative vendors had to be found for aboutRs 2 million of equipment.

IV. OPERATING PERFORMANCE

4.01 As noted (para 3.03), the Project was completed in January 1984 andafter initial trials, the unit was first synchronized on January 22, 1984.The anit attained full load on April 27, 1984 and in the first year ofoperation generated 3,108 GW' of electricity, corresponding to a utilizationfactor of about 71X. Unit availability during this period was over 85% whichis commendable. The unit, however, had to be taken out for three weeks inOctober 1984 to install baffles in the second pass to overcome the problem ofduct resonance on the steam generator. The unit was also shut down threetimes and tripped 17 times; most of these trips occurred while correcting and

-11-

optimizing protective and control circuits. The unit, however, was broughtback on line within two hours of each shutdown because of the provision of aturbine bypass.l/

4.02 Performance tests on all individual plants which were conducted ateither the site or works were satisfactory. Preliminary tests indicate thatthe plant is operating at specified efficiency.

V. FINANCIAL PERFORMANCE

5.01 The earnings of licensees like TEC are regulated by the SixthSchedule of the Electricity (Supply) Act, 1948. This schedule provides,inter alia, that licensees shall so adjust their charges for the sale ofelectricity, whether by enhancing or reducing them, that their "clear profit"in any year shall not, as far as possible, exceed their amount of "reasonablereturn". "Clear profit" represents the entity's income (from the sale ofenergy, rentals and other utility receipts), less its admissible expenses(including operating expenses, interest on money borrowed, income tax,certain appropriations to statutory reserves, and other specialappropriations permitted by the State Government). The admissible expenses,together with a margin for clear profit, form the basis for determining theaverage sale price of power which is set at the maximum allowed under theAct. "The amount of reasonable return" is defined as the sum of:

(a) seven percent of that part of the capital base equal to the capitalas of March 31, 1965;

(b) a percentage on the balance of the capiLal base equal to 2% over theReserve Bank rate prevailing at the beginning of the year (currentlythe Reserve Bank rate is 102); and

(c) additional sums equal to 0.5% on capital borrowed

( i) from institutions approved by the State Government; and

(ii) by the issue of debentures.

In the event that the Companies' "clear profit" would exceed the amount ofreasonable return for the year, provision is made in the Act for itsdisposal.


-12-

5.02 TEC's income statements, sources and application of funds statements,balance sheets, clear profits statements and capital base and reasonablereturn statements are presented in Annex 6. The financial statements comparethe appraisal forecast foL the period FY78-FY83 with the actual results.However, since the Project was not completed until 1984, the actual resultsfor that year are also presented.

5.03 TEC's financial performance between FY78 and FY83 was satisfactory.In each of those years except FY83, profits, after tax and appropriations,were higher than forecast by the appraisal, about 17% higher in FY78, 10.7%in FY79, 50% in FY80, 140% in FY81 and 73% in FY82. In the following year,by contrast, profits were 46% lower than the appraisal estimate, Rs 26.8million compared to Rs 49.3 million. This was due to both, depressedelectricity sales (para 5.04) and TEC's decision to increase the investmentallowance reserve and special appropriation to cover the Project costoverruns (para 3.12).

5.04 The improvement in TEC's financial performance between FY78 and FY82was due to higher than forecast increases in both electricity sales andtariffs. Electricity sales were about 6.3% higher than the appraisalestimate in FY78, 16.3% in FY79, 6.2% in FY80 and 8.4% in FY81. This trendwas interrupted in FY82 by the strike in the textile industry, and TEC'selectricity sales dropped below the SAR forecast in FY82 and FY83. As shownbelow, this decline, however, was more than offset by the upward adjustmentsin tariffs which increased between FY78 and FY83 at an average annual rate ofabout 20.7% compared to the SAR forecast of about 1.7%.

Increase in TEC's Electricity Sales and Tariffs

Electricity Sales (Gwh) Tariffs (paise/Kwh)

SAR Actual as % SAR Actual as %Estimates Actual of Estimate Estimates Actual of Estimate

FY78 6350 6754 6.4 22.25 22.01 -1.1FY79 6350 7385 16.3 22.53 24.50 8.7FY80 6540 6947 6.2 23.40 27.73 18.5FY81 6735 7299 8.4 24.83 33.98 36.8FY82 6940 6375 - 8.1 25.79 44.70 73.3FY83 7145 5382 -24.6 24.16 56.41 133.4

5.05 Despite the improvements noted above, TEC had problems in maintainingsufficient liquidity to conduct its operations. During the Projectimplementation period the current ratio, instead of increasing from 1.5 inFY78 to 1.7 in FY83, dropped to 1.0 in FY81 and remained at that levelthereafter. The cash flow problem was precipitated by the difficulty TEC hadin securing financing from GOM for which an understanding was obtained from

-13-

GOI and TEC in the preamble of the Loan Agreement. As per thatunderstanding, COM was required to contribute to the Project an amount equalto the difference between Rs 172 million and any security deposits which TECmight collect from its consumers. Under the Act, TEC had the right tocollect from each consumer a security deposit amounting to a maximum of threemonths' billings, or an aggregate of about Rs 150 million. As TEC wascollecting these amounts, several consumers brought suit against a differentutility in the Greater Bombay area contending that because of their longhistories of paying bills promptly, the posting of security was unnecessary.The court ruled in favor of the plaintiffs and, in a separate action enjoinedTEC from collecting any more security deposits from its consumers; however,it did not require TEC to refund the Rs 51 million already collected, leavinga financing gap of about Rs 121 million. GOM agreed to contribute Rs 73million to bridge the financing gap with the rest being secured by TECthrough the revenue enhancement measures that it had instituted in 1981.Although an amount of Rs 73 million was included in COM's PY83 budget, TECreceived only a partial payment of Rs 40 million on March 31, 1983, togetherwith the assurance that the remaining Rs 33 million had been budgeted andwould be paid during FY84. However, TEC did not pursue the release of thisbalance as it was able to cover the financing gap for the Project through aspecial appropriation fund and by deferring some minor capital improvements(para 5.06).l/

5.06 The problem of TEC's liquidity was also exacerbated by thesubstantial cost overruns in the implementation of the Project which it hadto meet in advance of realizing reimbursements or refinancing of these costs.To meet these cost overruns, TEC raised an additional Rs 266.4 million inloans from local financial institutions; Rs 39.1 million in fixed depositloans from shareholders and the public at large, and Rs 16.6 million fromi: .ernal sources. To cover the remaining gap, and also to ease theconstraints caused by its inability to collect the aforementioned Rs 121million, TEC created and began contributing two paise/kWh on all power soldto a Special Appropriation for Project Costs beginning 1981 without theapproval of GOM. However, a favorable ruling regarding the admissibility ofpast contributions to this Special Appropriation was recently obtained. TEChad contributed Rs 267.7 million to this by FY84. This contribution wasintended to cover the remaining gap of Rs 195.3 million for the Projecttogether with the Rs 48 million differential between GOM's obligation tofinance Rs 121 million and its agreement to meet only Rs 73 million of theProject cost. TEC had also raised the Rs 33 million that was to be securedfrom GOM, thereby ensuring full financing for the Project.


VI. INSTITUTIONAL DEVELOPMENT

6.01 One of the objectives of the Project was to promote institutionbuilding by assisting in the transfer of technology for the design,construction and operation of large thermal power plants (para 2.03). Thisobjective was fully achieved with the commissioning of the 500 MW unit atTrombay. The experience gained has had beneficial spin-offs for thefollow-up Fourth Trombay Thermal Power Project (Loan 2452-IN), where greaterattention is being accorded to: completing the civil works earlier toprovide clear access and a clean working environment for equipment erectors;and packaging civil works contracts differently to make them more manageable.The Project has also benefitted CEA and NTPC in that TEC, as per theagreement with GOI, made available its facilities and expertiese to theseentities for training their staff in implementing 500 MW power plants. Theinstallation of the computerized 500 MW analogue simulator (para 3.03),moreover, has provided the facility needed for the training of TEC's andother power utilities' staff in the operation of 500 MW power plants.Finally, the Project was instrumental in augmenting the generating capabilityof TEC, a critical private sector element in the country's power subsector.l/

VII. ECONOMIC REVALUATION

7.01 In the staff appraisal report the return on investment for theProject was calculated on the basis of quantifiable benefits to be derivedfrom the 500 MW unit at Trombay. It was defined as the discount rate atwhich the present worth of the Project costs equal the present worth of thebenefits over the life cycle of the Project. The measurable costs includedwere:

(a) capital and labor costs involved in the implementation of theProjert;

(b) the annual operation and maintenance costs; and

(c) fuel cost.

The measurable benefits included the revenues to be derived from the sale ofelectricity.


-15-

7.02 Based on the measurable costs and benefits associated with theProject, the ex-ante internal economic rate of return (IERR) was estimatedat about 14%. However, because of substantial reductions in the cost of fuelprecipitated by the use of associated gas until F'i90 instead of coal as wasoriginally planned, this same approach results in an ex-post IERR of about30.5%. Details of the assumptions used are presented in Annex 7. Theex-post IERR which compares favorably with the opportunity cost of capital ofabout 12% fully justifies the Project on economic grounds. It also validatesthe appropriateness of the Government's decisi3n to allow the use ofassociated gas, which otherwise would have been flared, for power generation.

VIII. PERFORMANCE OF IHE BORROWER AND THE BANK

8.01 The performance of TEC, the executing agency, needs to be commendedbecause it was able to overcome unexpected implementation problems and avoidan additional year's delay in the commissioning of the plant by increasingthe work force and implementing a number of tasks conc:urrently. Specificareas in which TEC played a critical role in the successful implementation ofthe Project are:

(a) involvement of key operation and maintenance personnel in thedesign of the Project to ensure that feedback from their experiencewas built into the specifications;

(b) quality control and quality assurance programs at manufacturer'sworks, and shipping releases after detailed inspection from the rawmaterial stage up to finished product;

(c) involvement of operational personnel in the testing of equipment atmanufacturers' works and at the site;

(d) meticulous attention to housekeeping to improve productivity andsafety and maintain morale;

(e) close attention to monitoring all field activities, equipmentsupplies, transport and related matters; and

(f) use of mechanized concrete batching plant and placement equipment.

8.02 The Bank supervised the Project nine times and maintained goodrelations w.th the borrower. This involvement resulted in the processing ofthe follow-up Fourth Trombay Thermal Power Project (Loan 2542-IN) whichinvolves the installation of yet another 500 MW thermal power unit and in afurther extension of TEC's license to August 15, 2004.

-16-

IX. CONCLUSIONS

9.01 The Project was entirely successful in that the power plant wascompleted satisfactorily and is functioning properly. The VAjor factorsleading to the successful completion of lndia's first 500 KW thermal powerunit were the active involvement of the borrower in all stages of Projectpreparation, implementation and quality control. The Project has introducedinto India the technology for designing, manufacturing and implementing largethermal power units whose role in the country's power sector is expected toincrease substantially over the foreseeable future.l/ The Project, with theinstallation of the computerized analogue simulator, has also provided thefacilities needed to train local personnel in operation of those powerplants. Finally, the Project has been instrumental in augmenting thegenerating capability of TEC, a critical private sector element in thecountry's power subsector.2/

1/ Presently, twelve 500 KW units ere being implemented.


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Annex 1

INDIA



Organization of the Power Subsector in India

Responsibility for the supply of electricity is shared between theCentral and State Governments. The State Electricity Boards (SEBs) andthe Regional Electricity Boards (REBs) are controlled by States; theCentral Electricity Authority (CEA), the National Thermal PowerCorporation (NTPC), the National Hydro-Electric Power Corporation (NHPC),and ti.e Rural Electrification Corporation (REC) are controlled by theCentral Governmeat. SEBs were instituted under the Electricity (Supply)Act, 1948 (the Act), to promote the development of the power subsector andto regulate private licensees. Although SEBs are supposed to autonomousin managing their day-to-day operations, in practice they are under thecontrol of State Governments in such matters as capital investment,tariffs, borrowings, pay and personnel policies. As a first step towardsnational integration, the SEBs have been grouped into five regionalsystems, each coordinated by an REB. Coordination responsibilitiesinclude overhaul and maintenance programs, generation schedules,inter-State power transfers and concomitant tariffs. CEA was created in1950 to develop national power policy ar,d to coordinate the variousagencies involved in supplying electricity. It is responsible for theformulation of countrywide investment plans for approval by the CentralGovernment, development of integrated system operation, training ofpersonnel, and research and development. It maintains operations,economic and financial data at both the Central and State levels, andprovides consulting support to SEBs. NTPC and NHPC were incorporated in1975 by GOI to construct and operate large power stations and associateetransmission facilities. They sell bulk power to the SEBs fordistribution. NTPC has had marked success and has grown rapidly. Incontrast, NHPC is still struggling to establish a role for itself. The5tates own most hydro sites and are reluctant to relinquish these sourcesof comparatively inexpensive energy to the Central Government. REC wasestablished in 1969 to coordinate rural electrification and providefinancial and technical expertise for SEB schemes. At present, RECfinances more than half of total rural electrification investment.

-18- Annex 2

INDIA



MSEB's Generation Developments not Approved by 1977but Scheduled for Commissioning by 1983/84

Date to beThermal MW Commissioned

Bhusawal No. 3 210 October 1982Ojari No. 1 210 December 1982Ojari No. 2 210 April 1983Parli No. 4 210 June 1983Chandrapur No. 3 210 December 1983Chandrapur No. 4 210 February 1984

TOTAL 1,260

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-21- Annex 4

INDIA



Estimated and Actual Project Cost(US$ Millions)

Item Estimated ActualLocal Foreign Total Local Foreign Total

Preliminary Works

(a) Roads & Railways 0.9 - 0.9 0.8 - 0.8(b) Miscellaneous 1.8 - 1.8 1.5 - 1.5

Subtotal 2.7 - 2.7 2.3 - 2.3

Civil Works 16.0 - 16.0 21.7 - 21.7

Electrical & Mechanical

(a) Turbogenerator(KFW) 8.6 31.6 40.2 13.9 28.0 41.9(b) TG Associated

Equipment (KFW) 6.1 5.0 11.1 7.4 12.3 19.7(c) Steam Generator 23.5 23.0 46.5 49.6 1.1 50.7(d) SC & TG Associated

Equipment 22.2 6.6 28.8 15.7 9.1 24.8(e) Sulphur dioxide

removal eqpt/particulate removal 4.6 13.7 18.3 12.1 1.5 13.6

(f) Electrical 9.1 3.1 12.2 8.7 9.2 17.9(g) Miscellaneous E&M

Equipment 5.0 0.7 5.7 8.0 0.5 8.5Subtotal 79.1 83.7 162.8 115.4 61.7 177.1

Coal & Ash Handling 7.6 - 7.6 8.4 - 8.4

Switchyard 6.6 4.6 11.2 12.4 2.0 14.4

Construction Equipment 2.1 - 2.1 0.8 1.0 1.8

Engineering & Admn. 4.5 2.5 7.0 14.5 1.1 15.6

TOTAL 118.6 90.8 209.4 175.3 66.0 241.3

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Annex 5Page 1 of 4

INDIA

THIRD TROMBAY THERMAL POWER PROJECT - WAN 1549-IN


Schedule of Disbursements

SAR Actual as ZEstimate Actual of Estimate

----US$ Million---

June 30, 1979 11 9 82June 30, 1980 35 15 43June 30, 1981 80 42 52June 30, 1982 100 75 75June 30, 1983 105 93 89June 30, 1984 101 96December 30, 1984 105 100

Ann,ex 5Page 2 of 4

-23-

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INDIASHIRD TROlMT ThhRJAL POWER PROJECT

TATA ELECTRIC COMPANIES

Combined Forecast and Actual Source and Application Statements, FY78 - F84(In Millions of Rupees, except where otbervise stated)

March 31 1978 19?9 1980 1981 1982 1983Appraisal Actual Appraisal Actual ApDraisal Actual Appraisal Actual Appraisal Actual A*Draisal Actual Acul

ENERGY GENERATED AND SOLD

Rydro Generation CGll 1,250.0 1,417.0 1,250.0 1,486.0 1,200.0 1,308.0 1,200.0 1,;..;0 1,200.0 1,342.0 1,200.0 1,245.0 1,245.0Thermal Generation G11b 1,900.0 2,196.0 1,900.0 2,347.0 1,900.0 2,153.0 1,800.0 2,016.0 1,800.0 2,235.0 2,550.0 2,171.0 2,309.0Power Purebases GWb 3.605.0 3.506.0 3.605.0 3.934.0 3,850.0 3.837.0 4.165.0 4.177.0 4,385.0 3.194.0 3.910.0 2.326.0 2.911.0Totsl 6,755.0 7,119.0 6,755.0 7,767.0 6,950.0 7,298.0 7,165.0 7,663.0 7,385.0 6,771.0 7,660.0 5,742.0 6,571.0Use in Station, and Trans- 405.0 365.0 405.0 382.0 410.0 351.0 430.0 364.0 445.0 396.0 515.0 360.0 414.0mission Loss GWbSsles of Energy GlWb 6,350.0 6.754.0 6.350.0 7,385.0 6.540.0 6.947.0 6.735.0 7.299.0 6.940.0 6.375.0 7,145.0 5.382.0 6.257.0Average Price (paise/lk'b) 22.25 22.01 22.53 24.50 "3.40 27.73 24.83 33.98 25.79 44.70 24.16 56.41 57.74

OPERATING REVENUE

Sales of Energy 1,412.8 1.486.3 1,430.6 1,809.1 1,530.1 1.926.6 1.672.6 2.480.5 1.790.0 2.649.5 1.726.4 3,035.9 3.612.9

OPERATING 8XPENSES

Cost of Fuel 366.3 435.5 368.3 461.6 368.3 510.7 358.9 840.2 358.9 1,060.9 501.3 1,101.6 1,276.7Other Operating Kaintenance 164.1 157.9 173.1 193.7 178.6 203.8 184.1 225.7 189.3 339.6 229.3 387.5 435.7Power Prebcases 740.5 695.8 740.5 905.3 793.0 920.7 855.6 1,127.7 892.5 997.1 681.0 1,060.6 1,449.2Depreciation 24.3 24.9 25.2 26.1 25.7 27.0 26.0 27.4 26.3 28.2 25.6 28.4 53.4 1Tax on S es 26.4 27.5 26.4 29.2 27.1 26.7 27.9 25.4 28.7 25.2 29.6 24.0 29.0 9Excise on leneration - 5.8 - 67.0 - 59.7 _ 60.3 - 61.6 - 56.8 64.3 1Write off - Misc. Exp. 0.3 0.3 0.3 0.2 0.2 0.2 - - - - - 0.4 2.2Total Operating Expenses 1,323.9 1,357.7 1,333.8 1,683.1 1,392.9 1,748.8 1,452.4 2,306.7 1,495.7 2,512.6 1,466.8 2,661.3 3,310.5Operating Incomes 88.9 128.6 96.8 126.0 137.2 177.8 220.2 173.8 294.3 336.0 259.6 23.8 302.4lon Operating Incomes 9.0 21.7 9.1 41.9 9.2 32.9 9.3 29.1 93.5 3.0 237.6Total Income 97.9 150.3 105.9 167.9 146.4 210.7 229.5 202.9 303.7 417.3 269.1 482.1 540.0Deduct Interest on Debt 30.9 31.8 49.2 44.6 78.8 64.9 140.9 90.4 189.0 166.1 212.6 202.8 222.9Foreign Exchange - Write Off 4.6 4.6 4.4 4.1 4.4 3.7 2.0 1.2 - _ 0.6Provision for Taxation 27.1 62.4 22.6 67.7 33.7 81.8 49.2 31.0 64.4 145.0 - 5.9 (I.*YTotal - Deductions 62.6 98.8 76.2_ 116.4 116.9 150.4 192.1 122.6 253.4 311.1 212.6 208.7 22I9tProfit 35.3 51.5 29.7 51.5 29.5 60.3 37.4 60.3 50.3 106.2 212.6 273.4 318.1

Lee& Contingencies Reserve 2.4 2.2 1.3 1.8 1.2 1.3 1.3 0.5 1.2 1.1 7.2 8.6 8.5Investment Allowance Reserve 6.4 6.1 4.1 4.1 3.5 4.0 - 2.3 - 4.1 - 127.3 56.0Tariff and Dividends Control Reserve 2.6 1.9 - 2.4 - 2.2 - (9.0) - (9.2) - 4.1 (6.5)Sp. Appre. re. Deferred Tax - 13.3 - 16.3 15.6 - -

0 Project Cost - - - - - - - - 50- 106.6 12. IV~Total Statutory Appropriations 11.4 23.5 5.4 24.6 4.7 23.1 1.3 (6.2) 1.2 21.0 7.2 246.6 183.1 bPProfit (after tax and Appreciations) 23.9 28.0 24.3 26.9 24.8 37.2 36.1 86.5 49.1 85.2 49.3 26.8 135.0 DAdjusents from previous years - - - - - - - - - - - -Distributable Profits 23.9 28.0 24.3 26.9 24.8 37.2 36.1 66.5 49.1 85.2 49.3 26.8 135.0 1Less Proposed Dividend 20.5 20.5 20.5 20.5 20.5 23.1 26.3 23.0 23.0 42.7 34.5 42.7 50.7 oRetained Profit to General Reserve 3.4 7.5 3.8 6.4 4.3 14.1 9.8 63.5 6.4 50.7 6.6 (23.9) 81.1 ,Operating Rati, (eitrating

expenses as purceAtage ofoperating revenue)2 94 91 93 93 91 91 87 93 84 88 85 88 92

DW!ATUIRD TROK& TENAL P OCT

TTAA ELECIC COCIPhIlES

Combined Forecast an Actual Source and Auslication of Funds. FY78 - 14(In Millions of Rupees, except where otherwise stated)

Marcb 31 1978 1979 1980 1981 1982 1983 t984Appraisal Actual Aa9raiaal Actual Aunairal Actual Aaisal Actual araisal Actual Anoraisal Actal As&MlSOURCES OF FUNDS

Internal Cash GenerationTotal Incme 97.9 150.3 105.9 167.9 146.4 210.7 229.5 202.9 303.7 417.3 269.1 482.1 540.0Depreciation 24.3 24.9 24.9 26.1 25.7 27.0 26.0 27.4 26.3 20.2 25.6 28.4 53.4Mtiscellaneous Expenses 0.3 0.3 0.3 0.2 0.2 0.2 - - - - - - 2.2(written-off)

Total - Cash Ceneration 122.5 175.5 131.4 194.2 172.3 237.9 255.5 230.3 330.0 445.5 294.7 510.9 595.6Capital Raised

Equity Subscriptions - - - - - - 87.5 - 87.5 177.6 - 5.1 0.4Security Deposits from Consumers - 2.0 30.0 26.2 50.0 24.6 50.0 15.8 20.0 1.4 - 2.2 2.3Approved Loans - Unit 5:World Bank - - 93.7 62.0 151.5 29.0 392.8 175.5 225.7 304.9 39.3 208.6 130.1E0D - - - - - - - - - - - 41.7 5.9Local 3.3 16.5 20.0 205.2 140.0 252.2 177.5 30.8 112.5 64.0 75.0 42.0Approved Loans - Others - - 7.7 4.6 4.5 16.9 1.7 - - 16.2 - -Debentures 50.0 - - - - - - 77.5 - 72.5 - 72.1Cash Credits - - 13.6 - - - - 65.0 - - 3.2 - -Total Capital Raised 53.3 2.0 153.8 115.9 434.2 198.1 7".4 513.0 364.0 668.9 122.7 404.7 18D.7Fixed Deposits - 26.2 - - - - - - - 145.2 - 23.8 -Other Item 1.1 1.9 1.1 5.0 L.1 4.9 1.1 11.1 1.3 1.4 1.3 3.0 O.S176.9 205.6 286.3 315.1 607.6 440.9 1.056.0 754.4 695.3 1.261.0 418.7 942.4 776.8

APPLICATION OF FUNDS

Capital ExpenituresGeneral Construction 34.0 36.0 30.0 28.6 30.0 24.4 30.0 41.6 30.0 40.2 30.0 2.5 21.7Third Trembay Power Project 3.3 - 140.2 176.9 406.7 187.0 782.5 586.8 364.0 730.4 103.3 602.8 197.5(unit 5)

Total 37.3 36.3 170.2 205.5 436.7 211.4 812.5 628.4 384.0 770.6 133.3 631.3 219.2Debt Service

Repayment 13.8 - - - - - - 3.2 - - - -Interest 30.0 31.8 49.2 44.6 78.8 64.9 140.9 90.4 189.0 166.1 212.6 202.8 222.9Ami otisation 27.1 20.4 17.6 28.3 11.6 25.7 17.6 61.5 8.0 115.9 8.0 8.3 6.2.j3.. 0,Total - Debt Service 71.8 52.2 66.8 72.9 96.4 90.6 158.5 151.9 200.2 282.0 220.6 211.1 28851 00Capital Issue Expenses/Share - - - - - - 4.6 - 16.7 - 5.5 - SRedemptionInvestments 2.9 4.4 2.4 2.5 1.3 2.0 2.8 1.4 2.8 0.2 1.2 1.2 10.9 0Tax Provision 27.1 62.4 22.6 67.7 33.7 81.8 49.2 31.0 64.4 145.0 - 5.9 (1.6) i-bDividend 20.5 20.5 20.5 20.5 20.5 23.1 26.3 22.8 42.7 34.5 42.7 50.7 53.9Working Capital (Increase/Decreaae) 17.3 29.8 3.8 (54.0) 19.0 32.0 6.7 (85.7) 8S) 12.0 20.9 36.7 M.3176.9 205.6 286.3 315.1 607.6 440.9 1.0S6.0 754.4 695.3 1.261.0 418.7 942.4 7f6l8No. of times Debt Service covered by

Total Cash Genleration 1.7 3.4 2.0 2.7 1.8 1.5 1.6 1.6 1.6 1.6 1.3 2.4 2.1

lEeb 3" 197S 1979 19SO 1981 19S2 1983 1S

Aurajeasl Actual Auratijal Actual Aeral eal Actual Antreisal Actal1 Ancieeul Actual Anraieel Actual Actul

A8mACroes liad A^seet 950.1 952.6 980.J 989.8 1,005.7 I 015.4 1.030.? 1,031.2 1.054.7 1,053.6 2,S7S.7 1,748.0 3.386.Sl1losa Depreciation (371.4) (376.51 (393.6) (402.0) (415.3) (428.3) (437.3) t447.4) (45.8.) 1475.2) (479R) (501.0) (553.9Iet tixed Assets in Serice 577.7 576.1 567.1 567.8 590.4 590.1 593.4 583.8 59f.9 578.4 2.399.1 1,239.0 2,830.9Work; in Progress 32.1 43.3 166.7 210.5 573.4 392.1 1.355.9 9S6.6 1,719.9 1,727.3 23.3 1,668.1 24U.SForeign LachangT - Incre e d Coet

od LOans fer purchseo of CapitalAesets 10.8 9.5 6.4 3.4 2.0 (12.2) - (9.) _ ( T2.4) - - 96

Sotol - Wired Assets 620.6 62.9 760.2 801.7 1,165.8 970.0 1,949.3 1,561.1 2.315.8 2,303.1 2,422.4 2,907.1 3,IS9.6

Contingnie eaeio e 45.0 45.3 47.4 47.5 4S.7 49.3 49.9 50.7 M1.2 51.5 52.4 52.5 61.1

Otb rs 9.7 10.8 9.7 11.1 9.7 11.3 11.3 11.3 12.8 10.7 12.8 10.6 1l3.154.7 56.1 57.1 56.6 58.4 60.6 61.2 62.0 64.0 62.2 65.2 63.3 74.2

Cash and *an 4.0 31.8 4.0 11.0 434.2 196.1 799.4 513.0 364.0 648.9 122.7 404.7 1SD.7Ifhentoriee 115.7 114.6 115.? 113.3 - - - - - 145.2 - 23.S Debtore (Co"na rs) 1 3.1 173.2 4 S.1 203.3

Sotal - Current Asets 320.5 368.6 322.3 S29.3 3' .1 451.6 s54.5 4AcS 364.5 6JI.2 3S2.5 807.ua 968.3

ot al -F e Assets 990.3 91562 114°0 1.28.0 1.563.9 1.012.4 2.3SS.0 2.108.5 2.74473 3.053.6 2.870.0 13.80.2 4.232.7

Sbare CapitalOrdirry Sba Capit 133.6 133.6 133.6 133.6 133.6 135.6 221.1 153.6 308.6 311.2 30S.6 316.3 316.7

Preferenc Share 38.6 38.6 38.6 358.6 38.6 38.6 3S.S 34.4 36.6 34.4 3S.6 34.4 34.4 1.Total - Capital 172.2 172.2 172.2 172.2 172.2 172.2 259.7 168.0 347.2 345.6 347.2 350.7 351.1

Shreoldere ear,ee 163.7 168.6 167.5 174.7 171.8 168.6 181.6 252.6 IS86.0 303.3 196.0 279.4 360.4Contixgedes Reses 47.4 ".5 48.7 49.3 49.9 50. 51.2 51.4 52.4 52.5 59.6 61.1 69.5

Wther Statutory Reeres32.8 32.1 36.9 38.7 40.4 44.9 40.4 36.2 40.4 33.1 48.4 164.4 213.9

Deferred Tag Resre 30.4 42.9 30.4 59.2 30.4 74.8 30.4 t4.S 30.4 74.8 30.4 74.8 74.8

T8ta -porito Rsrve 274.3etCot 52.2 263.5 321.9 292.5 359.1 303.6 417.0 311-.2 488.7 325.0 711.3 9765.5

CA"h Crit 11.0 14.1 24.6 10.1 4U.5 - 47.5 S5.0 44.3 - 47.5 - -

Debentures 206.5 158.5 200.5 158.5 192.5 158.5 11 .5 212.6 176.5 268.3 168.5 335.6 325.1

AID L1a 28.6 27.5 19.2 17.7 9.6 8.9 - - - - -

iLoans Sereobs") - - 93.7 62.0 245.2 79.1 638.0 254.6 863.7 5 59 .5 903.0 770.8 976.4

Other Financial Institution 3.3 - 19.8 20.0 229.6 189.7 496.7 368. 5129.5 450.0 609.7 566.7 5S3.5Unsecured toans 85.7 129.4 85.7 122.6 85.7 90.7 S5.7 81.7 _ .S7 224.1 85.7 244.5 242.9

Total 337.3 329.5 443.5 390.9 810.1 528.9 1,454.4 962.7 1,699.7 1,501. 1,81S4.4 1,814.4 2,327.9ConasnrA Saenritp D posits - 2.0 30.0 26.2 80.0 52.6 150.0 46.5 150.0 49.9 150.0 52.1 -

mdro Creditors 122.3 15 14. 122.3 187.7 122.3 201.3 127.3 277.2 129.0 40.8 12.0 449.6 4.6Other Liabilitis SS.2 108.4 8 .4 17S.9 126 157. 85.7 0.6 2. 3.4 101.9 21a.7 3 9 .1

Total - Curret LiAbilitis 208.5 253.9 206.7 364.6 204.9 358.9 213.0 477.8 31.8 652.2 228.9 751.3 7S0.7 00

Consro Contributions 4.0 o 0. s. 2 4.1 11.5 4.3 1. 4.4 15.5 *.5 17.2 17.5 tTotol - Liabilities 996.3 1.054 2 1.140.0 1.288 0 1.563.9 1.482.4 2.365.0 1.14.5 .744.3 3.053.8 2.870.0 3.6.2 4.232.7

Debtllquity Xtato - Unapid Debtas S of Capitel Resrve andDebt 43.0 32.0 49.0 44.0 64.0 50.0 72.0 63.0 72.0 S4.0 73.0 64.4 62.0

Curn Asts to Currenttia bilitie 1.5 1.5 1.6 1.2 1.2 1.3 1.7 1.0 3.6 1.0 1.7 1.0 1.0

ntIRD TRO0A TBIRMAL. iw PrIJEiTA EEl:tIC pPh3Ifl

siorpeast aid Actual Cleat Prfit. m8-n84(In Million Runs. excent dhere otherwise stated)

Marcb 31 1978 1979 1980 1981 1982 1983 IW4________ Aoraisal Actrul Airaisal Actual A aiesa Actual Auraisal Actual Aaraisal Actual hAnraiIL Aetj5l Actual

Power Purebase 740.5 695.8 740.5 905.3 793.0 920.7 855.5 1127.7 692.5 M.1 681.0 1060.6 1449.2Cost of Fuel 368.3 435.5 368.3 461.6 368.3 510.7 358.9 840.2 358.9 1060.9 501.3 1101.6 1276.7Ta on sale of Electricity 26.4 27.5 26.4 29.2 27.1 26.7 27.9 25.4 28.7 25.2 29.6 24.0 29.1Excise Duty on Gewration - 5.8 - 67.0 - 59.7 - 60.3 - 61.6 - 58.6 64.:sOperatin8 Expenses 158.8 155.7 167.8 161.3 173.3 190.7 178.8 210.8 184.0 266.5 224.0 291.5 372.6Ilteet - snit 5Security Deposits freo Consmers - - 0.3 0.7 3.0 4.4 5.8 5.5 7.7 5.4 8.3 5.6 5.6world Dank - - 11.2 4.7 22.9 12.9 48.8 21.5 78.1 36.4 92.0 53.2 68.4ICD - - - - - - - - - - - 2.6 4.2Local Institutions - - 6.9 3.5 20.2 13.5 47.6 24.0 64.6 S6.6 73.3 61.9 65.9tnterest oO Approeed Lomas - Otbers 1.1 1.5 - 2.9 0.3 3.4 1.7 4.2 2.8 11.4 3.9 -intcrest on Debenture. 14.0 12.6 17.6 12.6 16.8 12.6 19.7 18.9 (a) 16.9 27.0 (a) 18.0 37.7 38.2Iaterest on Casb Credits 4.5 4.4 2.6 6.9 5.4 5.6 7.1 5.4 6.9 10.4 7.1 5.6 4.9 1Depreciation 24.0 24.6 24.9 25.6 25.4 26.3 25.7 26.7 26.0 27.6 25.3 27.4 52.4Taxtion 28.7 64.2 24.2 70.0 35.3 80.1 50.8 69.1 66.0 148.8 - 7.8 (1.2)Iiscellaneous Elpenditure Written-off 0.3 0.3 0.3 0.2 0 2 0.2 - - - - - 0.4 2.2Appropriation fot Contingencies Reserve 2.4 2.2 1.3 1.8 1.2 1.3 1.3 0.5 1.2 1.1 7.2 8.6 8.5Appropriation for lwestment Allowance Reserve 6.4 6.1 4.1 4.1 3.5 4.0 - 0.2 - 0.3 - 55.5 -Special Approp. re Dealuation Increases 5.2 5.2 4.8 4.4 4.7 4.0 2.1 1.3 - - _ - 1.6Special Approp. re Deferred Tax Reserve - 13.3 - 16.3 - 15.6 - - - - - -Special A4prop. re Project Cost - - - - 25.0 - 106.6 125.1Special Approp. re F.D. Interest Differential - - - - - - - - - - .

Aduisaible Expenses 1380.6 14S4.7 1401.7 1778.1 1500.6 1892.6 1631.7 2441.7 1736.3 2761.5 1671.0 2915.1 3573.3

I In for Clear Profit * 41.5 4f.1 335.7 48.1 36.4 50.1 47.9 56.0 60.8 102.3 62.6 140.4 119.otel to be Cowerd by Ravenue 1422.1 1499.8 1437.4 1826.2 1537.0 1942.7 1679.6 2497.7 1797.1 2863.8 1733.6 3056.5 3692.5Dduct Other Income 6.7 11.6 6.8 14.7 6.9 13.9 7.0 17.2 7.1 14.3 7.2 13.6 9.6Total Revene to be Cowered by Tariff 1415.4 1468.2 1430.6 1811.5 1530.1 1928.8 1672.6 2480.S 1790.0 2849.5 1726.4 3041.9 3612.9Ene" Sales (lfb nillion)(b) 6350.0 6754.0 6350.0 7385.0 6540.0 6947.0 6735.0 7299.0 6940.0 6375.0(b)714S.0 5382.0(b)6257.0 1 /werqge Price (pado/h) 22.25 22.03 22.53 24 S3 23.40 2t.77 24.83 33.98 25.79 44.70 24.16 56.S2 S7.74 0

~~~~~~~~~~~~~~~~~~~~~~~~~~(D MReasonable retu plwu permissible excess. wherever awailable. It differs from "distribution profits" 0%hobw in the Income Statement, since these include items of inceme d expenditure outside the definition of clear profit.

f

(a) Includes interest on Pebentarers - Unit 5 4.0 10.8 20.2(b) Net of Energy wbeeled for IMS 957.0 1790.0

INDIATHIRD IUOMbAY IMAUL PWU fEOJIC?

TATAl ELECTI C cuI?3RS

Forecast and Actual Canital ase and Reasonable Return. 11Z8-F!84(In Milnion gave")

Marcb 31 1978 1979 1980 1961 1982 1983 1984Appraisal Actual a-ael Actual Asoraisal Actual Anraisal Actual &rgid *cl Actual Apraisal 4 tual Actul

Capital Base ComoutaLion

Original Cost of Fixed Assets 943.2 938.9 973.8 975.5 998.8 1001.3 1023.8 1013.2 1047.8 1039.5 2871.8 .tl1.6 3361.21daf: Capital Contributions from Consumers 4.0 5.5 4.1 8.2 4.2 12.5 4.3 14.5 4.4 15.5 4.5 17.2 17.5

939.2 933.4 969.7 967.3 994.6 988.8 1019.5 998.7 1043.4 1024.0 2667.3 1694.4 3343.7Cost of Licenses and Capital Issue Expense. 6.4 6.5 6.4 6.5 6.4 6.5 6.4 3.3 6.4 20.0 6.4 25.8 25.8Cost of Works-in-Progress System 35.6 40.4 30.0 30.9 30.0 27.0 30.0 34.9 30.0 47.3 30.0 40.0 40.7Cost of Works-in-Progress Unit 5 3.3 - 143.5 177.6 550.2 364.4 1332.7 9S0.9 1696.7 16U1.3 - 1623.8 197.0Contingencies Reserve Iuvestments 45.0 45.3 47.4 47.5 48.7 49.3 49.9 50.7 51.2 51.5 52.4 52.5 61.1Average Stores & Toole Balsnce 108.0 109.4 110.0 115.5 112.0 126.0 114.0 145.5 116.0 168.3 132.0 172.2 287.6Average Cash & Bank Balances 4.0 33.8 4.0 24.8 4.0 52.4 4.0 49.8 4.0 98.8 6.0 54.5 63.9Average Casb Credit Bacincec (14.9) (23.1) (17.0) (34.0) (36.0) (21.3) (47.5) (16.5) (45.9) (52.6) (7.5) (6.1) _._16)

A 1126.6 1145.7 1294.0 1336.1 1709.9 1593.1 2509.0 2217.3 2901.8 3038.6 3046.6 3657.1 1013.7 1

Deduct ions0

Depreciation Fund 369.6 373.6 390.5 398.7 411.9 424.3 433.6 442.9 454.8 470.9 475.3 493.2 546.SLicense & Capital Issue Expenses Written-off 5.9 5.9 6.2 6.1 6.4 6.3 6.4 2.7 6.4 2.7 6.4 3.0 5.2Con mera Security Deposits - 2.0 30.0 28.2 80.0 52.8 130.0 48.5 150.0 49.9 150.0 52.1 54.4Approved Loans - Unit 5World Sank - 93.7 62.0 245.2 92.4 638.0 264.1 863.7 562.1 903.0 770.8 876.83CGD - - - - - - - - - - - 41.7 43.3Local 3.3 - 19.8 20.0 225.0 160.0 477.2 337.5 508.0 450.0 572.0 525.0 542.9Approved Loas - Others - 10.0 - 25.2 4.6 29.7 21.5 31.3 21.5 - 37.7 - -Debenturus - Unit 5 - - - - - - - 77.5 - 100.0 - 172.1 166.9Debentures - Others 208.5 158.5 200.5 158.5 192.5 158.5 184.5 135.1 176.5 168.3 168.5 163.5 158.2Tariffs & Dividends Control Reserve 14.2 14.1 16.8 16.3 16.8 18.5 16.8 20.6 16.8 8.4 16.8 0.5 6.5Comsumerc Benefit Account 3.6 3.5 6.2 5.7 4.4 7.8 2.6 10.0 - 10.0 - 10.0 16.0Inveetuet Allowance Reserve 16.0 16.1 10.1 20.2 23.6 24.2 23.6 24.3 23.6 24.6 23.6 80.1 - 10.1Special Appropriation re Deferred Tax 30.4 42.9 30.4 59.2 30.4 74.8 30.4 74.8 30.4 74.8 30.4 74.8 74.8Special Appropriation re Project Cost - - - - - - - - 25.0 - 131.6 2S6.7

B 651.5 626.6 814.2 800.1 1240.8 1049.3 1964.6 1469.3 2251.7 1946.7 2383.7 2518.4 2828.3 d

0*Capital Base (A - 5) 475.1 5:).1 479.8 536.0 469.1 543.8 544.4 748.0 650.1 1091.9 662.8 1138.7 1138.7 X

Reasouable Return O72 on Capital Base of Rc 475 million as of 3/31/65 33.2 33.1 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 "t112/122 on balace of Capital Base - 4.9 0.6 6.8 - 7.6 7.7 30.1 19.3 67.9 20.7 79.7 85.3 UnOther Incme 0.3 0.4 0.3 0.5 0.3 0.5 0.4 0.6 0.6 0.7 0.6 0.7 1.11/22 on approed loans from World ank - 0.5 0.3 1.2 0.5 3.2 1.3 4.2 2.8 4.4 3.9 4.4112S on approved louns from local institutins 0.1 0.2 1.1 0.9 2.5 1.8 2.& 2.3 2.9 2.6 2.71/2S on E06D Credit - - - - - - - - - - - 0.2 0.21121 on Debentures 1.0 0.8 1.0 0.8 1.0 0.8 0.9 1.1 0.9 1.3 0.8 l.t 1.61/21 on Investment Allowance Reserve - 0.1 - 0.1 - 0.1 _ 0.1 - 0.1 - 0.4 .A

Apont of Reasoable Return 34.5 39.4 35.7 41.9 36.4 43.6 47.9 68.2 60.8 108.3 62.6 122.4 128.9

Annex 7Page 1 of 2

-31-

INDIA



Internal Economic Rate of Return (Ex-Post)

Assumption

I. COSTS

1. Capital Costs of the Project, expressed in constant 1977 rupees, areas follows:

Year Foreign Local Total

78/79 62.0 114.9 176.979/80 29.0 158.0 187.080/81 175.0 411.3 586.881/82 304.9 425.5 730.482/83 208.6 394.2 602.883/84 130.1 67.4 197.5

2. Local Costs were expressed in the equivalent border prices using thefollowing conversion factors: labor - 0.75; and material - 0.8.

3. Annual Operating and Maintenance Costs were calculated at 2% of thecapital cost.

4. 1/ Fuel Cost. The power plant is being operated on associated gas andLSHS instead of coal as was originally planned. Since at the margin, smallquantities of associated gas continue to be flared and since no alternativeuses for this gas were envisaged, its opportunity cost is assumed to be zero.It is further assumed that the power plant would continue to use this gasuntil 1990 when it would be displaced by domestically produced coal fromSingrauli. The economic cost of this coal at the pithead is estimated atabout Rs 200/ton and that of delivering it to Trombay at about Rs 320/ton,which amounts to about Rs 1,184/toe (1 ton of coal = 0.44 toe). In constant1977 prices, the cost of coal is about Rs 750/toe.

1/ Amended in light of comments of the Borrower.

-32-

Annex 7Page 2 of 2

II. BENEFITS

S. Benefits are based solely on electricity sales and existing tariff.Allowance is made of station consumption and transmission losses of about 8%of gross generation. The existing tariff is about 66.4 paise/kWh which, inconstant 1977 prices, amounts to 39.7 paise/kWh.

III. INTERNAL ECONOMIC RATE OF RETURN

Capital Operation & Fuel Total Electricity NetYear Expenditure Maintenance Cost Cost Sales Benefits Benefits

78/79 150.8 150.8 -150,879/80 133.0 133.0 -133.080/81 383.0 383.0 -383.081/82 465.6 465.6 -465.682/83 359.1 359.1 -359.183/84 122.2 16.2 0 138.4 920 365 226.684/85 32.3 0 32.3 1,840 730 697.885/86 32.3 0 32.3 2,760 1,096 1,063.786/87 32.3 0 32.3 2,760 1,096 1,063.;87/88 32.3 0 32.3 2,760 1,096 1,063.788/89 32.3 0 32.3 2,760 1,096 1,063.789/90 32.3 0 32.3 2,760 1,096 1,063.790/91 32.3 531 563.3 2,760 1,096 532.72013/2014 32.3 531 563.3 1,096 532.7

IERR = 30.5%

ATTACHMENT APage 1 of 2

COMMENTS FROM THE GOVERNMENT-33-

3166175 FINE IN248423 WORLDBANK

FROM SIIRI SUMIT BOSE DEPUTY SECY ECOFAIRS NEW DELHI

TO SHRI CM VASUDEV ADVISER TO ED (INDIA) WORLD BANK WASHINGTON

REGARDING PROJECT COMPLETION REPORT - INDIA: THIRD TROMBAY THERMAL

POWER PROJECT (LOAN 1549-IN) (.) KINDLY PASS ON THE FOLLOWING

COMMENTS TO MR. YUKINORI WATANABE DIRECTOR OPERATIONS EVALUATTON

DEPARTMENT (.) QUOTE:

MR. MANAKTALA MANAGING DIRECTOR TATA ELECTRIC COMPANIES HAS FOR-

WARDED HIS COMMENTS ON THE DRAFT PCR OF THIRD TROMBAY THERMAL

POWER PROJECT (.) WHILE CONCURRING WITH THE COMMENTS CONTAINED THEREIN

WE HAVE THE FOLLOWING OBSERVATIONS TO MAKE (.)

(1) PARA. 5.05 ON PAGE 12 - WHILE IT IS TRUE THAT GOM WERE UNABLE AmendedFootnote

TO MEET THEIR COMMITTMENT OF RS. 73 MILLION TO TEC IN 1983-84, TEC Page 13

WERE ABLE TO IMPROVE THEIR LIQUIDITY POSITION BY CONTRIBUTING TWO

PAISE/KWH ON ALL POWER SOLD TO A SPECIAL APPROPRIATION FOR PROJECT

COST AND THEREFORE DID NOT PURSUE THE RELEASE OF THE BALANCE

AMOUNT WITH GOM IN 1984-85 (.) IT HAS BEEN CONFIRMED BY TEC THAT

THEY DID NOT NEED THE BALANCE AMOUNT PLEDGED BY GOM SUBSEQUENTLY (*)

REQUEST THAT THE WORDINGS IN THIS PARA MAY BE AMENDED SUITABLY TO

REFLECT THIS FACT (.)

(2) PARA 9.01 ON PAGE 15 - AS ALREADY POINTED OUT BY TEC THE

EXTENSION OF LICENSE WAS MERELY COINCIDENTAL AND NOT AN INTENDED

OBJECTIVE OF THE PROJECT (.) THE GOVERNMENT COVENANT TO THIS

EFFECT IN THE AGREEMENT WITH THE BANK WAS AIMED AT ENSURING THAT

THE LICENSE WAS NOT TERMINATED. WE MAY ALSO POINT OUT THAT THE AmendedFootnotes

EXISTENCE OF SUCH PRIVATE COMPANIES FOR GENERATION AND DISTRIBUTION Pages iv,

OF ELECTRICITY IS NOT REPUGNANT TO OUR POLICY AND THAT SOME PRIVATE 14 and 15

COMPANIES OTHER THAN TECS ARE ALSO OPERATING IN THIS FIELD (.) WE

THEREFORE DIFFER FROM THE BANK'S CONCLUSION QUOTE MOST IMPORTANTLY

THE PROJECT HAS BEEN INSTRUMENTAL IN ENABLING TEC TO EXTEND ITS

ATTACHMENT A-34- Page 2 of 2

LICENSE THEREBY PRESERVING A CRITICAL PRIVATE SECTOR ELEMENT

IN THE COUNTRY'S POWER SUBSECTOR UNQUOTE AND WOULD REQUEST

THAT THIS MAY BE DELETED FROM THE REPORT (.) REGARDS (.)

UNQUOTE (.)

DATED 11/4/1986 KEWAL

ATTACHMENT B-35_ Page I ot -

S. P. MANAKTALA lATA ELECTRIC COMPANIES,MANAGING DIRECTOR BOMBAY HOUSE, FORT,

BOMBAY 400 023.

March 20, 1986.

COMMENTS FROM THE BORROWER

Dear Mr. Watanabe,Trombay 500 MW Unit 5 Project

Loan 1549 - IN

This has reference to your letter of February 13, 1986addressed to Mr. K.M. Chinnappa, Vice Chairman, enclosing theBank's draft Project Completion Report.

We find the report to be satisfactory except for somecomments which are separately listed and forwarded with thisletter.

Referring to the last para of the Highlights andConclusions (P. 15), we find more importance being given to amendesthe project having been instrumental in enabling TEC to extend Footnotesits license thereby preserving a critical private sector element agen iv1in the country's power subsector. We would view this more as 14 and 15coincidental with the other benefits listed in thesp paras viz.transfer of technology to the country's power sector, trainingfacilities in operation of 500 MW Units, development of TrainingSimulator etc. being more important.

With kind regards,

Ygurs sincerely,

S. P. Manaktala

Mr. Y. Watanabe,Director,Operations Evaluation Department,The World Bank,Washington D.C. 20433,U.S.A.

ATTACHMENT B

-36-- Page 2 of 3

THE TATA HYDRO-ELECTRIC POWER SUPPLY GO. LTD.THE ANDHRA VALLEY POWER SUPPLY CO., LTD.THE TATA POWRR COMPANY LIMITED

Commnts on Project Completion ReportThird Txombav Thermal Power Prolect (Loan 1549-IN)

Amended 1. Pace 1 s Delete 220 KV in 1.03 line 7 as there wer no 220 KVFootnote Page 1 lines in TEC systou in 19771

Amended 2, Po*L 2 i 3.10 line 14 'Re. 38 million' should reed lb. 88 million.Footnote Page 7 ;

3. Project Costs c Pare 2 and Page 1ii of preface, Page Iv) ofHighlights, Page 8 and Annexure 4 refer to a final project postof S 280.4 million. We presume this has neon derived by convertingthe lb. 241.2 crores indicated in P. 13 of our report into dollarsat 1 t - 8.6 Re. the exchange rate prevailing in 1978. Ve bblievethis does not reflect the true project cost as all expenditure hasbeen converted to rupees by us at the exchange rate prevailing at

Aomended the tim of payment and takes into account the general depreciationFootnotes in the rupee till project completion, resulting in the final coat-ages i, ii of h. 241.2 crorea.

iv and 7

To illustrate. I S of equipment in original project costhas been booked when incurred at 10 lb. in the final cost but theBank reconverts this to dollars at I S a 8.6 lb. i.e. $ 1.16 whereasonly 1 $ has been incurred. This method gives the picture thatproject costs increased by 34% whereas a more fair view would beto also present the project cost as having increased fXm S 209.3million to $ 241.2 million i.. 15.3% as given in P. 13 of ourrport,.

4. Page 6 s Pare 3.06 refers to delay in delivery of valves andrehesters for Steam Generator "because of takeover ofBharat Heavy Electrical Limited'a subvendor in Europe

Amended by another Company'.Footnote The reference to IHEL may be deleted and the followingPage 6 may be included Obecause of takeover of the valve

supplier in Europe by another Company'.

S. Page 7 : Pare 3.09, line 6, US $ I million should read as

Amended US $ 3 million. The reference to US $ I million inour report was to the CIF cost of the Simulator.FootnotePage 7

... 2

ATTACHMENT B-37- Page 3 of 3t

THE TATA MYDRO-ELECTRIC POWrR SUPPLY Me LTD.THE ANDHRA VALLEY POWER SUPPLY CO.. TD.O.THE TATA POWgR COMPANY LIMITED

2 s

6. Pogo s Para 3.11 end Page 5, 3.03 refer to- 3 months' delay infinaliestion of steam generator contract. In Page 9 ofour report what was implied was that the apptAsalreport had envisaged that contracts would be awardedby June/July 1978. Howevor, though the loan agreement

Amended was signed only in June 19761 TEC on their own InitiatedFootnotes action end finelisod the steam generator contract in aPages 5 and 9 short period of 3 months. Therefore, the reference to

delay in finalisation of steam generator contract shouldpreferably be linked to the loan agroewnt being signedin June 1978 rather then delay in contract finalisationas such.

Pare 3.18, line 7, "Parent Company" to read 'AssociatesM.

7. Page 10 s Para 3.19 (b), line 5, "by the borrower' to read "withthe assistance of the borrower'.

Para 4.01 to read 'As noted in Para 3.03 the project wascompleted in January 1984, and after initial trials theunit was first eynchronised on January 25, 1984. Aftercorrecting manufacturing deficiencies the unit attainedfull load on 27th April, 1984, i.e. 92 days aftersynchronisation.

The Unit had also to be taken out for three weeks inAmended October 1984 to install baffles in the second pass toFootnote overcome the problem of duct resonance on the SteamPage 11 Generator. During the first year of operation in

1984-85 the unit availability was over 85% and generated3108 MUS corresponding to an utilisation factor of 71%which for first year of operation of a new unit iscommendable. During the year under reference the unitwas shutdown three times and tripped seventeen times;most of these trips occured while correcting andoptimising protective and control circuits.

The Unit, however. was brought back on line within twohours of each shutdown, because of the provision of a,turbine bypass.

8. Page 30 : Para 4, line 1, insert after associated gas 'and LSHS".

AmendedFootnotePage 31

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