ADB Provides $346 Million Loan for Rural Electricity in Maharashtra, India

The Asian Development Bank (ADB) has approved a $346 million loan to India to help provide efficient and reliable power connection to rural agriculture customers in the state of Maharashtra.

Maharashtra is the second-most populous state in India, and about half of the state’s labor force is engaged in agriculture and related activities in the rural areas. Agriculture output, however, has been impacted by lack of irrigation, less-than-efficient use of electricity and water, as well as inadequate storage and connectivity to markets. The loan will support the state government’s high voltage distribution system (HVDS) program for new grid-connected rural agricultural customers across the state.

“Providing efficient, reliable, and good quality power to rural agriculture customers in Maharashtra will improve agricultural productivity and efficiency in the electricity value chain,” said ADB Senior Energy Specialist Len George. “Wider adoption of HVDS with metering and usage-based tariffs sets the stage for investments in energy efficient pumps, drip irrigation and could support improvements in subsidy management.”

The loan will be under ADB’s results-based lending (RBL) modality, where fund disbursements are linked to the achievement of agreed program results rather than to upfront expenditures, as is the case with traditional investment lending. This first ADB-financed RBL program in South Asia’s energy sector will help in the early construction and installation of metered HVDS through the installation of about 46,800 kilometers of 11 kilovolt (kV) grid extension lines, construction and upgrading of 121 33/11 kV distribution substations. The program will also build institutional capacity in the Maharashtra State Electricity Distribution Company Limited (MSEDCL) on HVDS.

The Government of Maharashtra and MSEDCL will arrange for counterpart funding of $357.1 million equivalent toward the $703.1 million total cost of the project. The program will be implemented by the Maharashtra Energy Department and MSEDCL.

This loan supports the first phase of the state’s HVDS program. This program complements ADB’s Maharashtra Rural Connectivity Improvement Project and Maharashtra Agribusiness Network Project to promote economic growth and private sector development in rural Maharashtra. This loan will be accompanied by a $1 million technical assistance from ADB to demonstrate energy and water conservation efforts.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.