New Delhi– India and the Asian Development Bank (ADB) have signed a loan agreement to improve the country’s solar power transmission system.

“India and ADB have on Thursday signed a $175 million loan agreement to support construction of high voltage transmission systems to evacuate power generated from new mega solar parks to the interstate grid, and improve reliability of the national grid system,” the Finance Ministry said on Friday.

Speaking on the occasion, Raj Kumar, Joint Secretary in the Finance Ministry, said that by supporting the construction of interstate transmission systems for the mega solar power projects, the project will enable transmission of surplus solar energy from states with surplus power to power-deficit states.

“The loan will be given to the Power Grid Corporation of India Limited (POWERGRID) and will include sub-projects in various locations in India. As an innovative feature, the project is designed to adopt the country systems on both safeguards and procurement at the agency level,” the statement said.

This will be ADB’s first breakthrough of the country system’s application to a specific project.

After signing the loan agreement, Kenichi Yokoyama, Country Director of ADB for India, said the project will support the continued expansion of solar energy in India in line with the government’s objectives and contribute to climate change by increasing the share of clean energy in the power mix besides increasing overall efficiency of the power system.

He said the adoption of POWERGRID’s safeguard and procurement systems would improve its operational flexibility and autonomy, and reduce the transaction costs and time for project preparation and implementation.

As laid-out in the ADB Safeguards Policy, country safeguard systems constitute a country’s legal and institutional framework on environment and social safeguards.

In addition to the ADB loan of $175 million, the project includes $50 million co-finance from the Clean Technology Fund (CTF) — a $5.8 billion component of the Climate Investment Funds aimed at providing developing countries resources to expand efforts in utilising low carbon technologies and transitioning to clean, renewable energy sources.

POWERGRID would make an equity contribution of $135 million equivalent to support the total project cost of $450 million.

The $175 million loan will be from ADB’s ordinary capital resources (OCR) and will have a 20-year term, an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility.

“The project will improve the capacity and efficiency of interstate transmission networks, particularly in transmitting the electricity generated from the new solar parks to the national grid,” it said.

Apart from the evacuation of 2,500 MW of power from solar parks in Bhadla, Rajasthan, and 700 MW from Banaskantha, Gujarat, POWERGRID is also including two additional sub-projects that will increase solar power generation by 4.2 gigawatt and lessen carbon emissions by over 7 million tonnes every year.(IANS)