IFC to develop rural electrification pilot programs in India
UNI, April 26, 2006

Washington: The International Finance Corporation (IFC) will help develop rural electrification programme in selected Indian villages in West Bengal, Bihar, Orissa, Madhya Pradesh, Gujarat, Punjab, and Rajasthan. 

A memorandum of understanding was signed on April 25 at IFC’s headquarters in Washington, D.C. with Power Finance Corporation, India’s public financial institution dedicated to developing the power sector. At present, millions of villagers in India do not have access to electricity. 
The IFC is the private lending arm of the World Bank Group and Indian Minister of Power, Sushil Kumar Shinde, was present at the signing ceremony. 

The pilot projects will include long-term technical and franchising support and will be based on National Rural Electric Cooperative Association (NRECA)’s highly successful experience with rural electrification in the U.S. The NRECA model has been exported to several developing countries over the last forty-plus years. 

NRECA is a not-for-profit association of cooperatives that provides power to rural areas of the U.S. It also has world-class knowledge in designing and operating rural electrification programmes in emerging markets such as Bangladesh, Philippines, Guatemala, Bolivia, and other countries. NRECA’s members provide power to about 12 percent of the U.S. population covering 85 percent of the U.S. land mass. 

According to Vivek Talvadkar, Senior Vice President of NRECA International, India’s push for universal electrification by 2012 provides a timely opportunity to address sustainability issues in the sector. 

''Farmers, businesses, and households in India are not that different from their U.S. counterparts when it comes to electricity.

They want reliable service to help them prosper, not a handout.'' Noting that India’s non-urban distribution losses cost about five billion dollars annually, he said ''without addressing rural subsidies and distribution losses, the Indian economy will suffer needlessly.'' He said the IFC/NRECA partnership with Power Finance Corporation and the states is aimed at establishing business models that reduce economic inefficiencies by focusing on the consumer’s role as the ultimate guarantor of power sector investment. 

The Indian programme will focus on the creation of specialized rural area electric service enterprises in selected states. The new rural entities will be demand-driven and commercially sound, serving as models for addressing the 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, according to an IFC press release. 

The programme will be developed under a collaborative, joint decision-making process between the Power Finance Corporation, the Indian states involved, NRECA, and IFC. Some of the features will include: *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 established at the state and local levels to accommodate the recommended institutional model, *The availability of reliable and affordably-priced power supply for target project areas, *Key role ownership and operational roles for local communities, and *Allocation of financial and other resources needed for enterprise and project implementation according to need and merit under generally accepted and transparent procurement processes. 
The initial priority states will be selected from: West Bengal, Bihar, Orissa, Madhya Pradesh, Gujarat, Punjab, and Rajasthan. After projects are implemented in the initial states, other states will be approached. 

IFC promotes sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives.