Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Project Name Punjab High Voltage Distribution System Carbon Offset Project Region South Asia Sector SASDE Project ID P105618 Borrower(s) NA Implementing Agency Punjab State Electricity Board Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared July 30, 2007 Estimated Date of Appraisal Authorization November 21, 2007 Estimated Date of ERPA Signing March 31, 2008 I. Key development issues and rationale for Bank involvement To achieve and sustain the targeted 8 to 10 percent rate of economic growth required to meet its development goals, India will need to invest significant resources to expand and upgrade its overstretched infrastructure. As presented in the World Bank Country Assistance Strategy for India, the power sector continues to be viewed as one of the greatest constraints to maintaining growth and further reducing poverty in India. The Planning Commission of the Government of India has noted that the greatest weakness in the power sector is on the distribution side. Overall operating performance is well below international commercial norms, and Aggregate Technical and Commercial (AT&C) losses of most Indian State Power utilities remain high. The Planning Commission recommended that State governments should adopt the goal of bringing down AT&C losses from the current level of around 40 percent for the country as a whole to at least 15 percent by the end of the 11th Plan. 1 Progress in reducing losses will be highly beneficial in meeting broader developmental, sector- specific and environmental objectives. A series of earlier analyses conducted by the World Bank of the long- term environmental issues in India’s power sector at the national level and for selected States demonstrated significant financial and environmental gains for utilities from improved transmission and distribution performance. The Punjab State Electricity Board (PSEB), a vertically integrated utility, is currently faced with an energy deficit of over 15 percent, which is currently met by a combination of dynamic load shedding and power purchase from traders. Demand is expected to increase in the 11th plan period-according to the draft CEA 17th Electric Power Survey; demand will increase from 27,640 million units in 2008 to 40,559 million units by 2012, imposing increasing strain on 1 Government of India Planning Commission, “Towards Faster and More Inclusive Growth: An Approach to the 11 th Five Year Plan,” December 2006 40770 Page 2 PSEB to provide reliable service at affordable costs. Given the present need to increase the amount of available energy, PSEB is launching a large initiative to reduce technical losses on its system in line with the Planning Commission recommendations, thus increasing power availability and reducing both load shedding requirements and the amount of relatively expensive power that will have to be purchased from traders. This Carbon Offset project consists of purchase of Emissions Reductions created by PSEB reductions in technical losses. It supports the development of the international market mechanism for trading Emission Reductions (ERs) developed under the framework of the Kyoto Protocol. The sale of emission reduction credits to the World Bank-managed Carbon funds will allow for implementation of the large scale technical loss program of PSEB by generating additional financial returns to PSEB, providing the increased financial incentive necessary to ensure a full-scale implementation of the program. II. Proposed objective(s) The proposed development objectives of the Carbon Offset Project are: · Reduce global emissions of carbon dioxide · Increase the efficiency, reliability, and quality of electricity supply in the local distribution system of PSEB The objectives of this World Bank Carbon Offset Project are therefore consistent with the developmental and poverty reduction objectives of GOI. III. Preliminary Description The proposed carbon offset project consists of replacement of the existing 3-phase 400V distribution system with an 11-kV high voltage distribution system in 19 of the 20 distribution circles in Punjab by Punjab State Electricity Board to reduce technical losses. PSEB's overall losses are currently reported to be 25.1 percent, of which approximately 18 percent are estimated to be due to technical reasons. The proposed project, consisting of 46 separate schemes, will reduce technical losses to 11 percent within a five year period, saving an estimated 490 GWh per year once fully commissioned. Project financing has been secured from Rural Electrification Corporation (REC), and implementation is expected to begin in the summer of 2007. PSEB will decommission a large number of existing low capacity/voltage transformers and will install new 6.3-, 10-, and 16-kVA transformers to convert to a higher voltage distribution system. New power lines will not be installed as part of this project. The reduction in technical losses will result in significant reduction in generation required to serve existing and future load/demand, leading to consequent reductions in CO 2 emissions relative to a “business-as-usual” scenario. The first million tons of these emissions reductions will be sold to the World Bank-managed Carbon Funds. PSEB will be accountable for overall reporting on implementation progress, preparation of financial monitoring reports, and preparation of audited project accounts. Monitoring and evaluation will be undertaken through the specific monitoring plan for Verification of Emissions Page 3 Reductions that will be developed in the CDM Project Design Document. PSEB will also carry out advance testing of transformers included in the project to screen for Poly Chlorinated Biphenyls (PCBs) which are occasionally used as a dielectric medium. If PCBs are found, a collection and disposal plan will be prepared and reviewed by the Bank before implementation. IV. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment ( OP / BP 4.01) [X] [ ] Natural Habitats ( OP / BP 4.04) [ ] [X] Pest Management ( OP 4.09 ) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ ] [ ] X Involuntary Resettlement ( OP / BP 4.12) [ ] [X] Indigenous Peoples ( OP/BP 4.10) [ ] [X] Forests ( OP / BP 4.36) [ ] [X] Safety of Dams ( OP / BP 4.37) [ ] [X] Projects in Disputed Areas ( OP / BP 7.60) * [ ] [X] Projects on International Waterways ( OP / BP 7.50) [ ] [X] Piloting the Use of Borrower Systems to Address Environmental and Social Issues in Bank-Supported Projects (OP/BP 4.00) [ ] [X] V. Tentative financing Source: ($m.) Equity 53 REC 477 total Total 530 VI. Contact point Jeremy Levin jlevin @ worldbank. org 202-522-1664 1818 H St NW Washington DC 20433 * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas