US$648 million World Bank loan to help THDC India Ltd build hydropower project on Alaknanda

June 30, 2011

444 MW Vishnugad Pipalkoti Hydroelectric Project will help reduce GHG emissions by 1.6 million tons each year

Washington, June 30 2011 - The World Bank today approved a US$648 million loan to THDC India Ltd for constructing the Vishnugad Pipalkoti Hydroelectric Plant on the River Alaknanda, which is expected to generate an estimated 1,665 million kilowatt-hours of electricity each year to help relieve India’s chronic power shortage.

As a hydropower project capable of starting up quickly, the Project will help meet the sharp daily spurts in demand from households and industries at peak electricity consumption time. This will represent a valuable addition of peaking power to India’s Northern Grid, which faces severe power shortages at high-consumption times.  The 444 Megawatt Vishnugad Pipalkoti Project will also help reduce India’s greenhouse gas emissions by 1.6 million tons each year, compared to a thermal plant of the same capacity. 

“The Government of India is committed to improving the access of its people to power and thereby removing this constraint to human development and economic growth.  Hydropower is one of cleanest means of electricity generation and the Vishnugad Pipalkoti Hydro Electric Project is a priority project that will help relieve power shortages in India," said Mr Venu Rajamony, Joint Secretary in the Department of Economic Affairs, Ministry of Finance, Government of India. 

The Project will build a 65-meter diversion dam near Helang village in Chamoli district of Uttarakhand to create a small reservoir in the Alaknanda River.  A 13.4-kilometer headrace tunnel will carry the water to an underground powerhouse near Haat village to generate the power.  All the diverted water will then be returned to the river.

High minimum flow to be maintained in the river

There will be negligible impact on downstream water quality and THDC will ensure that there is a minimum flow of 15.65 cumecs of water in the Alaknanda at all times to sustain the aquatic health of the river.  This is equivalent to approximately 45 percent of the average lean season flow in the Alaknanda and represents one of the highest minimum flow standards maintained by any hydropower project in India.

“The Vishnugad Pipalkoti Hydro Electric Project has benefited from the Ministry of Environment & Forests’ comprehensive study of the cumulative impacts of hydropower development on the Alaknanda basin, and is one of the first hydropower projects in the country to implement a higher, more environmentally sustainable minimum flow regime,” said Mr Roberto Zagha, World Bank Country Director for India. “This is an important illustration of how India is balancing the needs of rapid economic growth with environmental sustainability.”

The Union Ministry of Environment & Forests had, in July 2010, commissioned a comprehensive assessment of the cumulative impacts of hydropower development on the Bhagirathi and Alkananda basins. THDC’s Vishnugad Pipalkoti Hydroelectric Project was among the projects scrutinized and was cleared for construction with an enhanced environmental flow requirement.

Project Benefits:

· 1,665 million kilowatt-hours of electricity each year

· Peaking power for north Indian states

· 1.6 million tons of GHG emissions reduced each year

· 12 percent free power to Uttarakhand

Minimal Impacts:

· Villages located high above the waterline; river not used for irrigation or for drinking water

· No house or field lost to submergence

· One-fifth of the 141.5 hectares needed acquired from local villagers; rest is government or forest land

· Impacts on forests, wildlife, or aquatic biodiversity manageable

· Robust plans for treating catchment area,  afforestation, muck-dumping drawn up

Sharing Benefits with Local Communities:

· Free electricity to affected households for 10 years

· One percent of project revenues for local area development

· Dedicated stream of funds for building village infrastructure over next five years

“As a responsible corporate citizen, THDC is keen to see the Indian hydropower industry  move to  more sustainable practices and we look forward to our continued association with the World Bank as we build out internal capacity and set up systems that will achieve this,” said Mr R. S. T. Sai, Chairman and Managing Director, THDC India Ltd.

Located on a section of the Alaknanda where it flows through a deep, largely uninhabited gorge, the Project is expected to have minimal negative impacts on the local communities and the environment.  Detailed social and environmental impact assessments, conducted after consultations with local communities and experts, have confirmed that these impacts (see box) are manageable with identified measures.

“Large infrastructure projects often inconvenience the host communities especially during the construction phase. THDC has not only tried to reduce this burden but will also share with the local people some of the benefits that will ultimately accrue from the Project,” said Mr Michael Haney, Senior Energy Specialist and Task Team Leader for the Vishnugad Pipalkoti Hydroelectric Project.

Reducing local impacts

THDC has put into place systems to see that construction of the project does not needlessly impinge upon the social and natural environment of the area.  It has decided to excavate the headrace tunnel with a Tunnel Boring Machine so that noise and dust emissions are reduced, and the nearby villages are not disturbed by vibrations from blasting.

THDC has also decided to insure all houses and structures in a defined corridor along the length of the tunnel so that the villagers living in the vicinity can be duly compensated in case any damage does occur as a consequence of the excavation.  The company has also identified specific locations where debris generated by the Project will be disposed of.  These areas will have strong retaining walls built so that no muck falls into the river.

Sharing benefits

Once the Project begins generation, each household affected by the Project will receive 100 kWh of free electricity every month for 10 years.  THDC will also make available one percent of the annual revenue of the Project for the development of the local area and can be used to build hospitals, roads, water supply schemes etc.  This is apart from Rs 310 million that THDC will provide to help build community infrastructure (like footpaths, footbridges, panchayat ghars etc) in project-affected villages over the next five years.

The power generated by the Vishnugad Pipalkoti Hydro Electric Project will feed into India’s Northern Grid, benefiting consumers in the states of north India and improving the availability of power at reasonable cost to those who currently have limited or no access to electricity. The Project will also provide the state of Uttarakhand with a royalty of 12 percent of the power generated, which is estimated to be around Rs. 90 crore (Rs 900 million or around US$ 20 million at current exchange rates) each year at expected tariffs.

A part of the Bank loan to THDC will help support the company’s capacity-building program that seeks to bolster its core technical staff and develop new competencies in the areas of social and environmental management at the Project and corporate levels.

The low-interest loan, from the International Bank for Reconstruction and Development (IBRD), has a six-year grace period, and a maturity of 29 years.

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