India’s Himachal Pradesh to Benefit From World Bank Loan

A US$100 million development policy loan (DPL) from the World Bank will help Indian state Himachal Pradesh move toward an “environmental model of economic recovery,” has learned.

The DPL, designed to promote “inclusive green growth,” will help the mountainous state launch “transformative actions across its key engines of economic growth,” which the World Bank defines as energy, watershed management, industry and tourism.

Hydroelectricity has been identified as one of Himachal Pradesh’s keys for economic development, and the bank says harnessing the state’s hydropower potential is a “critical low-carbon way to contribute to India’s growing energy demand.”

Already, the state has said it plans to increase its hydroelectric capacity by 10 GW over the next decade, and although the World Bank DPL will not directly support hydro development, it will make sure that the state’s expansion program incorporates policies and practices that are environmentally and socially sustainable, the bank says.

“Success by Himachal Pradesh can set examples not only for other Himalayan states in India, but for other countries in the South Asia region,” says Charles Cormier, lead environmental specialist and task team leader for the DPL program.

Himachal Pradesh is expected to adopt a river-basin approach in its assessment and management of environmental risks associated with large-scale hydropower development, the banks says. This will require the state to conduct cumulative impact assessment for all “key” river basins, review and monitor the release of environmental flows, and draw up Basin-Level Catchment Area Treatment Plans.

Himachal Pradesh will also adopt a new revenue-sharing scheme to help offset potentially negative effects caused by hydroelectric development. Under the new policy, 1% of power sales from all projects will be distributed as annuity payments to households in project-affected areas, with household units living below the poverty line receiving additional transfers.

The loan carries a maturity of 18 years, including a grace period of five years. Financing comes from the International Bank for Reconstruction and Development, which is one of five member institutions that compose the Washington, D.C.-based World Bank Group.


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