The World Bank has approved a $135 million loan to improve electricity distribution and grid modernisation infrastructure in Bengal in view of the state’s rapid economic growth and the damage caused to the power infrastructure by Cyclone Amphan.

The loan of about Rs 1,000 crore was approved by the bank’s board of directors on Tuesday after an appraisal conducted last February. It has a maturity period of 17 years, including a grace period of seven years.

“The ‘West Bengal Electricity Distribution and Grid Modernisation Project’ will strengthen distribution networks, invest in smart-grid technologies and ensure financial sustainability of West Bengal State Electricity Development Corporation Limited (WBSEDCL),” said Junaid Ahmad, the World Bank’s country director in India.

The official said the Covid-19 pandemic had adversely affected the financial health of electricity distribution companies in India and in turn the financial health of electricity generation companies and expressed hope that the support to the WBSEDCL could serve as an example for other public distribution utilities across India.

The loan from the World Bank is significant because the lender has highlighted that rapid economic growth in Bengal has resulted in growing electricity demand at a rate of 4.5 per cent in the past five years (and) the number of consumers served by the WBSEDCL has more than doubled in the past six years to almost 20 million consumers.

The project information document of the World Bank has also mentioned that Bengal can play an important role in facilitating and promoting regional power trade besides noting that “the state is already facilitating electricity trade with Bangladesh”.

The observations from the bank will surely be music to the ears of Mamata Banerjee as the report has mentioned that the main increase in consumers has taken place in rural areas, a focus area of the Trinamul government.

The report has noted that Bengal has reached close to universal electricity access; which, in turn, has also put a strain on the finances of electricity distribution companies, particularly during the period of Covid-19, as the electricity demand from commercial and industrial sectors has plummeted in recent times.

The assessment also recognised the damage from Cyclone Amphan in May 2020, vindicating the repeated claim of chief minister Mamata Banerjee on the issue.

“In May 2020, Amphan caused significant damage to the electricity infrastructure in West Bengal,” said the bank.

“The project will support network investments to improve operational efficiency and reduce losses”, said Rohit Mittal, the project task team leader from World Bank.

A source in the state power department clarified how the department suffered due to Amphan and other recent cyclones. “This support will be handy for us as repeated extreme weather events; from Bulbul to Amphan and then Yaas, have severely damaged electrical infrastructure in Sunderbans as well as other coastal areas of the state."

According to estimates as per national disaster response norms, the cost of electrical infrastructure repair and restoration during Amphan was Rs 1345 crore; while state government assessment was about Rs 3230 crore, explained a state government official.

The project document claims that the environmental risk of the project is “moderate” as the most extensive activities will happen mainly along existing alignments and would involve cable replacement.