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India secures $135m aid to implement West Bengal grid modernisation project

A $135 million loan secured from the World Bank by the government of India will help modernise the grid in the Indian state of West Bengal.

The government of West Bengal will use the loan to fund the implementation of the West Bengal Electricity Distribution and Grid Modernisation Project.

The project aims to help utilities in the state address energy sector challenges and prepare for changing business models and consumer energy demands.

Challenges being faced by utilities include:

Increases in energy demand: Electricity demand has risen by 4.5% in the past five years with utilities such as the West Bengal State Electricity Distribution Company (WBSEDCL) doubling the number of consumers in the past six years to reach 20 million consumers. The increase in demand is also due to a rapid increase in economic and industrial activities.

Financial instability: The COVID-19 pandemic has negatively affected the Indian economy resulting in commercial and industrial consumers struggling to pay their bills. WBSEDCL’s revenue generation from industrial and commercial customers, the main sources of income for the utility, has plummeted resulting in a financial crisis for the energy distributor.

Efforts by WBSEDCL to improve energy access across the state have led to more consumers from rural areas being connected to the grid. However, these consumers are struggling to pay their bills, resulting in an increase in the utility’s revenue deficit.

Junaid Ahmad, Country Director, India, on behalf of the World Bank said: “The financial stability of electricity companies is critical to providing efficient and reliable electricity to people. The pandemic has adversely affected the financial health of electricity distribution companies in India and in turn the financial health of the electricity generation companies.

“The West Bengal Electricity Distribution and Grid Modernisation Project will strengthen distribution networks, invest in smart-grid technologies, and ensure financial sustainability of WBSEDCL. This could serve as an example for other public distribution utilities across India.”

The grid modernisation project is also expected to help improve regional energy trading between India and neighboring countries since West Bengal is strategically located along the corridor to the Northeast and to Southeast Asia. Today, the state’s grid is enabling energy trading between India and Bangladesh.

By deploying smart grid solutions, WBSEDCL is expected to improve the efficiency and reliability of the grid and resistance to harsh weather events. The deal follows the state’s grid being heavily damaged by cyclone Amphan in May 2020.

In addition, distribution losses will be minimised and the integration of distributed energy resources increased for decarbonisation and stability purposes.

The Department of Economic Affairs, Ministry of Finance stated that, “Providing efficient and reliable electricity supply is a priority for the Government of India. The project will help improve the electricity distribution network in the state of West Bengal to ensure uninterrupted, affordable and quality supply of electricity to all homes, industries and commercial establishments in the state.”

The modernisation initiative is also expected to help India accelerate its electrification programmes, such as Deendayal Upadhyaya Gram Jyoti Yojana and Sahaj Bijli Har Ghar Yojana, as well as the implementation of the Government of India’s 24×7 Power For All Programme.

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