The Asian Development Bank (ADB) has given its approval for a $250 million policy-based loan aimed at enhancing the financial sustainability of India’s power sector and promoting the transition towards renewable energy. This policy-based loan would support India’s efforts to meet its climate change mitigation targets and will support in lowering obstacles to the expansion of commercial finance for clean energy.
The power sector reform programme (sub-programme 1), is the first component of a two-part initiative focused on enhancing the establishment of markets for power trade and associated ancillary services. Given India’s goal of obtaining 50 per cent of its power generation capacity from non-fossil fuel sources by 2030, this will make the integration of intermittent renewable energy projects easier. Among other things, these policy measures would encourage the utilisation of clean energy sources in the agriculture industry, expedite the adoption of solar and other clean energy technologies, and optimise power plant dispatch to lower emissions.
The loan will additionally facilitate initiatives to enhance the financial viability, corporate governance, and service standards of power distribution companies fostering a favorable setting for private sector investments. The loan will support the execution of a results-oriented incentive-based strategy to enhance the performance of discoms in various aspects such as losses, cost recovery, ensuring proper metering, and timely payment of dues. This approach is crucial for accessing government budget support.
This initiative expands on ADB’s efforts in innovative areas like green hydrogen, which is crucial to easing the transition to a more sustainable energy source. ADB will finance capacity building and the execution of policy reforms with grants totaling $1.5 million from the climate change fund and its technical assistance special fund. The initiative has been developed in collaboration with other development partners, including the German development cooperation through KfW.