A major highlight during the visit of Union Minister of Power Sushil Kumar Shinde to Washington, will be the signing of a memorandum of understanding between India and the International Finance Corporation on April 25.
The MoU would envisage a major turnaround in rural electrification in India through the development of several pilot projects in a number of states that will advance the government's goal of universal electrification by the year 2012.
International Finance Corporation - the private sector arm of the World Bank Group - is to work in partnership with the National Rural Electric Cooperative Association International, Ltd to develop and implement these programs initially in West Bengal, Bihar, Orissa, Madhya Pradesh, Gujarat, Punjab and Rajasthan.
These pilot projects will include long-term technical and franchising support components and will be based on NRECA's highly successful experience in the US-based model for rural electrification. This model was developed during the New Deal and exported to several developing countries over the last forty years.
NRECA is a not-for-profit association of cooperatives which provide power to rural areas of the United States, and has world-class and cutting-edge expertise in designing and operating rural electrification programs in the US as well as in emerging markets such as Bangladesh, the Philippines, Guatemala, Bolivia and several other countries. NRECA's members provide power to about 12 per cent of the US population covering 85 per cent of the US land mass.
Denise Leonard, chief investment officer in IFC's advisory services department told rediff India Abroad that "IFC has teamed up with NRECA to offer advisory services to the Indian government to design, implement, and scale-up public-private participation in rural electrification."
She said that providing such services is right up IFC's street because "we have considerable experience in designing and tendering public-private partnerships for infrastructure in emerging markets."
Leonard noted that "more than half-a-billion people in India have no access to electricity and this is driving the government," to enter into such an MoU to alleviate this acute malaise. "We believe that India will benefit from NRECA's international experience and best practices developed and documented in the numerous countries that have undertaken such programs."
She said that through the design and implementation of new, more commercially sustainable rural electrification markets and intermediaries, "these best-practices can render the rural electrification sector in the various states increasingly viable and credit-worthy."
The American rural electrification program was set up by the US Department of Agriculture as part of the New Deal. In the early 1960s, President John F Kennedy asked NRECA to take its program international.
According to Leonard, the Indian program will focus on the creation of specialised rural area electric service enterprises in the selected states. The new rural entities will be fundamentally demand-driven, scaled, and operationally oriented to be commercially sound, technology-neutral, and capable as models for solving the major portion of electricity service needs of rural populations in currently unserved or underserved regions.
The project format is highly flexible and can be adapted to brownfield or greenfield areas, grid extensions or distributed generation, and conventional or alternative energy sources, she added.
Leonard said the program will be developed under a collaborative, joint decision-making process amongst the Power Finance corporation-India's public financial institution dedicated to developing the power sector-the states involved, NRECA, and IFC.
Some of the main features are:
- Rural electric distribution entities are developed within parameters of economic scale and financial viability, including the ability to obtain affordable capital financing as well as to set tariffs sufficient to meet their operational and financial obligations.
- Legal and regulatory enabling environments are established at the state and local levels to accommodate the recommended institutional model.
- The availability of reliable and affordably priced power supply for the target project areas is assured.
- Local communities in the identified project target areas play a key role in the ownership and operation of the envisioned enterprises.
- Financial resources and other resources needed for enterprise and project implementation, including required personnel and implementation agencies, are allocated for projects according to need and merit under generally accepted and transparent procurement processes.
- After the projects are established is these initial priority states, Leoanrd said, other states will be slated to similar projects with considerable assistance being given in areas such as technical assistance to the new utilities if required and the setting up of franchising agencies to replicate and scale-up the pilot projects.
