Project Number: 47101-004 MFF Number: 0083 December 2020

India: Assam Power Sector Investment Program (Tranche 3) Distribution of this document is restricted until it has been approved by Management. Following such approval, ADB will disclose the document to the public in accordance with ADB's Access to Information Policy.

Periodic Financing Request Report

http://www.adb.org/Documents/LinkedDocs/?id=47101-004-DraftPFRRhttp://www.adb.org/Documents/LinkedDocs/?id=47101-004-DraftPFRR

CURRENCY EQUIVALENTS (as of 25 November 2020)

ABBREVIATIONS

ADB – Asian Development Bank AERC – Assam Electricity Regulatory Commission APGCL – Assam Power Generation Corporation Limited FFA – framework financing agreement MFF

MW – –

multitranche financing facility megawatt

PAM PMU

– –

project administration manual project management unit

NOTES

(i) The fiscal year (FY) of the Government of India and its agencies ends on 31 March.

“FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 31 March 2020.

(ii) In this report, "$" refers to United States dollars.

Currency Unit – Indian rupee (₹) ₹1.00 = $ 0.0135 $1.00 = ₹ 74.057

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Vice-President Shixin Chen, Operations 1 Director General Deputy Director General

Kenichi Yokoyama, South Asia Department (SARD) Diwesh Sharan, SARD

Director Priyantha Wijayatunga, Energy Division (SAEN), SARD Team Leader Len George, Senior Energy Specialist, SAEN, SARD Team members Jyotirmoy Banerjee, Senior Project Officer (Energy), India Resident

Mission (INRM), SARD Maila Cinco, Associate Project Analyst, SAEN, SARD Natasha Davis, Principal Institution Coordination Specialist, SARD Michael Gomes, Project Analyst, INRM, SARD

Ko Hamamoto, Infrastructure Specialist, Sustainable Infrastructure Division, Sustainable Development & Climate Change Department (SDCC) Yoojung Jang, Social Development Specialist, SAEN, SARD

Prabhjot Khan, Social Development Officer, INRM, SARD Jennifer D. Lazatin, Senior Operations Assistant, SAEN, SARD

Zhaojing Mu, Environment Specialist, SAEN, SARD Vankina Sri Rekha, Principal Counsel, Office of the General Counsel Maria Angelica Rongavilla, Senior Operations Assistant, SAEN, SARD

Joong-Jae Shim, Senior Procurement Specialist, Procurement Division, Procurement, Portfolio and Financial Management Department Jongmi Son, Finance Specialist (Energy), SAEN, SARD

Takayuki Sugimoto, Energy Specialist, SAEN, SARD Rajesh Yadav, Senior Project Officer (Natural Resources and Agriculture), INRM, SARD

Peer reviewer Zhang Lei, Senior Energy Specialist, Energy Division, Central West Regional Department

CONTENTS Page

TRANCHE AT A GLANCE I. BACKGROUND 1 II. ASSESSMENT OF MULTITRANCHE FINANCING FACILITY IMPLEMENTATION 2 III. PERIODIC FINANCING REQUEST 3

A. Impact and Outcome 3 B. Outputs 4 C. Summary Cost Estimates and Financing Plan 4 D. Implementation Arrangements 5 E. Project Readiness 6

IV. DUE DILIGENCE 6 A. Technical 6 B. Economic and Financial 7 C. Governance 7 D. Poverty, Social, and Gender 8 E. Safeguards 8 F. Summary of Risk Assessment and Risk Management Plan 10

V. ASSURANCES 10 VI. THE PRESIDENT’S DECISION 10

APPENDIXES 1. Design and Monitoring Framework for Project 3 2. Loan Agreement 3. Grant Agreement 4. Project Agreement 5. Project Administration Manual for Project 3 6. Contribution to Strategy 2030 Operational Priorities 7. Economic Analysis 8. Financial Analysis 9. Updated Summary of Poverty Reduction and Social Strategy 10. Procurement Plan 11. Environment Impact Assessment 12. Resettlement and Indigenous Peoples Plan 13. Gender Action Plan 14. Updated Risk Assessment and Risk Management Plan 15. Climate Change Assessment SUPPLEMENTARY APPENDIX (to be disclosed on request) 16. Financial Management Assessment Report 17. Stakeholder Communication Strategy 18. Grant Fund Report

I. BACKGROUND

1. Multitranche financing facility. The Asian Development Bank (ADB) and India signed a framework financing agreement (FFA) on 13 May 2014 for the Assam Power Sector Investment Program. On 3 July 2014, ADB’s Board of Directors approved the provision of a multitranche financing facility (MFF) to India for an aggregate facility amount of $300 million.1 2. Prior interventions by the Government of Assam, including those with ADB support,2 resulted in an increase in the number of electricity connections from 1.1 million in fiscal year (FY) 2004 to nearly 1.7 million in FY2008, while the generation capacity of the state government-owned Assam Power Generation Corporation Limited (APGCL) increased from 120 megawatt (MW) to about 400 MW over the same period. There was also a reduction in electricity distribution losses of the state government-owned Assam Power Distribution Company Limited (APDCL) from about 40% in FY2001 to about 24% in FY2012. Prior sector reforms include unbundling of the state utility as well as setting up of an independent Assam Electricity Regulatory Commission (AERC). However, in 2012, the state’s power sector continued to face challenges including (i) only about 37% of households had access to grid-supplied electricity with power cuts of about 5 hours a day; (ii) the peak demand–supply gap was as high as 23% with about 25% of demand met by in-state generation; (iii) distribution losses were high at about 24% compared to national targets of 15%; and (iv) the financial performance of power sector companies, particularly APDCL, remained poor. 3. The Government of Assam is taking various steps to address problems in the power sector with the objective of (i) achieving universal access to electricity by FY2022; (ii) improving the quality and reliability of power supply; and (iii) addressing power sector constraints to improve the state’s economy. Demand for power is expected to double from 1,250 MW in FY2012 to about 2,600 MW in FY2022. The focus in the generation subsector includes bridging the demand– supply gap through building new and efficient power projects in the state and purchasing power effectively from out-of-state sources. The transmission utility would seek to improve reliability and improve efficiency through investments. The focus in distribution is to improve efficiency through investments and operational improvements, strengthen financial sustainability, and deliver good quality power supply to end-users. The utilities also plan to build the capacity of staff for efficient service delivery and support the functioning of enterprise resource planning systems. 4. The Government of Assam has a power sector master plan with a road map that identifies $3.5 billion of investments for FY2012–FY2022. 3 This includes the ongoing ADB-supported Assam Power Sector Investment Program (APSIP) and other ADB interventions.4 The master plan targets an increase of the state-owned generation capacity to 1,410 MW by FY2022. Transmission investments include about 88 substations and 4,800 circuit kilometers of lines, while distribution investments cover 265 substations and 63,500 circuit kilometers of lines to service about 7.1 million new customers and reduce distribution losses to 15% by FY2022.

1 ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility to India for the Assam Power Sector Investment Program. Manila. The MFF closes in June 2024. 2 ADB has been supporting Assam’s energy sector since 2003. The first loan was approved to carry out power sector

institutional reforms as well as physical infrastructure investments. ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans and Technical Assistance Grants to India for the Assam Power Sector Development Program. Manila (Loan 2036-IND).

3 Government of Assam. 2014. Assam Power System Master Plan. Assam. It was supported under ADB. 2013. Technical Assistance for Updating Load Forecast and Power System Master Plan for Assam. Manila (TA 8129-IND).

4 On 18 November 2009, ADB’s Board of Directors approved an MFF to India for an aggregate facility amount of $200 million for transmission and distribution investments. Four loans were approved under the MFF. ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility and Technical Assistance Grant to India for the Assam Power Sector Enhancement Investment Program. Manila.

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5. The expected impact of the APSIP is increased availability of electricity in Assam. The expected outcome is increased capacity and efficiency of energy generation and distribution systems in Assam. The investment program is financing (i) augmentation of in-state generation capacity through retrofitting of the inefficient gas-fired generating plant at Lakwa (project 1); (ii) distribution loss reduction and efficiency improvement through upgrading and expansion of the distribution system (project 2); and (iii) construction of a new hydropower plant at Lower Kopili (project 3). The investment program will also finance nonphysical components to achieve long-term institutional and financial sustainability of the power utilities in Assam, and to improve customer services. In addition, the investment program includes resources for the preparation of project 3, and implementation support for all projects under the MFF.5 6. The proposed 120 MW project at Lower Kopili will add to Assam’s power generation capacity from a clean energy source and will double APGCL’s generation capacity from hydroelectric sources (footnote 9). The project will support lower electricity costs in the state, particularly during peak evening periods through reduced dependence on expensive fossil fuel sources. Support for hydroelectric power generation is relevant to complement India’s target of 175,000 MW of power, largely from intermittent wind and solar energy sources by FY2022, and to achieve 40% of installed capacity from non-fossil fuel-based energy sources by 2030.6 7. Tranches. The report and recommendation of the President indicated there would be three tranches (footnote 1). The first tranche was approved on 11 July 2014 to finance the retrofitting of the Lakwa gas plant to improve efficiency in power generation, while the second tranche was approved on 23 November 2015 to support downstream electricity distribution investments.7 ADB received from the Government of India a periodic financing request (PFR) for the third tranche in September 2018 for the Lower Kopili hydroelectric project. The PFR was resubmitted on 25 April 2020 reflecting the increased funding requirement for project 3, and following prior tranche cancellations under project 2.8 The investments under project 3 cover a part of the Government of Assam’s power sector road map to enhance clean power generation capacity and improve electricity availability for customers. The scope of project 3 is within the original scope of the MFF and in compliance with the FFA.

II. ASSESSMENT OF MULTITRANCHE FINANCING FACILITY IMPLEMENTATION

8. Progress on road map. The Government of Assam is implementing its road map for the Assam power sector, and has made significant progress. Household access to electricity has increased from 37% in FY2011 to 61% in FY2016, and the pace of electrification has accelerated towards 100% with funding from the Government of India. Consequently, peak demand in Assam increased from 1,250 MW in FY2012 to nearly 2,193 MW in FY2019, while the installed power generation capacity increased from 960 MW to 1,729 MW over the same period.9 Distribution losses have reduced to about 19% in FY2019 and investments are under implementation to meet efficiency targets. The state is investing in in-state generation projects, including from clean

5 To ensure coordinated development, the Assam Electricity Grid Corporation Limited improved transmission

connectivity through support under the Assam Power Sector Enhancement Investment Program (footnote 4). 6 Government of India. 2015. India‘s Intended Nationally Determined Contribution. New Delhi. 7 ADB. 2014. Periodic Financing Request Report: Assam Power Sector Investment Program (Tranche 1). Manila; and

ADB. 2015. Periodic Financing Request Report: Assam Power Sector Investment Program (Tranche 2). Manila. 8 Project 3 is included in ADB. 2020. Country Operations Business Plan: India, 2021–2023. Manila.
 9 This includes 433 MW of state-owned generation through Assam Power Generation Corporation Limited (APGCL)

including 113 MW from hydroelectric sources, 1,226 MW of central government-owned power projects, and about 70 MW of private projects as of October 2019.

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energy sources, to meet demand and better utilize its natural resources. Implementation has been delayed resulting in dependence on alternate power sources. 9. Improvements in policy framework. The policy framework maintains continuity through the Power for All Program that outlines the Government of Assam’s power sector priorities.10 A multi-year tariff mechanism was developed by AERC to improve performance. For FY2019–FY2022, targets for generation availability, generation efficiency, and distribution losses are to be achieved through investments, capacity building, and increased commercial orientation. 10. Progress of investment program. The investment program is under implementation and there have been no substantive or material changes in the type of investments. Project 1, with a regular loan of $50.0 million, was approved in July 2014, and made effective in May 2015. The major package was the replacement of inefficient, old open-cycle turbines with a more efficient gas engine for the 70 MW Lakwa gas plant, while nonphysical subcomponents included preparation for project 3, implementation support for project 1, enterprise resource planning support, capacity building and training. Contracts worth $39.1 million were awarded and fully disbursed. APGCL has completed the Lakwa project and commercial operation started in April 2018. The tranche was closed in September 2019, and uncommitted funds of $10.9 million were returned to the facility. Two consultancy contracts and enterprise resource planning (ERP) tenders originally planned under project 1 are proposed under project 3. 11. Project 2, with a regular loan of $48.0 million, was approved in November 2015. The loan was made effective in December 2016 to support distribution efficiency improvement through APDCL. Contracts worth $29.8 million were awarded and $25.0 million was disbursed. The tranche was closed in August 2020. Based on a review of contracts awarded, $18.2 million was canceled and returned to the facility which would be used to augment the financing requirement of project 3. The MFF performance rating as of October 2020 is on track.

12. Compliance with undertakings and loan covenants. The executing agencies for projects 1 and 2 are compliant with most of the FFA undertakings and the loan covenants in the loan agreements. However, fulfillment of five undertakings related to financial management has been delayed. APGCL was expected to address the issues identified by its auditor by December 2014. It was also expected to implement an ERP, complete asset valuation, improve its financial sustainability, and implement identified institutional measures by 2018. These are works in progress. A revised financial management action plan for these covenants has been prepared with implementation progress to be reported to ADB on a monthly basis. Environmental and social monitoring reports were submitted to ADB for both projects with some delays. Compliance with unfulfilled undertakings and covenants identified above will be closely monitored.

III. PERIODIC FINANCING REQUEST

A. Impact and Outcome

13. Project 3 is aligned with the following impact: increased availability of electricity in Assam.11 Project 3 will have the following outcome: increased electricity supply from clean energy in Assam.12

10 Government of Assam. 2015. Power for All – Assam. Guwahati. 11 Government of India. 2017. Three Year Action Agenda. New Delhi, and footnote 10. 12 The design and monitoring framework is in Appendix 1.

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B. Outputs

14. Output 1: Lower Kopili hydropower plant installed. This output will include the construction of the 120 MW Lower Kopili hydroelectric project and its connection to the transmission grid by December 2023. The project comprises 2 units of 55 MW main powerhouse, and 2 units of 2.5 MW and 1 unit of 5 MW auxiliary powerhouses. By June 2025, the hydropower plant is expected to increase electricity supply from clean energy in the state by 469 gigawatt-hour (GWh),and reduce greenhouse gas emissions by 360,000 tons of carbon dioxide annually. 15. Output 2: Institutional capacity of Assam Power Generation Corporation Limited strengthened. Project 3 will build the capacity of at least 30 APGCL staff (including six women) in construction, operations and maintenance, and safeguards. It also includes the establishment of an enterprise resource planning system and completion of asset verification studies. 16. Output 3: Resource management and community resilience initiatives implemented. This output includes (i) installation of sensors and monitoring equipment, and development of dashboards for state and local government for resource management; and (ii) development of plans and training of at least 500 people (including 40% women) along the Kopili River basin for increased capacity in managing disasters. C. Summary Cost Estimates and Financing Plan

17. Project 3 is estimated to cost $297.0 million (Table 1). Detailed cost estimates by expenditure category and by financier are included in the project administration manual (PAM) (Appendix 5). The project team reviewed the impact of COVID-19 on the project and has factored in measures to mitigate the impact on implementation costs and timelines (para. 24, Table 4).

Table 1: Summary Cost Estimates ($ million)

Item Amounta A. Base Costb 1. Lower Kopili hydropower plant installed 250.6 2. Institutional capacity of APGCL strengthened 18.6 3. Resource management and community resilience initiatives implemented Subtotal (A)

1.8

271.0 B. Contingenciesc 19.6 C. Financial Charges During Implementationd 6.4 Total (A+B+C) 297.0

APGCL = Assam Power Generation Corporation Limited. a Includes goods and service taxes of $2.4 million to be financed by the Government of Assam, and $32.7 million to

be financed by ADB loan resources. The taxes and duties to be financed by ADB (i) are within the reasonable threshold identified during the country partnership strategy preparation process, (ii) are not excessive and represent a nominal percentage (14.2% of the loan), (iii) apply only to ADB-financed expenditures, (iv) are intended to simplify and expedite disbursement arrangements, and (v) are considered material and relevant to the success of the project. In addition, taxes and duties pertaining to output 3 (supported under the Trust Fund) will be financed by the Japan Fund for Poverty Reduction.

b In 2020 prices. c Physical contingencies computed at 1.0% of base costs. Price contingencies computed at average of 1.6% for foreign

exchange costs and 4.0% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.

d Includes interest and commitment fee. Interest during construction is computed at the on-lending rate to APGCL and does not include $8.0 million of interest serviced by India.

Sources: Asian Development Bank and Assam Power Generation Corporation Limited.

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18. The Government of India has requested a regular loan of $231 million from ADB’s ordinary capital resources to help finance the project. The loan will have a 20-year term, including a grace period of 5 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate based lending facility; a commitment charge of 0.15% per year and such other terms and conditions set forth in the draft loan and project agreements. Based on the straight-line repayment method, the average loan maturity is 12.75 years, and the maturity premium payable to ADB is nil. The Japan Fund for Poverty Reduction (JFPR) will provide a grant not exceeding the equivalent of $2 million to be administered by ADB. 19. The summary financing plan is in Table 2. ADB will finance the expenditures in relation to the turnkey contracts (including goods and service taxes), consulting services, capacity development, enterprise resource planning, and contingencies. The JFPR grant will finance equipment, consulting services and capacity development for resource management, and community resilience improvement under output 3. The Government of Assam will finance establishment costs, recurrent costs, interest during implementation, land transfer, environmental and social mitigation, project management, remuneration of counterpart staff, and taxes and duties for one consulting package. The government has assured ADB that it will cover any shortfall in financing required to meet the agreed outputs.

Table 2: Summary Financing Plan

Source Amount

($ million) Share of Total (%)

Asian Development Bank Ordinary capital resources (regular loan) 231.0 77.8

Japan Fund for Poverty Reductiona 2.0 0.7 Government of Assam 64.0 21.5

Total 297.0 100.0 a Administered by the Asian Development Bank. Source: Asian Development Bank estimates.

20. Climate mitigation is estimated to cost $229.3 million to support clean energy development and climate adaptation is estimated to cost $1.7 million to address risks of changes in rainfall and emergencies. ADB will finance 100% of mitigation costs and 100% of adaptation costs. Details are in the Climate Change Assessment (Appendix 15). D. Implementation Arrangements

21. The implementation arrangements are summarized in Table 3 and described in detail in the PAM (Appendix 5). A project management unit (PMU) under the Managing Directors of APDCL, APGCL, and Assam Electricity Grid Corporation Limited has been functioning since 2014 for overall MFF coordination. APGCL has established a project PMU, headed by a project director, for day-to-day project coordination. A project supervision consultant (PSC) with significant hydropower development experience was recruited in 2017 to support the PMU. The Government of Assam and APGCL were advised that ADB’s approval of advance contracting and retroactive financing does not commit ADB to finance any part of the project. APGCL and the Government of Assam have confirmed the intent to complete the project within the MFF availability period.

22. Goods, equipment, and civil works to be financed under the project will be procured following ADB’s Procurement Guidelines (2015, as amended from time to time). International competitive bidding is used for turnkey packages. The PSC was recruited in accordance with ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time) with a two-stage contract. The first stage to support tendering was funded under project 1 while the second stage for project implementation would be under project 3. The JFPR grant will be administered

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by ADB and guided by a steering committee comprising APGCL and key stakeholders in the Government of Assam including autonomous district councils.

Table 3: Implementation Arrangements for Project 3 Aspects Arrangements Implementation period November 2020–December 2023 Estimated completion date 31 December 2023 (loan) and 30 June 2023 (grant) Estimated loan and grant closing date 30 June 2024 (loan) and 31 December 2023 (grant) Management

(i) Oversight body Steering Committee – Principal Secretary, Power Department, GOA (chair), Managing Director APGCL and AEGCL (members).

(ii) Executing agency Government of Assam through APGCL (iii) Project Implementation PMU with 11 staff including at project site.

Procurement ICB 8 contracts $212.6 million Consulting services QCBS, ICS 6 contracts $13.6 million Retroactive financing and advance contracting

Advance contracting in place. Retroactive financing of up to 20% of the loan amount for expenditures incurred 12 months before loan signing.

Disbursement The loan and/or grant proceeds will be disbursed following ADB’s Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between GOI, GOA, and ADB.

ADB = Asian Development Bank, AEGCL = Assam Electricity Grid Corporation Limited, APGCL = Assam Power Generation Corporation Limited, GOA = government of Assam, GOI = Government of India, ICB = international competitive bidding, ICS = individual consultant selection, PMU = project management unit, QCBS = quality- and cost-based selection. Source: Asian Development Bank.

E. Project Readiness

23. Technical and commercial clearances were received from the Central Electricity Authority (CEA) under the Ministry of Power in May 2016. APGCL prepared the environment impact assessment (EIA) (Appendix 11), and a public hearing was conducted in January 2017 by the State Pollution Control Board. A no-objection to the environmental clearance was provided in December 2017 by a committee under the Ministry of Environment Forest and Climate Change (MOEFCC), and forest clearance was received in February 2019. The land allotment letter has been received for both Dima Hasao and Karbi Anglong.

24. The PSC scope of work includes detailing tender designs and preparing bidding documents, review of costs, assistance to APGCL in the bid evaluation process, supervision of the engineering, procurement and construction contracts during implementation and related training of APGCL staff. The civil and hydromechanical package was re-tendered in 2019 and the contract was awarded in August 2020. The remaining packages will be awarded subsequently. The packages for asset valuation and ERP were awarded and have commenced implementation. The labor required for the civil works would be locally available and construction materials would be locally sourced. The PSC and APGCL are coordinating with contractors for timely delivery of equipment and material to project site.

IV. DUE DILIGENCE

A. Technical

25. APGCL engaged a hydropower consulting firm to prepare a detailed project report (DPR) that includes the project scope and conceptual design, demonstrating the project’s technical, financial, and economic viability. 13 This was reviewed under the MFF and technical and

13 APGCL. 2015. Detailed Project Report: 120 MW Lower Kopili Hydro Electric Project. Guwahati.

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commercial clearances were subsequently received from the CEA. An independent expert would be recruited to monitor dam safety. In addition, a detailed climate risk and vulnerability assessment was conducted to ensure that project design considers projected climate impacts and would be climate and disaster resilient in the long term. A capacity building program to strengthen APGCL’s operations and maintenance for hydroelectric projects is included. The project adopts protection measures to address water acidity in the Kopili River. B. Economic and Financial

26. Economic viability. An economic analysis was conducted in accordance with ADB’s Guidelines for the Economic Analysis of Projects.14 The non-incremental benefit of avoided fuel costs and the environmental benefit of avoided carbon dioxide emissions were calculated based on displaced diesel generation. Incremental outputs were valued using the willingness-to-pay methodology, while non-incremental outputs were valued at resource cost savings. The economic analysis indicates an economic internal rate of return of 14.8%. Given a hurdle rate of 9%, the project is deemed economically viable based on risk and sensitivity analysis. 27. Financial viability. A financial cost-benefit analysis was conducted in accordance with ADB’s technical guidance note on financial analysis and evaluation.15 The electricity produced by the project will be priced in accordance with the tariff regulations set by the AERC, which allows cost recovery through a tariff.16 The grant portion was excluded from the computation of revenue as well as capital expenditure following AERC’s decision that any grant that does not carry any liability of repayment is not permitted for cost recovery. The financial internal rate of return for the project was calculated in real terms on an after-tax basis. Results indicate a financial internal rate of return of 8.3% that is above the weighted average cost of capital of 2.4%; based on this and the results of the sensitivity analysis, the project is deemed financially viable. C. Governance

28. Since 2014, APGCL has progressively demonstrated improved financial management including through an improvement in the quality and timeliness of regulatory submissions to the AERC, and through the development of manuals for accounting, budgeting, internal audit, inventory management, fund management, and investment policy. A long-term human resource plan was prepared under project 1 and adopted by APGCL. The tariff for APGCL is set by the AERC based on a review of costs and public scrutiny and feedback. However, despite these improvements, the financial management risk continues to be rated high because of delays in recruitment of key staff, implementation of enterprise resource planning, and asset valuation. These packages are now being financed under project 3. A time-bound action plan to address residual risks is in place and is under implementation with periodic reviews by ADB. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and APGCL. The specific policy requirements and supplementary measures are described in the PAM (Appendix 5). ADB reserves the right to examine and review directly any alleged corrupt, fraudulent, collusive, or coercive practices relating to the project.

14 ADB. 2017. Guidelines for the Economic Analysis of Projects. Manila. 15 ADB. 2019. Financial Analysis and Evaluation – Technical Guidance. Manila. 16 AERC. 2018. Terms and Conditions for Determination of Multi Year Tariff Regulations. Guwahati. Grants are

excluded from revenue computation and capital expenditure following AERC tariff principles.

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D. Poverty, Social, and Gender

29. The project will contribute to an increased supply of affordable and clean electricity to Assam with development activities focused on the districts of Dima Hasao and Karbi Anglong. Reliable and affordable electricity supply improves living conditions, promotes business expansion, increases employment opportunities, and reduces poverty. Electricity supply contributes to meeting basic human needs, including health and education. The project is expected to generate jobs for skilled and unskilled laborers, including vulnerable groups and women, during the construction period; and to increase economic activities and livelihood opportunities. It would also support rural development expenditure in the two districts from the royalties on power sale. These measures would contribute to Assam’s post COVID-19 recovery. In addition to the Government of Assam’s resettlement and rehabilitation plan to support skills development in the project areas for affected people, measures to improve resource management and community resilience to disasters will be supported under the proposed JFPR grant. The summary poverty reduction and social strategy was updated and is included in Appendix 9. 30. The project will contribute to improving gender equity by enhancing the gender capacity of APGCL, and improving women’s participation in and contribution to training and community-led interventions. Project 3 is classified as effective gender mainstreaming. A gender action plan (GAP) has been prepared to ensure gender equality activities are effectively implemented (Appendix 13). Gender capacity building of PMU staff and contractors will create improved gender responsiveness in planning and implementation. Orientation workshops focusing on enhancing female workforce participation, skills, wage equality, health, safety, and hygiene will be planned for contractors and laborers. The GAP will promote women’s participation in project-related community awareness campaigns, consultations, and development of disaster resilience action plans. Disaster warning systems and mitigation plans will integrate an inclusive approach to planning and execution. Local area development planning activities will promote gender responsive infrastructure, education, health facilities and services. Gender-focused awareness campaigns in nutrition, health and menstrual hygiene will be planned and targeted towards female students. Special measures will be taken to enhance women’s participation in resettlement, rehabilitation, and income restoration initiatives. Monitoring and evaluation mechanisms will track beneficiary data across interventions in a sex disaggregated manner. Impact evaluations and the social audit methodology will include gender parameters. Consultations have been held continuously during project design and preparation and will be continued during the project cycle. A stakeholder communication strategy is included in the PAM (Appendix 5). E. Safeguards

31. Environment (category A). The EIA (Appendix 11) was undertaken based on ADB’s Safeguard Policy Statement (2009), the Environment Assessment and Review Framework, and national regulatory requirements. 17 Mitigation measures are proposed in the EIA and the environment management plan (EMP) including a compensatory afforestation plan and a biodiversity and water quality restoration plan to minimize and monitor environmental, health and safety impacts because of changes in the hydrological regime and loss of forest land. The EIA was disclosed on the ADB website on 16 October 2018. Any updates to the EIA from a change in project scope will be similarly disclosed. 32. The project area is not a notified environmentally sensitive area. The project area is not a

17 Footnote 1 (Environmental Assessment and Review Framework accessible from the list of linked documents in

Appendix 2 of RRP).

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critical habitat for any species and a comprehensive program of mitigation, management, and biodiversity offsets is planned. Key environmental impacts are associated with the submergence of 552 hectares (ha) of land under the reservoir, loss of biodiversity and habitat because of the diversion of 523 ha of forest land, and disruption of hydrological balance through the disruption of river flow for reservoir creation. Special attention will be given to two threatened species, the Asian elephant and the Chinese pangolin, including monitoring and protection of their habitat and support for a species recovery program.

33. APGCL’s institutional capacity and commitment to manage its environmental risks are deemed adequate. However, trainings and capacity building are included in the EMP. Information disclosure and consultations with affected people were conducted in accordance with ADB’s requirements. The PMU at APGCL is responsible for EMP implementation. APGCL has allocated sufficient budget to implement the EMP. External experts will be recruited under the loan to monitor the project’s environmental impacts and provide environmental monitoring reports to ADB on a regular basis. The monitoring reports will be posted on ADB’s website and disclosed locally by APGCL. In the event of any unanticipated environmental impacts during implementation, or if monitoring identifies a breach of performance standards to be complied with by APGCL and/or its contractors, APGCL will submit a time-bound corrective action plan or update the EIA and EMP. 34. Involuntary resettlement (category A) and indigenous peoples (category A). The hydroelectric project affects 16 villages with 1,831 tribal households in Dima Hasao and Karbi Anglong districts. It physically displaces 18 households. The project will acquire 1,577 ha of land of which 1,054 ha are leaseholds lands; and 523 ha are state forests. The affected persons (APs) include indigenous people; after consultations, APGCL and the district councils signed agreements indicating broad community support. 18 The transmission line could impact 350 households because of tower erection and right-of-way.19 The area under the right-of-way is estimated as 182 ha of which the transmission tower bases totally require 4.2 ha of land. The impacts for the transmission line are mainly temporary with no physical displacement expected. However, tall trees under the right-of-way and crops on tower footings are permanently affected.

35. Following the resettlement framework and indigenous peoples framework, an assessment was done in consultation with concerned stakeholders.20 A resettlement and indigenous peoples plan (RIPP) (Appendix 12) was prepared to record social, economic, and cultural aspects of the project area and affected communities, and present a comprehensive mitigation plan to address adverse social impacts.21 As all the APs affected by land acquisition are scheduled tribes, a combined plan is considered sufficient to address indigenous peoples and resettlement aspects. The entitlements in the RIPP provide all the APs compensation commensurate to the impacts, and enable the APs to restore and improve their livelihoods and sources of income. 36. The RIPP is prepared in compliance with the state and national laws, regulations and ADB’s Safeguard Policy Statement. APGCL has allocated adequate budget for land acquisition, resettlement and rehabilitation of APs. The document outlines the institutional arrangements to deliver entitlements and project benefits to the project APs and other stakeholders, a mechanism to resolve grievances, and a monitoring framework. APGCL has established a safeguards cell and is supported by the PSC and experienced safeguards specialists. A nongovernment organization is supporting implementation.

18 Discussions also included the Lower Kopili Hydroelectric Project Affected Persons Association. 19 Of the 350 households, 178 are affected by transmission tower bases and 172 by the transmission line corridor. 20 Footnote 1 (Resettlement Framework and Indigenous Peoples Framework accessible from the list of linked

documents in Appendix 2 of RRP). 21 This comprises two volumes: one for the hydroelectric project and the other for the transmission line.

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37. APGCL will provide social monitoring reports to ADB on a semiannual basis. The reports will describe the implementation progress of resettlement and indigenous people activities, compliance issues and quantitative monitoring data in accordance with the RIPP. The monitoring reports will be posted on ADB’s website and disclosed locally by APGCL. An external expert will be recruited to monitor the project’s resettlement and indigenous people impacts. In the event of any unanticipated resettlement impacts during implementation, or if monitoring identifies a breach of performance standards that should be complied with by APGCL and/or its contractors, APGCL will submit to ADB a time-bound corrective action plan or update the combined resettlement and tribal development plan and combined resettlement and indigenous peoples plan. F. Summary of Risk Assessment and Risk Management Plan

38. Significant risks and mitigating measures are summarized in Table 4 and described in detail in the risk assessment and risk management plan. 22

Table 4: Summary of Risks and Mitigating Measures

Risks Mitigation Measures Limited project management capacity

The project management unit is adequately staffed. A hydropower consultant supports procurement, design reviews, and implementation monitoring.

Cost and time overruns due to geological risks and COVID-19

Contingency is available to cover cost overruns. Labor and materials for civil works will be locally sourced. Additional investigations along the tunnel are completed. COVID-19 awareness and management plans to be tracked. Incentive payments for timely completion are included in turnkey contracts.

Environmental and social factors impact implementation

Environmental clearance is in place. DCs support the project. Multi-tiered safeguard teams including a nongovernment organization, PSC, and external monitors are proposed.

Weak financial management systems

APGCL to address audit qualifications, complete asset verification, implement ERP, and recruit key staff under project 3.

Acidic water reduces power generation

Design features of turbines and associated infrastructure are suitably modified to ensure longevity of the project.

APGCL = Assam Power Generation Corporation Limited, COVID-19 = coronavirus disease, DC = district councils; ERP = enterprise resource planning, PSC = project supervision consultant. Source: Asian Development Bank.

V. ASSURANCES 39. The Government of India, Government of Assam, and APGCL have assured ADB that implementation of the project shall conform to all applicable ADB policies including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM and loan documents. The Government of India, Government of Assam and APGCL have agreed with ADB on certain covenants for the project, which are set forth in the loan agreement and project agreement.

VI. THE PRESIDENT’S DECISION 40. On the basis of the approval by ADB's Board of Directors for the provision of loans under the multitranche financing facility in an aggregate principal amount not exceeding $300,000,000 to India for the Assam Power Sector Investment Program, the President has approved the proposed tranche as described in para. 18 and such other terms and conditions as are substantially in accordance with those set forth in the draft loan and project agreements. The President has also approved the administration by ADB of the grant not exceeding the equivalent of $2,000,000 to India, as described in para. 18, for the proposed tranche of the Assam Power Sector Investment Program, to be provided by the Japan Fund for Poverty Reduction.

22 The updated risk assessment and risk management plan is in Appendix 14.

Appendix 11

Design and Monitoring Framework for the Investment Program under Project 3 Impact the Project is aligned with: Increased availability of electricity in Assam (Power for All, and Government of India’s Three Year Action Agenda)a

Results Chain Performance Indicators with

Targets and Baselines Data Sources and Reporting

Risks

Outcome Increased electricity supply from clean energy in Assam.

By June 2025: a. 469 GWh/year of hydroelectricity generated from Lower Kopili Hydro Electric Project (2019 baseline: 0 GWh/year) (OP 3.1.3) b. GHG emissions reduced by about 360,000 tCO2/year (2019 baseline: 0) (OP 3.1)

a. APGCL annual reports b. APGCL annual report, CEA report on grid emission factors in India

Changes in rainfall patterns and catchment management beyond projection reduce energy output. Increased costs of generation may require curtailment of purchases.

Outputs 1. Lower Kopili

hydropower plant installed

By December 2023: 1a. 120 MW Lower Kopili hydropower plant constructed (FY2019 baseline: 0) (OP 3.1.3, 3.2.5)

1a. APGCL annual report

COVID-19 impact on supply chains delays access to site, and geological uncertainties result in construction delays and cost overruns.

2. Institutional capacity of APGCL strengthened

3. Resource management and community resilience

By December 2023: 2a. At least 30 relevant APGCL staff (including at least 6 eligible women) reported increased knowledge on construction, operations, maintenance, and safeguards for hydropower development (2019 baseline: 0) (OP 6.1) 2b. Enterprise Resource Planning system established and operational (2019 baseline: not established) (OP 6.2.3) 2c. Fixed asset verification and valuation completed (2019 baseline: not established) (OP 6.2.3) Financed under JFPR grant By June 2023: 3a. Dashboard for the state and 5 local governments established and

2a. Pre-and post-training assessment. 2b-c. APGCL annual report. 3a. Grant report

Changes in key staff positions delay development of institutional capacity and knowledge transfer.

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Results Chain Performance Indicators with Targets and Baselines

Data Sources and Reporting

Risks

initiatives implemented

generate reports for decision making on resource management and disaster management (2019 baseline: not established) (OP 6.1) 3b. At least 500 residents along the Kopili river basin (40% women) reported increased knowledge on community-based disaster management (2019 baseline: 0) (OPs 2.3.2, 2.5, 3.2, 3.2.2)

3b. Pre-and post-training assessment

APGCL = Assam Power Generation Corporation Limited, CEA = Central Electricity Authority, COVID-19 = coronavirus disease, GHG = greenhouse gases, GWh = gigawatt hour, JFPR = Japan Fund for Poverty Reduction, MW = megawatt, OCR = ordinary capital resources, OP = operational priority, Q = quarter. a Government of Assam. 2015. Power for All-Assam. Guwahati; and Government of India. 2017. Three Year Action

Agenda. New Delhi. Contribution to Strategy 2030 Operational Priorities Expected values and methodological details for all OP indicators to which this operation will contribute results are detailed in Contribution to Strategy 2030 Operational Priorities (Appendix 6). In addition to the OP indicators tagged in the DMF, this operation will contribute results for:

OP 1.2 Jobs generated (number). Expected: At least 400 low skilled workers employed during construction.

Source: Asian Development Bank Estimates.

Key Activities with Milestones 1. Lower Kopili hydropower plant installed 1.1 Issue package 2 bid documents by Q2 2019 and award in Q3 2020 1.2 Issue other bid documents by Q2 2020 and award in Q1 2021 1.3 Completion of construction in Q4 2023 1.4 Power plant commercial operation by Q2 2024 2. Institutional capacity of APGCL strengthened 2.1 Issue bid documents by Q3 2020 and award in Q4 2020 2.2 Staff trained in various aspects of hydroelectric power plant construction, operation and maintenance;

ERP established; and staffing improved by Q4 2023 3. Resource management and community resilience initiatives implemented 3.1 Issue bid documents by Q4 2020 and award by Q1 2021 3.2 Resource management and community initiatives implemented by Q2 2023 Inputs ADB (loan): $231.0 million (OCR) ADB (JFPR Grant): $2.0 million (Grant) Government: $64.0 million Assumptions for Partner Financing Not applicable

I. BACKGROUNDII. ASSESSMENT OF MULTITRANCHE FINANCING FACILITY IMPLEMENTATIONIII. PERIODIC FINANCING REQUESTA. Impact and OutcomeB. OutputsC. Summary Cost Estimates and Financing Plan18. The Government of India has requested a regular loan of $231 million from ADB’s ordinary capital resources to help finance the project. The loan will have a 20-year term, including a grace period of 5 years; an annual interest rate determined in a...D. Implementation ArrangementsE. Project Readiness

IV. Due diligenceA. TechnicalB. Economic and FinancialC. GovernanceD. Poverty, Social, and GenderE. SafeguardsF. Summary of Risk Assessment and Risk Management Plan

V. ASSURANCESVI. THE PRESIDENT’S DECISIONSource: Asian Development Bank Estimates.