Indian State Transmission Utilities and Power Grid Corporation of India to Receive €1 Billion Soft Loan from Germany

November 16, 2016

The German government-owned development bank, KfW, is providing €1 billion (~$1.05 billion) soft loan to India to develop inter and intra-state transmission infrastructure under the green energy corridor program.

The states of Tamil Nadu, Rajasthan, Himachal Pradesh, Andhra Pradesh, Gujarat, and Madhya Pradesh, and the Power Grid Corporation of India (PGCIL) have signed individual loan agreements with KfW Germany to fund the projects, stated Mr. Piyush Goyal, Minister of Power.

To bolster energy and transmission efficiency in the country, the Ministry of New and Renewable Energy (MNRE) and PGCIL have started the Green Energy Corridor program that allows for evacuation of renewable energy from a power surplus state to a power deficit state. “Under the program, development of intra-state transmission network will be overseen by MNRE and the inter-state transmission network will be overseen by the PGCIL,” stated an MNRE official.

For intra-state transmission projects, the states of Tamil Nadu, Rajasthan, Himachal Pradesh, Andhra Pradesh, Gujarat, and Madhya Pradesh have signed loan agreements from KfW, aggregating €488 million (~$511 million). These projects will be funded with 20 percent equity from the state government, a 40 percent grant from National Clean Energy Fund (NCEF) and the remaining 40 percent from KfW. The MNRE official also said, “by March 2020, we can expect the intra-state transmission projects to be online.”

The inter-state transmission programs are to be funded with 30 percent equity by PGCIL and 70 percent in soft loans. A loan agreement for financial assistance of €500 million (~$523 million) from KfW has been signed by PGCIL and the projects are likely to be complete by 2018. “These loan approvals will allow the PGCIL to operate at a faster pace to link renewable energy generation sources across various states to the grid,” stated an official at PGCIL.

Mercom had previously reported that PGCIL estimated the investment requirement for development of the Green Energy Corridor will be about ₹430 billion (~$6.34 billion) and had sought loan assistance of $1 billion (~₹67.82 billion) from the Asian Development Bank.

India is targeting ~25 GW a year in new power capacity addition for the next five years. The Green Energy Corridor will boost project installations in the country as grid-strengthening and infrastructural development will resolve power evacuation and transmission issues.