ADB Approves $250 Million Loan for India’s Power Sector Reform

The loan aims to improve DISCOM performance and drive the transition towards renewable energy

December 4, 2023


The Asian Development Bank (ADB) has approved a $250 million (~₹20.8 billion) policy-based loan to strengthen India’s power sector, supporting a speedy transition to renewable energy.

The Power Sector Reform Program (Subprogram 1), the first phase of a two-part initiative, aims to develop markets for power trade and ancillary services, including policy actions to accelerate solar and renewable energy deployment, encourage renewables in agriculture, and optimize power project dispatch for emission reduction.

The loan will enhance the financial performance, corporate governance, and service quality of electricity distribution companies (DISCOM), fostering a conducive environment for private sector investment. An incentive-based approach targeting parameters like losses, cost recovery, metering, and prompt payment of dues will elevate DISCOMs’ performance.

This program builds on ADB’s engagements in emerging areas, such as green hydrogen, that will be important to facilitate energy transition. ADB will allocate $1.5 million (~₹124.83 million) in financial grants from its Technical Assistance Special Fund and the Climate Change Fund for capacity development and policy reforms. The program has been collaboratively prepared with development partners, including Germany’s KfW.

ADB Principal Energy Specialist Len George said, “ADB has been working with the Government of India to help ramp up its transition to clean and renewable energy and facilitate policy actions to ensure a sustainable, inclusive, and climate-friendly power supply. This policy-based loan will help reduce barriers to scale up commercial financing for clean energy and contribute to India’s fulfillment of its climate change mitigation commitments.”

In May, ADB launched the ‘Innovative Finance Facility for Climate in Asia and the Pacific’ (IF-CAP), with an initial of $3 billion in guarantees, unlocking up to $15 billion in new loans for climate action. The program involves partner nations such as Denmark, Japan, South Korea, Sweden, the United Kingdom, and the United States and contributes to ADB’s $100 billion climate change combat goal for 2019–2030.

ADB’s recent proposals aim to boost rooftop solar systems in India, offering four models — utility facilitation, roof-leasing with utility investment, EPC-annuity payment basis, and utility as a Renewable Energy Service Company — to expedite deployment and enhance outcomes in India’s solar transition.