Global lenders flock to AP: Naidu’s power agenda

A known economic reformer, AP Chief Minister Nara Chandrababu Naidu had a prized catch in the form of World Bank and KFW. He once again proved that the relationship between economic reform and political success depends on how one can funnel the fruits of reforms to large masses. It is in recognition of such creditworthiness that global monetary agencies have once again bestowed him with the support to his new power projects.

An astute politician and reformist Chandrababu Naidu has successfully caught the attention and interest of the global investors not only to risk their funds in building a capital for the new state of Andhra Pradesh but also get the support of the global bodies like the World Bank for liberal loans for infrastructure program of AP like power generation.

Gifting for pro-reform attitude of the Captain of AP Inc team, Naidu, the World Bank appears to have agreed to lend Rs 2,500 crore to state’s power utilities to enhance the rural electricity supply including feeder segregation and high voltage distribution system. Also, KFW, the German Bank, has cleared modalities for sanctioning Rs 515 crore at a concessional rate of interest towards green energy corridor.

The World Bank package included support to the ‘smart city’ project including underground cables, GIS sub-stations and smart metering, apart from strengthening distribution and transmission systems and technology up gradation.

The Andhra Pradesh has been riding high on Modi government’s flagship concepts of 'smart city' and 'Power for All' to attract both domestic and global focus on the populist-cum-reform program of Chief Minister Naidu.

And for Naidu, the WB loan was a god-send opportunity to rebuild a virgin AP, as per his choice of designs. Naidu usually says in media interactions, that “There is no time or scope to bluff as I am tasked to not only build a new state but also ensure that it succeeds in a definite time frame”.

What is agenda for power?

WB loan to power sector, interestingly, shows that Naidu still maintains his priority on power reforms, even in his second innings. Perhaps, power reforms, considered as the root for infrastructure and industrialisation, would finally augment his populist agenda to remain in power.

So it may not be a surprise when Naidu successfully campaigned for a lion’s stake in central programs like PFA (power for all) and also ‘Smart City’ etc which was earmarked a massive funding in the national budget.

It is known practice for the international lending agency to encourage reforms by extending liberal loans, and Naidu knowing the agency’s tune as being the past beneficiary, understood to have impressed the World Bank.

The government could successfully run a campaign for energy conservation by using of LED bulbs, solar agriculture pumps, non-conventional power generation options like solar and wind. And finally, the government’s efforts recognized and rewarded.

Currently, the residual state has total installed generation capacity of 17,285 MW. Of this, 11,980 MW is based on thermal, while 3,734 MW is based on hydro sources. Most of these capacities (9,046 MW) are owned by the state, while 5,082 MW are run by private players and remaining 3,156 MW are owned by Central undertakings.

Besides, the state, at present, generates 127 MW of solar energy and has set a target to take this figure to 5,000 MW in five years.

On the other hand, it has wind power generation capacity to the tune of 897 MW and proposed to take it to 4,000 MW by 2020. Steps have already been initiated with about 2,500 MW capacity of solar power in Kadapa, Kurnool and Anantapur districts. Andhra Pradesh, one of the three states identified for the ‘power for all’ scheme of the central government, has now fixed targets for reducing the aggregate technical and commercial (AT&C) losses to single digit by implementation of energy efficiency measures and green corridor projects.

Earlier, in the united Andhra Pradesh, under Naidu rule, the power reforms brought down transmission and distribution losses (now termed as AT&C) from 27 per cent to 17 per cent and now the goal is to reduce it further to 15 per cent.

In another related development linked to the green energy corridor, the central government in a communication to the state government said that KFW, the German Bank, has cleared modalities for sanctioning Rs 515 crore at a concessional rate of interest towards green energy corridor.

The state is contemplating completion of the green energy corridor with an estimated cost of Rs 1,289 crore with support from the central government and international financial institutions. On its own, the central government has also sanctioned Rs 515 crore for evacuation of wind power and green energy corridor.

Thus, the residual Andhra Pradesh is now became a role model to showcase – promotion of green energy (wind, solar power) and reduction of AT&C would part of power policy. In this regard, the AP has won the support from center and also laurels from agencies like WB, KFW etc.

KVVV Charya