DHAKA, BANGLADESH (23 October 2013): The Asian Development Bank (ADB) and the Government of Bangladesh today signed a loan agreement for $12 million in additional financing for a cross-border electricity initiative between Bangladesh and India.
Md. Abul Kalam Azad, Secretary, Economic Relations Division (ERD) and M. Teresa Kho, Country Director for ADB’s Bangladesh Resident Mission, signed the loan agreement on behalf of Bangladesh and ADB respectively, at a ceremony at ERD, Sher-e-Bangla Nagar, Dhaka.
With the additional support, ADB provided a total of $112 million for the $199 million initiative, called the SASEC Bangladesh–India Electrical Grid Interconnection Project. The additional financing will cover the funding gap for the project. Prime Ministers of Bangladesh and India jointly inaugurated the project on 5 October 2013.
The assistance for the Bangladesh-India Electrical Grid Interconnection Project helped build a 27-kilometer 400-kilovolt transmission line between the electrical substations at Baharampur in India and Bheramara in Bangladesh, a 500-megawatt (MW) high voltage substation at Bheramara, a 230 kV double circuit loop-in loop-out interconnection at Bheramara to link with the transmission network in Bangladesh, and associated infrastructure. The interconnection facilitates an initial power flow of 500 MW into Bangladesh from the Indian grid, with a provision to expand the power flow to 1,000 MW in the future. The project is supported by ADB’s concessional Asian Development Fund.
The project is an outcome of the landmark joint communiqué for greater cooperation signed between Bangladesh and India during Bangladesh PM Sheikh Hasina’s visit to India in January 2010.
The project signaled a new era in energy cooperation in South Asia and is likely to herald further power trading agreements, resulting in the more effective use of existing energy resources in the region, said M. Teresa Kho, Country Director for ADB’s Bangladesh Resident Mission. “Connecting the two grids will demonstrate substantial economic benefits that come from enhanced regional cooperation, and help to address energy gaps across the region,” Ms. Kho said.
The project will also help Bangladesh reduce existing power deficit, improve the supply, and lower its current reliance on captive and rental generation facilities, and help to generate jobs and new business opportunities by providing a more reliable supply of power to industries.
Bangladesh’s fast growing economy has seen power demand sharply outstripping supply, resulting in frequent power cuts, voltage fluctuations and losses in economic output estimated at nearly $1 billion a year. While the economy has grown by an average of 6% a year since 2005, less than half the population of 156 million has access to power. Unreliable power supply has hurt industry and will hamper efforts to provide better economic opportunities and social services for the poor.
The ADB loan has a 32-year term including a grace period of 8 years, with interest charged at 1.0% per annum during the grace period and 1.5% per year for the rest of the term. The balance of the total investment was funded by the Government of Bangladesh, while interconnection facilities on the Indian side were financed, developed and operated by India. The Power Grid Company of Bangladesh Limited is the executing agency for the project.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region