NTPC Installation Cost

PCR:IND 20027
ASIAN DEVELOPMENT BANK
PROJECT COMPLETION REPORT
ON THE
UNCHAHAR THERMAL POWER PROJECT

(Loan 907-IND)
IN
INDIA
September 2002
CURRENCY EQUIVALENTS
Currency Unit – rupee/s (Re/Rs)
At Appraisal At Project Completion

15 August 1988 4 April 2001
Re1.00 = $0.07 $0.02
$1.00 = Rs14.20 Rs46.07
ABBREVIATIONS
ADB – Asian Development Bank

AGM – additional general manager
CEA – Central Electricity Authority
DEA – Department of Economic Affairs
EA – Executing Agency
EIRR – economic internal rate of return
FIRR – financial internal rate of return
INRM – India Resident Mission
MOEF – Ministry of Environment and Forests
NTPC – National Thermal Power Corporation
PLF – plant load factor
RAP – rehabilitation action plan
RRP – Report and Recommendation of the President
SEB – State Electricity Board
TA – technical assistance
UPG – Uttar Pradesh government
UPPCB – Uttar Pradesh Pollution Control Board
UPRVUN – Uttar Pradesh Rajya Vidyut Utpadhan Nigam
UPSEB – Uttar Pradesh State Electricity Board
WACC – weighted average cost of capital
WEIGHTS AND MEASURES
V (volt) – unit of electrical pressure

kV (kilovolt) – 1,000 volts
W (watt) – unit of real power
kW (kilowatt) – 1,000 watts
MW (megawatt) – 1,000,000 watts
GW (gigawatt) – 1,000 megawatts
Wh (watt-hour) – unit of electrical energy
kWh (kilowatt-hour) – 1,000 Wh
GWh (gigawatt-hour) – 1,000,000 kWh
TWh (terawatt-hour) – 1,000 GWh
load factor – ratio of average power demand to maximum
powerdemand
1 ton of crude oil – 10,000,000 kilocaloriesequivalent (toe)
or 39,680,000 British thermal units
NOTES
(i) The fiscal year of the Government and the National Thermal Power Corporation ends on
31 March. FY before a calendar year denotes the year in which the fiscal year ends,
e.g. FY2001 ends on 31 March 2001.
(ii) In this report “$” refers to US dollars.

CONTENTS
Page
BASIC DATA iii
MAP ix
I. PROJECT DESCRIPTION 1
II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2
B. Project Outputs 2
C. Project Costs 3
D. Disbursements 4
E. Project Schedule 4
F. Implementation Arrangements 5
G. Conditions and Covenants 5
H. Consultant Recruitment and Procurement 5
I. Performance of Consultants, Contractors, and Suppliers 6
J. Performance of the Borrower and the Executing Agency 6
K. Performance of ADB 6
III. EVALUATION OF PERFORMANCE 7

A. Relevance 7
B. Efficacy in Achievement of Purpose 7
C. Efficiency in Achievement of Outputs and Purpose 8
D. Preliminary Assessment of Sustainability 9
E. Environmental, Social, and Other Impacts 9
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 10

A. Overall Assessment 10
B. Lessons Learned 11
C. Recommendations 11
APPENDIXES
1. Project Scope 13
2. Chronology of Main Events in Project Implementation 14
3. Cost Breakdown by Project Components 17
4. Project Costs and Summary of Contracts 18
5. Annual Average Exchange Rate for the Rupee and Dollar 20
6. Project Financing Plan 21
7. Projected and Actual Disbursements of Loan Proceeds 22
8. Implementation Schedule 23
9. Organization Chart and Project Implementation Structure 24
10. Status of Compliance with Major Loan Covenants 25
11. Economic and Financial Evaluation 28
12. Environmental Monitoring Data and Compliance for Environmental Clearance 35
13. Resettlement and Rehabilitation Measures 38
14. Unchahar Stage – 2 Plant Performance (Two Units) 39
ii
CONTENTS
Page
SUPPLEMENTARY APPENDIXES (available upon request)
A. NTPC Outstanding Dues as on 31 March 2002 40
B. Settlement of Dues of CPSUs Owed by State Electricity Boards 42
C. Balance Sheets 45
D. Income Statements 46
E. Cash Flow Statements 47
F. Ratio Analysis 48
G. Status of Reforms and Restructuring of State Electricity Boards 49
iii
BASIC DATA
A. Loan Identification
1. Country India
2. Loan Number 907-IND
3. Loan Title Unchahar Thermal Power Project
4. Borrower India
5. Executing Agency National Thermal Power Corporation
(NTPC)
6. Amount of Loan (net of cancelation) $126.676 million
First cancellation $15.00 million 30 July 1998
Second cancellation $5.00 million 8 February 1999
Third cancellation $5.00 million 28 December
1999
Fourth cancellation $7.00 million 3 October 2000
Fifth cancellation $1.32 million 4 April 2001
7. Project Completion Report Number PCR:IND 711
B. Loan Data
1. Appraisal
- Date Started 8 June 1988
- Date Completed 23 June 1988
2. Loan Negotiations
- Date Started 29 August 1988
- Date Completed 2 September 1988
3. Date of Board Approval 29 September 1988
4. Date of Loan Agreement 1 December 19881
5. Date of Loan Effectiveness

- In Loan Agreement 1 March 1989
- Actual 30 April 1989
- Number of Extensions 2
6. Closing Date
- In Loan Agreement 30 September 1995
- Actual 4 April 2001
- Number of Extensions 3
7. Terms of Loan
- Interest Rate 6 months variable ordinary capital
resources (OCR) rate
- Maturity (number of years) 25
- Grace Period (number of years) 5
8. Terms of Relending
- Interest Rate 6 months variable OCR rate
- Maturity (number of years) 25
- Grace Period (number of years) 5
1
The subsidiary Loan Agreement was signed with NTPC on 9 September 1995 and became effective on 14
November 1995.
iv
9. Disbursements
a. Dates
Initial Disbursement Final Disbursement Time Interval

5 Dec 1995 4 Apr 2001 5 years, 4 months
Effective Date Original Closing Date Time Interval
30 Apr 1989 30 Sep 1995 6 years, 5 months
b. Amount ($ million)
Last Net Amount Undis-

Original Revised Disbursed bursed
Category Allocation Allocation Balance
1. Steam Boilers and 90.00 58.22 58.22 0.00

Auxiliaries
2. Turbine Generators and 60.00 42.59 42.59 0.00
Auxiliaries
3. Local Handling Plant 0.00 13.58 13.58 0.00
4. Ash Handling Plant 0.00 5.77 5.77 0.00
5. Control and 0.00 6.52 6.52 0.00
Instrumentation
6. Unallocated 10.00 0.00 0.00 0.00
Total 160.00 126.68 126.68 0.00
10. Local Costs (Financed) 0
C. Project Data
1. Project Cost ($ million)
Cost Appraisal2 Actual

Estimate
Foreign Exchange Cost 225.88 127.04

Local Currency Cost 339.03 173.67
Total 564.91 300.71
2
Amounts mentioned are revised cost estimates (November 1993), at the time of approval of change of executing
agency from Uttar Pradesh Rajya Vidyut Utpadhan Nigam (UPRUVN) to NTPC.
v
2. Financing Plan ($ million)
Cost Appraisal Estimate3 Actual
A. Implementation Costs
1. Borrower-Financed 322.00 144.82
2. ADB-Financed 150.004 126.68
3. Other External Financing 0.00 0.00
Subtotal (A) 472.00 271.50
B. IDC Costs
2. ADB-Financed 0.00 0.00
Subtotal (B) 92.91 29.21
Total 564.91 300.71

ADB = Asian Development Bank, IDC = interest during construction.
3. Cost Breakdown by Project Component ($ million)
Appraisal Estimate4 Actual
Component Foreign Local Total Foreign Local Total
A. Base Cost
1. Structural Steel 0.00 10.43 10.43 0.00 11.70 11.70
2. Civil Works 0.00 52.08 52.08 0.00 31.53 31.53
3. Steam Generator with 62.90 26.96 89.86 58.35 12.88 71.23
Associated Auxiliaries
4. Turbine Generator with 49.15 21.05 70.20 42.82 4.76 47.58
5. Control and 10.38 4.45 14.83 6.52 1.22 7.74
Instrumentation
6. Coal Handling System 12.81 5.49 18.30 13.58 11.57 25.15
7. Ash Handling System 5.31 2.28 7.59 5.77 5.35 11.11
8. Miscellaneous Mechanical 14.96 6.41 21.37 0.00 16.74 16.74
Equipment
9. Transformers 2.45 1.05 3.50 0.00 4.15 4.15
10. Switchgears 3.96 1.70 5.66 0.00 5.63 5.63
11. Power Cables 3.03 1.30 4.33 0.00 4.34 4.34
12. Miscellaneous Electrical 4.76 2.04 6.80 0.00 6.94 6.94
Equipment
13. Tools & Plants, 3.46 26.42 29.88 0.00 27.66 27.66
Commissioning,
Engineering and
Administration
14. Taxes and Duties 0.00 41.50 41.50 0.00 Included Included
above above
Subtotal (A) 173.17 203.16 376.33 127.04 144.46 271.50
3
agency from UPRVUN to NTPC.
4
Excluding the unallocated $10 million out of the total loan of $160 million.
vi

B. Contingencies
1. Physical Contingencies 8.66 13.28 21.94 0.00 0.00 0.00
2. Price Escalation 21.73 51.99 73.73 0.00 0.00 0.00
Subtotal (B) 30.39 65.27 95.67 0.00 0.00 0.00
C. Interest During 22.31 70.60 92.91 0.00 29.21 29.21

Construction
Subtotal (C) 22.31 70.60 92.91 0.00 29.21 29.21
Total 225.88 339.03 564.91 127.04 173.67 300.71

Source: Asian Development Bank estimates.
4. Project Schedule
Appraisal Estimate NTPC Estimate6 Actual
Item Start End Start End Start End
Land Acquisition Jan 1989 Jan 1989 Jan 19897
Civil Works Jul 1990 Jun 1994 Aug 1995 Oct 2000 May 1995 Dec 1999
Steam Generator & Auxiliary Jul 1989 Sep 1994 Aug 1995 Jun 2000 Jun 1995 Mar 2000
Turbine Generator & Auxiliary Jul 1989 Mar 1995 Aug 1995 Jun 2000 Jun 1995 Mar 2000
Control & Instrumentation Mar 1990 Sep 1994 Oct 1996 Apr 2000 Aug 1997 Dec 1999
System
Coal Handling System Mar 1990 Mar 1995 Apr 1996 Jun 2000 Oct 1996 Dec 1999
Mechanical Services Oct 1990 Sep 1994 Jul 1996 Mar 2000 Jul 1996 Jan 2000
Transformers Jul 1990 Sep 1994 Feb 1996 May 2000 Aug 1995 Oct 1999
Switchgears Oct 1990 Sep 1994 Aug 1996 May 2000 Jul 1996 Jul 1999
Switchyard Equipment Oct 1990 Sep 1994 Jul 1996 Jun 2000 Mar 1996 Jul 1999
Electrical Services Oct 1990 Sep 1994 Jul 1996 Jun 2000 Aug 1995 Dec 1999
5. Project Performance Report Ratings
Rating
Implementation Period Development Implementation
Objectives Progress
From Mar 1990 to Nov 1998 A A
From Dec 1998 to Aug 2000 PS HS
From Sep 2000 to Oct 2000 PS S
From Nov 2000 to Dec 2000 S S
A = highly satisfactory, PS = partly satisfactory, HS = highly satisfactory, S = satisfactory.
5
Amount mentioned are revised cost estimates (November 1993), at the time of approval of change of executing
6
Start and end dates are revised dates (November 1993) at the time of approval of change of executing agency
from UPRVUN to NTPC.
7
Land was already acquired during the first stage of the Unchahar Thermal Power Plant.
vii
D. Data on Asian Development Bank Missions
Number Number of
of Person- Specialization
Name of Mission Date Persons Days of Membersa
Fact –Finding 2–18 Feb 1988 4 68 a,b,c,d
Appraisal 8–23 Jun 1988 6 84 a,b,c,g,h
Inception 16–20 Oct 1989 2 10 a
Special Loan 7–15 Mar 1990 2 18 a,b
Administration
/Review 1
Review 2 10–12,19 Nov 1990 2 8 a
Review 3 12–22 Feb 1991 2 22 a,b
Fact –Finding 24 Sep–3 Oct 1991 3 30 a
Consultation 4–19 Feb 1992 3 32 a,b
Review 4 7 Sep 1992 1 1 a
Review 5 12–29 Jul 1993 2 18 a,b
Review 6 25 Nov–5 Dec 1996 5 55 a,d,i,j
Review 7 4–7,17,25 Mar 1998 1 6 a
Review 8 11–15,25 Jan 1999 2 12 a
Review 9 20–23 Oct 1999 2 8 a
Review 10 17–19 Jul 2000 2 6 a
Project Completion 17–19 Apr 2002 2 6 a,i
Review 11b
a
a = engineer, b = financial analyst, c = counsel, d = economist, e = procurement/consultant specialist, f =
control officer, g = programs officer, h = environment specialist, i = loan administration staff, j = young
professional.
b
This report was prepared by V. R. Karbar, Project Implementation Officer (Energy), and R. Kapoor, Assistant
Project Analyst, India Resident Mission (INRM). J. Srinivasan, Senior Control Officer, INRM helped calculate
FIRRs and EIRRs.
Map 1 ix
I. PROJECT DESCRIPTION
1. India has large reserves of coal. To make productive use of these resources and to
redress the worsening balance-of-payments situation resulting from the steep increase in
imports of oil, in the 1980s the Government decided to set up a number of coal-based thermal
power plants (Appraisal Report). The Unchahar Thermal Power Project of Uttar Pradesh Rajya
Vidyut Utpadhan Nigam (UPRVUN), with a maximum capacity of 1,050 megawatts (MW), was
developed as a component of the Government’s long-term National Power Development
Program to meet the country’s energy needs and ease the country’s dependence on imports. To
meet the Government’s long-term objectives, the Central Electricity Authority (CEA) prepared an
investment plan for the power sector. The Project was part of CEA’s long-term, least-cost
generation investment plan for the northern region. (Report and Recommendation of the
President [RRP], para. 75). The Uttar Pradesh government (UPG) entrusted project
implementation to UPRVUN. It commissioned the first 210 MW unit in August 1989, and the
second, in June 1990. The present scope of additional generating capacity of 2 x 210 MW was
taken up in the second stage of the Project. At appraisal in 1987, the Uttar Pradesh State
Electricity Board (UPSEB), with a total installed capacity of 4,540 MW under the state sector
and an additional 3,591 gigawatt-hours (GWh) from central power sector undertakings (CPSUs),
met only 13,655 GWh of demand, with unmet demand at 15%. Peak demand shortage was
about 22%. During financial year (FY) 1988, generation constraints caused regular load
shedding of 1,326 MW. CEA forecasts1 up to 2000 indicated that load shedding would persist in
spite of planned2 capacity expansion plans undertaken by the UPG and CPSUs (Appraisal
Report), as projected demand for power was anticipated to exceed the planned capacity
expansion. In September 1988, ADB approved a loan of $160 million, with UPRVUN as
executing agency (EA), to help implement the second stage of the generating capacity
expansion program—the Unchahar Thermal Power Extension Project—consisting of two 210
MW units to produce a net 2,575 GWh annually.
2. After the loan was approved in 1988, UPRVUN had serious financial and management
problems, and project construction could not start. Since commissioning, the first two 210 MW
units were owned and operated by UPRVUN. In February 1992, the National Thermal Power
Corporation (NTPC) purchased the two units from UPRVUN in lieu of payment of dues by the
UPG to NTPC. NTPC proposed to implement the second stage of the Project, and with
Government support requested that the ADB project loan be re-lent by the Government to
NTPC. In November 1993, ADB approved the request for change in EA, and NTPC became the
EA. The appraised project cost estimates and implementation schedule and arrangements were
revised in November 1993.
3. At appraisal, the Project’s primary objective was to mitigate the power shortage in Uttar
Pradesh by providing an additional 420 MW of generating capacity to produce a net output of
about 2,575 GWh. After NTPC became the EA, the project objective was redefined to mitigate
the power shortage in the northern region, with anticipated net annual output of 2,280 GWh.
4. The Project comprised the following major components3 (Appendix 1): (i) civil works for
site preparation, foundation, power station building, cooling water systems, and other facilities;
(ii) two 700-ton/hour coal-fired steam boilers and auxiliaries; (iii) two 210 MW reheat steam
1
Thirteenth Electric Power Survey of India, December 1987
2
From 1988 to 1998, about 4,000 MW of new generation projects were ongoing and sanctioned by Government,
and about 1,100 MW cleared by CEA (including the Project) in Uttar Pradesh.
3
Components for consultancy service and training were taken out of the scope of the Project subsequent to
change in EA in November 1993.
2
turbine generators and auxiliaries; (iv) instrumentation and control systems; (v) coal- and ash-
handling systems; (vi) water treatment and chlorination plants; (vi) miscellaneous mechanical
equipment and systems; (vii) precipitators, cooling towers, and air pollution sampling equipment;
(ix) transformers, switchyard, and other miscellaneous electrical equipment; (x) consulting
services; and (xi) training. The main components under ADB financing are (i) 2-ton/hour coal-
fired steam boilers and auxiliaries; (ii) two 210 MW reheat steam turbine generators and
auxiliaries; (iii) instrumentation and control systems; and (iv) coal- and ash-handling systems.
5. The Project was developed as a load center-based power plant using coal from Jharia
and North Karanpura in Bihar state, about 600 kilometer east of the project site. The coal is
transported by rail; lines and rolling stock are adequate.
II. EVALUATION OF DESIGN AND IMPLEMENTATION
6. The main events in project implementation are given chronologically in Appendix 2.
A. Relevance of Design and Formulation
7. The most serious energy issue is the power and oil shortage, which constrains economic
development. At appraisal, power shortages were about 10% of demand for electricity and up to
30% of peak demand. Load shedding caused industrial production losses of about 3% or
approximately $1 billion annually (Appraisal Report, para. 5). As oil consumption steadily
increased, so did India’s dependence on imported oil, worsening the balance of payments. Oil
imports, which comprised 35.1% of oil requirements in FY1987, were expected to rise to 50% by
the mid-1990s. The latest figures indicate that oil imports meet about 70% of the total
requirement. Still, growing consumption of traditional or noncommercial energy forms
contributed to deforestation. Since the 1980s, therefore, India’s energy strategy has stressed
development of indigenous energy, and formation of adequate supply and distribution systems.
The Seventh Plan FY1986–1990 allotted about Rs548 billion ($42 billion) to energy or about
30% of total public outlay. The Eighth Plan allocated about Rs1,155 billion (about 26.6% of total
public outlay), and the Ninth Plan, about Rs1,600 billion (about 31.4%). At appraisal, EA was
envisaged to contribute up to 73% of the total project cost. At project completion, total EA
contribution was about 62%. The Project was highly relevant to the Government’s sector
strategy at appraisal and at completion.
8. At appraisal, ADB’s country operational strategy for India was to mitigate the constraints,
caused by infrastructure bottlenecks, on industrial growth and effective utilization of existing
industrial capacity. ADB’s assistance was to expand power-generating capacity by 420 MW for
northern India and was highly relevant to ADB’s strategy. ADB support to develop the Project
was equally relevant at appraisal as well as at completion, since infrastructure bottlenecks still
hinder industrial growth.
B. Project Outputs
9. At appraisal, the Project comprised the installation and commissioning of the following
components to develop the second phase, consisting of two 210 MW units with anticipated
annual output of 2,575 GWh: (i) civil works for site preparation, foundation, power station
building, cooling water systems, and other facilities; (ii) two coal-fired steam boilers, with
auxiliaries; (iii) two 210 MW reheat steam turbine generators, with auxiliaries; (iv)
instrumentation and control systems; (v) coal- and ash-handling systems; (vi) water treatment
and chlorination plants; (vii) miscellaneous mechanical equipment and systems; (viii)
3
precipitators, cooling towers and air pollution sampling equipment; and (ix) transformers,
switchyard, and other miscellaneous electrical equipment. Consulting services and staff training
were also proposed. However, when ADB approved replacing UPRVUN with NTPC as EA in
November 1993, consulting services and staff training were excluded as NTPC had adequate
trained personnel and experienced engineering staff.
10. As envisaged during appraisal, all the components have been installed and
commissioned successfully without delay. The first unit was synchronized on 27 January 1999,
the second, on 22 October 1999. NTPC’s effective and efficient operation of the power plants
and prudent plant maintenance enabled the two units to generate about 3,069 GWh of energy
during FY2002 against the appraised annual energy output of 2,280 GWh, exceeding the
appraised output by about 34.6%.
C. Project Costs
11. At appraisal, the total project cost was estimated at $598 million equivalent comprising
$297 million (49.7%) in foreign currency and $301 million (50.3%) in local currency. The cost
estimates were revised in November 1993, when the change of EA was approved. The revised
total project was estimated at $564.91 million equivalent (as per the prevailing prices in 1993)
comprising $225.88 million (40%) in foreign currency and $339.03 (60%) in local currency. The
ADB loan at appraisal was $160.00 million, of which only $126.68 million (79.2%) was utilized.
Cost savings of $264.20 million equivalent (46.8%) comprised $98.84 million in foreign currency
and $165.36 million in local currency. Appendix 3 compares estimated (revised in 1993) and
actual project costs. The project costs and summary of contracts are in Appendix 4. Appendix 5
provides the average exchange rates used to convert local currency to the dollar equivalent.
12. When the change of EA was approved in November, NTPC’s contribution to the Project
was estimated at $414.91 million (73.5%), with the balance of $150.00 million to be financed by
ADB (26.6%), with an unallocated $10.00 million in ADB’s total loan amount of $160.00 million.
At NTPC’s request, in September 1996, ADB reallocated the loan proceeds, including the
unallocated portion. The allocation of loan proceeds at appraisal and as revised in September
1996 are in Tables 1 and 2.
Table 1: Allocation of Loan Proceeds at Appraisal

($ million)
Category Item Description Amount Allocated

I Equipment
A. Steam Boilers and Auxiliaries 90
B. Turbine Generators and Auxiliaries 60
II Unallocated 10
Total 160
4
Table 2: Revised Allocation of Loan Proceeds

($ million)
Category Item Description Amount Allocated

I Equipment
A. Steam Boilers and Auxiliaries 68.0
1. Coal Handling Plant 22.5
2. Ash Handling Plant 9.5
II B. Turbine Generators and Auxiliaries 53.0
1. Control & Instrumentation 7.0
Unallocated (transferred to A) 0.0

Total 160.0
13. Actual project cost estimates show NTPC’s contribution to be $174.03 million (57.9%),
and borrowings from ADB, $126.68 million (42.1%). Appendix 6 compares the revised financing
plan approved in November 1993 and actual financing plan. The share of ADB increased from
26.6% to 42.1% despite the decrease in the loan amount from $160.00 million to $126.68
million.
14. The foreign exchange cost savings are attributable to (i) lower-than-estimated costs
incurred in equipment procurement ($46.13 million) due to competition in the market; (ii) savings
in physical and price escalation ($30.40 million), which were not needed as the Project was
completed as scheduled at the time of contract award; and (iii) savings in interest during
construction ($22.31 million). Local currency savings in dollar terms are largely due to (i)
savings in physical and price contingencies ($65.27 million); (ii) savings in interest during
construction ($41.39 million); and (iii) lower-than-estimated costs incurred in equipment
procurement and civil works ($58.70 million).
D. Disbursements
15. Disbursements totaled $126.68 million out of the original loan amount of $160.00 million;
$33.32 million was canceled in four stages as loan savings. Initial disbursements under the loan
started on 5 December 1995, and the final disbursement was on 4 April 2001, or 64 months
later. No funds were disbursed during 1989-1994 as project implementation could start only in
April 1995, with the award of contract for the main plant in May 1995. Actual disbursements
picked up significantly and exceeded initial projections (Appendix 7). The imprest-fund
procedure was used although the statement-of-expenditures (SOE) procedure provides for
disbursements. NTPC did not utilize SOE facility and appreciated the resulting additional
liquidity. NTPC informed ADB that the imprest fund facility enabled it to make foreign currency
payments to contractors on time and expeditiously.
E. Project Schedule
16. The main events during project implementation are in Appendix 8. The Project was
scheduled to start in July 1989. The first unit was to be commissioned in September 1994, the
second, in March 1995, implemented over 72 months. These dates were delayed significantly
as UPRVUN could not start implementing the Project as originally scheduled. In November
1993, ADB approved the replacement of UPRVUN with NTPC as EA and revised the
implementation schedule and arrangements. The new schedule envisaged issue of tender
documents in November 1993, award of the main contracts in August 1994, commissioning of
5
the first unit in July 1998 and the second in December 1998, and implementation over 52
months. Due to delay in obtaining the Government’s approval for the investment,
implementation started in April 1995 and the main plant award was placed in May 1995, about 9
months behind schedule. The first unit was commissioned in January 1999, the second, in
October 1999. The 16 stator bars of the first unit were damaged due to an earth fault that
occurred on 27 July 1999. The generator was repaired at the supplier’s works and
recommissioned in January 2001. NTPC could have implemented the Project in 53 months from
the date of the main plant award.
F. Implementation Arrangements
17. The implementation arrangements were the same as envisaged when ADB approved
the change in EA, and ADB found the implementation arrangements to be satisfactory. The
general manager of Unchahar Station was in charge of the Project. He was assisted by two
additional general managers (AGMs). The project AGM was responsible for construction and
erection; the operations and maintenance AGM, for commissioning. The executive director for
corporate contracts and materials handled all contract awards; and the executive director for
corporate finance, project finances. Project progress was reviewed quarterly by the director of
projects, who was responsible for all NTPC projects, during project review, contract review, and
technical coordination meetings. The executive director for corporate planning was the overall
coordinator with ADB. ADB considered the implementation arrangement to be adequate as
overall coordination existed and a proper project management system was in place. The project
implementation structure is in Appendix 9.
G. Conditions and Covenants
18. The status of compliance with key loan covenants is in Appendix 10. Most of the
covenants, including that on timely submission of the audited accounts and financial statements,
were complied with, except for that requiring NTPC to maintain its receivables at a level not
exceeding an amount equivalent to the proceeds of power sales for the 2 preceding months.
Due to the poor financial state of the state electricity boards (SEBs) and other power utilities,
NTPC’s outstanding receivables were equivalent to 7.7 months billing as of 31 March 2002. The
SEBs’ condition can be directly attributed to low revenue, which is usually nowhere near the
actual cost of the power sold and due to (i) huge transmission and distribution losses
(commercial and technical); (ii) irrational power tariffs; (iii) pilferage; (iv) very low agricultural
tariff or free power to agriculture load; (v) subsidies; and (vi) inefficient operations and political
interference in SEB management. SEBs thus failed to generate enough revenue to pay for the
power from CPSUs such as NTPC and Power Grid, and defaulted on payments. The statement
on NTPC’s outstanding dues as of 31 March 2002 is in Appendix A. A brief note on NTPC’s
various measures to maintain receivables at a level not exceeding an amount equivalent to the
proceeds of power sales for the 2 preceding months is in Appendix B.
H. Consultant Recruitment and Procurement
1. Consultant Recruitment
19. Recruitment of a consultant for design and construction supervision was excluded from
the project scope when ADB approved NTPC as EA, as it had experienced engineering staff
who could execute the Project.
6
2. Procurement
20. NTPC followed ADB’s Guidelines for Procurement for ADB-financed contracts. For other
contracts NTPC followed its own tendering procedures. The revised implementation schedule
envisaged issue of tender documents for contracts in November 1993; award of the main
contracts in August 1994; and commissioning of the first unit in July 1998, and the second, in
December 1998. However, implementation was delayed by slow government investment
approval, which was obtained in April 1995. The first unit was to be completed in January 2000,
the second, in July 2000. NTPC placed the main contract award in May 1995, after a 9-month
delay. While no procedural problems were encountered, the control and instrumentation
contract award was delayed by 10 months, the ash-handling plant, by 11 months, mainly due to
prolonged clarifications sought by the bidders. However, the two packages were executed on
time without affecting the commissioning of first and second units.
I. Performance of Consultants, Contractors, and Suppliers
21. NTPC reported that the performance of all the contractors and suppliers was generally
satisfactory. All the goods complied with the required specifications and other parameters in the
contracts, and the contracts were executed without difficulty.
J. Performance of the Borrower and Executing Agency
22. The Government was the Borrower, and UPRVUN and NTPC were the executing
agencies (EAs). Performance of the Government and UPRVUN was unsatisfactory. The
Government took an unusually long time to approve NTPC’s investment. UPRVUN could not
implement the Project for almost 2 years since the loan was declared effective in April 1989—a
fact that UPRVUN did not tell ADB. However, after obtaining Government investment approval
in April 1995, NTPC performed satisfactorily during project implementation. Operation of the
power station since its commissioning by NTPC was also satisfactory. Despite the 10-month
delay in the award of the control and instrumentation package, and the 11-month delay in that of
the ash-handling plant, both units were commissioned ahead of schedule due to NTPC’s
prudent management and implementation practices. NTPC informed ADB that to offset any
delays in contract awarding, NTPC follows the in-house revised-scheduling practice called the
best-efforts schedule, which facilitated the implementation of the two packages.
K. Performance of ADB
23. ADB closely monitored project progress, regularly monitored the Project through review
missions, and advised NTPC staff to familiarize them with ADB’s procurement guidelines and
procedures. However, in the initial years of project implementation, ADB could have reviewed
the reasons for implementation delay and taken them up with the Government.
24. The India Resident Mission also closely monitored project administration. ADB, NTPC,
and Department of Economic Affairs officials held many tripartite meetings, which improved
NTPC’s performance. Various timely corrective measures were suggested and implemented as
a result of these reviews. Thus, ADB’s overall performance was satisfactory.
7
III. EVALUATION OF PERFORMANCE
A. Relevance
25. At appraisal and completion, the Project was rated highly relevant to the Government
and ADB power sector strategy (paras. 7 and 8). The Project’s primary objective at appraisal
was to mitigate the power shortage in Uttar Pradesh, with project implementation entrusted to
UPRVUN. However, the project objective was redefined when ADB approved NTPC as the new
EA. The Project was to provide a net annual energy output of about 2,280 GWh to the northern
power grid. The allocation of power from the Project to the various northern states is in Table 3.
Table 3: Allocation of Power to Northern States

State Allocation
(MW)
Uttar Pradesh 144
Haryana 23
Jammu and Kashmir 30
Himachal Pradesh 12
Punjab 60
Rajasthan 38
Delhi 47
Unallocated 66
Total 420
MW=megawatt
26. Although the Project provides 420 MW of generating capacity, the northern region still
has power shortages and the resulting load shedding. The peak power and energy shortages
for FY2002 are 1,854 MW (8%) and 7,973 GWh (5.3%) in spite of the region’s total installed
capacity of 27,462 MW. The Government continues to pursue capacity expansion, unbundling
of SEBs, distribution reforms, realistic tariff setting by independent regulators, reduction of
transmission and distribution losses, and private sector participation. To provide power on
demand by 2012, the Government has a program to expand capacity by 100,000 MW. Since the
early 1990s, ADB’s power sector strategy has been to support comprehensive reform of the
state institutional and regulatory frameworks within an appropriate national power policy by
emphasizing (i) restructuring and commercialization of SEBs, (ii) rationalization of power tariffs,
(iii) establishment of independent regulatory commissions, and (iv) improvement in demand-side
management and efficiency.
B. Efficacy in Achievement of Purpose
27. The Project achieved its immediate objective of providing 420 MW to partly mitigate the
power shortage in the northern region. The Project was designed to provide a net annual energy
output of about 2,280 GWh. Due to NTPC’s effective and efficient operation of the power plant
and prudent plant maintenance, the two units could generate about 3,069 GWh of net energy in
FY2002, exceeding the appraised output by 34.6%.
28. The Project also achieved its long-term objective of supporting economic development
by mitigating the power shortage in the northern region by supplying 3,069 GWh of energy in
FY2002, reducing the power shortage to about 7,973 GWh. The Project is expected to generate
8
and supply 2,500–3,000 GWh to the northern region, which has the second-highest power
deficit in the country.
C. Efficiency in Achievement of Outputs and Purpose
29. The Project is rated efficient.
1. Financial Internal Rate of Return
30. The financial evaluation of the Project was done incrementally using the sales data
provided by NTPC and a plant load factor (PLF) of 85%, and considering the total actual project
cost. The recalculated financial internal rate of return (FIRR) is 10.97% against a weighted
average cost of capital (WACC) of 9.07%, which compares well with the appraisal estimate of
11.26% when WACC was estimated at 16.2%. The Central Electricity Regulatory Commission
has yet to finalize the tariff for the new facilities. The tariffs, therefore, have been estimated
based on the model that would usually be adopted by the commission, assuming that the PLF is
68.5%. Any increase or decrease in WACC would be automatically reflected in higher or lower
tariffs as they are worked out on a cost-plus basis. The major assumptions used in the financial
evaluation, and the detailed calculations for FIRR are in Appendix 11. Balance sheets, income
statements, cash-flow statements, and ratio analysis of NTPC are in Appendixes C, D, E, and F,
respectively.
2. Economic Internal Rate of Return
31. Current tariff levels represent consumers’ minimum willingness to pay, and the costs of
alternative energy supply represent maximum willingness to pay for more electricity. The
average of these two values is the average willingness to pay for more electricity. Some
proportion of electricity supply from the Project will displace alternative energy sources that
would otherwise be used with the Project. The significant difference between local financial and
economic border prices arises due to the incidence of a substantial tax element included in local
financial prices. The overall weighted economic value of electricity supplied by the Project is
estimated to be Rs3.27 at border prices.
32. The economic evaluation of the Project was carried out incrementally, considering (i)
actual generation in FY2001 and FY2002, and estimating a PLF of 85% for future years; (ii)
economic costs of the Project (based on financial costs adjusted for duties and taxes); and (iii)
border prices for fuels. The economic internal rate of return (EIRR) is estimated at 19.4%,
significantly higher than the 13.6% estimated at appraisal. The higher EIRR is due to a
substantially lower project cost, estimated at Rs16.1 billion in 2001 prices, as against the
appraisal estimate of Rs27.6 billion in 2001 prices—a saving of 41.7%. The significant tax
element on fuel, which is excluded in economic border prices, also contributed to the higher
EIRR. The border prices of fuel are significantly lower than the financial prices due to a high tax
element on diesel. The financial price of diesel is Rs17.50 per liter, while the border price of
diesel is about Rs8.47 per liter. The EIRR indicates that the Project is expected to provide an
adequate return to the economy. Major assumptions used in the economic evaluation and the
detailed calculations for EIRR are in Appendix 11.
9
D. Preliminary Assessment of Sustainability
33. The technical sustainability of the Project is high for the following reasons:
(i) Northern India suffered power shortages of 6.5% in FY2000, 8.6% in FY2001,
and 5.3% in FY2002. The demand supply gap is expected to continue and may
even worsen. CEA forecasts that by the end of FY2007, the power shortage of
16.4% may deteriorate as assumed in CEA’s perspective plan study for 1997-
2012. Demand for the project-generated power will be adequate.
(ii) Operation performance figures such as PLF, plant availability factor, and specific
fuel consumption of plant (Appendix 14) indicate that the unit cost of the project-
generated power will be competitive and may be reasonably cheaper than that of
power generated by newer plants.
(iii) NTPC has demonstrated that it can operate power plants at efficiency levels
comparable to those of well-run utilities abroad. The first coal-fired 200 MW unit
of Singrauli Super Thermal Power Plant, commissioned in 1982 by NTPC, is one
such facility.
34. As project tariffs are determined based on cost plus methodology, which ensure the
recovery of costs incurred at a normative PLF of 68.5% and return on equity of 16.0%, with
incentives for better-performing plants, the Project is expected to be financially sustainable.
However, NTPC must expeditiously bring down its outstanding receivables position to the
comfortable level of 2.0 months from the present 7.7 months billing, or else jeopardize the
commercial sustainability of NTPC plants in general and the Unchahar Thermal Power Project
in particular. As the FIRR exceeds the WACC, the Project is financially viable (para.30), and
returns from it will contribute to NTPC’s overall financial health.
35. On 17 April 2002, the Government accepted the recommendations of the Ahluwalia
Committee for one-time settlement of total dues from SEBs and full payment of current dues.
The successful implementation of these recommendations is expected to bring the outstanding
receivables position to a comfortable level. The Mission is also of the view that realizing the
objectives of the reforms and SEB restructuring programs, such as achieving minimum 3%
return on net fixed assets, would substantially improve SEBs’ financial condition by ensuring
timely payment to NTPC for the power purchased from this Project, mitigating the commercial
and financial project risks, and improving project sustainability.
E. Environmental, Social, and Other Impacts
36. The power plant was designed to meet the environmental standards of the
environmental clearance certificate issued by the Ministry of Environment and Forests (MOEF)
and Uttar Pradesh Pollution Control Board (UPPCB). Environmental pollution-mitigating
equipment installed are (i) a 220-meter multiflue chimney; (ii) electrostatic precipitators of 99.5%
efficiency; (iii) a 264-hectare (ha) ash disposal area adequate for all four units for 10 years of
operation (NTPC is developing an additional 80 ha ash disposal area adequate to cover the life
span of the four units); (iv) effluent-monitoring equipment; (v) dust extraction and suppression
systems; and (vi) ash water-recycling system. NTPC has planted more than 700,000 trees as a
part of afforrestation and greenbelt development around the plant. NTPC spent about Rs1,261.7
million (about $26 million) on these measures. An environmental management group headed by
10
a senior manager at the power station monitors the quality of effluents and conducts regular
tests specified in the environmental management plans. UPPCB also conducts its own tests.
Details of test results and compliance with MOEF conditions are in Appendix 12. The Project
fully complied with standards for ambient quality, stack emission, and liquid effluent. The Project
is required to ensure 100% commercial utilization of dry fly ash. NTPC informed the Project
Completion Report Mission that about 37% of ash produced is commercially utilized, part of it to
manufacture bricks for in-house use and the rest supplied free to nearby cement manufacturers
as per Government notification.
37. The site for the plant was developed and resettlement satisfactorily completed in stage 1
of the Project (para. 16 of Board-approved paper, India: Loan No. 907-IND: Unchahar Thermal
Power Extension Project – Change in Executing Agency and Implementation Arrangments, 6
October 1993). Under the Indian Land Acquisition Act 1984, NTPC acquired about 100 ha more
for the ash pond and ash pipeline corridor, affecting 541 persons. Rs13.1 million ($280,000)
was paid to compensate private landowners. Although more than 90% of the affected people
(492 out of 541) lost less than 4,000 square meters and were affected only marginally, NTPC
prepared a rehabilitation action plan (RAP) as per NTPC’s 1993 resettlement and rehabilitation
policy, which was approved by the Government and endorsed by the World Bank as conforming
to its program implementation guidelines. The RAP has a budget of Rs33.68 million ($720,000)
and is scheduled for completion by September 2003.
38. The RAP covers various infrastructure development activities such as construction of
roads, drains, culverts, community centers, and school buildings; installation of hand pumps;
training program for skill development; and self-employment schemes. Income-generating
schemes have so far helped 121 people set up dairy, poultry, goat-keeping, and retail
businesses. Another 60 people are being screened for eligibility to benefit from income-
generating schemes. NTPC informed ADB that the RAP is being implemented in consultation
with the Unchahar Block and District Rural Development Authority, UPG, and Raibarely. The
details of various NTPC rehabilitation and resettlement measures are in Appendix 13.
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS
A. Overall Assessment
39. In general, the Project is considered successful in view of the following:
(i) Although completion was considerably delayed, the Project has been
implemented substantially as conceived at appraisal. The Project was estimated
to be completed by 30 September 1994, over 72 months. It was completed in
October 1999, delayed by about 61 months. The appraisal schedule was realistic
and feasible compared to the implementation period required by other SEBs to
set up power stations of similar size and capacity. The main causes for delay
were the following: (a) although tenders for the Project were invited in 1989,
UPRVUN did not award contracts until the end of 1991; (b) ADB decided to
replace UPRVUN with NTPC as EA; and (c) Government approval of NTPC was
delayed. After ADB approved the change of EA in November 1993, project
implementation started in May 1995, when NTPC obtained Government
approval. As per the implementation schedule agreed upon between the
Government and NTPC, the first unit was to be commissioned in January 2000,
the second, in July 2000. The units were commissioned in January and October
1999, respectively.
11
(ii) The project objective of partly mitigating the power shortage in the northern
region, which is reeling under regular power shedding, was achieved. The
Project generated and supplied about 3,069 GWh to the northern region in
FY2002, or about 2% of the total requirement for FY2002.
(iii) NTPC achieved high power plant operational efficiencies (Appendix 14) and
project sustainability (paras. 33-35).
B. Lessons Learned
40. In addition to the merits of the project, ADB must also evaluate other issues such as the
EA’s capability and past performance to execute the project within schedule and budget.
41. NTPC has demonstrated that it can turn around poorly performing power plants within a
reasonable time.
42. The successful completion of infrastructure projects of this scale requires evaluation of
the EA’s preparedness and commitment to start project implementation as envisaged.
43. The Mission is of the view that to curtail procurement delays, ADB may consider
deputing a procurement specialist with sector-specific experience as a part of the inception
mission or advise the EA to hire an experienced consultant to prepare and evaluate bid
documents. Doing so may substantially improve the quality of bid documents and reduce the
time needed to review and finalize bid documents and evaluation reports.
44. Regular discussions with Government on implementing assurances under the Project
prompted the Government to increase the rate of return on NTPC’s equity from 12% to 16% and
address the issue of balance-of-accounts receivables (Appendix B).
C. Recommendations
1. Project Related
a. Future Monitoring
45. All project components have been successfully implemented and the two units are
operating commercially. As NTPC has a long and successful track record of efficiently operating
coal-fired generating plants, no future project monitoring by ADB is required.
b. Covenants
46. Most of the covenants were complied with, except for that requiring NTPC to maintain its
receivables at a level not exceeding an amount equivalent to the proceeds of power sales for
the 2 preceding months. Due to the poor financial state of the SEBs and other power utilities,
NTPC’s standing receivables were equivalent to 7.7 months billing as of 31 March 2002. NTPC
said that, based on the Ahluwalia Committee’s recommendations for one-time settlement of total
dues, it is encouraging state governments to sign tripartite agreements (Appendix B, paras. 1-
4). The committee recommended securitization of total dues as of 30 September 2001, and full
payment of current dues. The successful implementation of these recommendations should
improve the outstanding receivables position to a comfortable level of 2 months and improve the
financial sustainability of the Project and NTPC operations. NTPC also said that Andhra
12
Pradesh, which has signed a tripartite agreement, has been receiving current payments
regularly and its outstanding current dues position is just 1 month (Appendix A). This is a
positive development and the Mission expects that other states will follow in view of the fiscal
benefits accruing through compliance with the recommendations.
c. Further Action or Follow-up
47. The Project does not require any specific future action. The reliability and future
performance of the power plant are closely monitored by NTPC as well as by beneficiaries of
the Project at the Northern Regional Electricity Board, which the Ministry of Power adjudged
ninth-best performing power plant in FY2001, and fifth best in FY2002. However, ADB needs to
monitor the implementation of the Ahluwalia Committee recommendations.
2. General
48. Since its creation in 1975, NTPC has become the largest electric utility in India, with
20,092 MW of installed capacity in operation as of March 2002. As NTPC’s share of total power
generation has increased steadily to about 26%, so has the agency’s role and influence in the
sector. NTPC has also demonstrated that a public sector utility can be operated as efficiently as
well-run private utilities in India and abroad. NTPC’s investments in new generating capacity
generally have been completed without time and cost overruns, reflecting the agency’s strong
management capability.
49. NTPC’s capacity expansion program envisages development of 20,000 MW generating

capacity by 2012. For the first time, supercritical technology is being adopted in India at NTPC's
Sipat Power Project, with installed capacity of 3 x 660 MW. NTPC requires Rs1,100 billion
($22.5 billion) worth of investments in the next 10 years. ADB may consider supporting NTPC,
particularly to develop supercritical technology power projects, as the capital cost per MW of
these units is lower than that of the 500 MW units, lowering generating costs.4
50. As it has developed strong management and technical capabilities and is a major
stakeholder in the power sector, NTPC may consider investing in distribution to make it
commercially viable, beginning with a few state-level distribution circles. Any NTPC distribution
initiatives may be considered for ADB support.
51. In addition to the merits of the project, ADB must also evaluate other issues such as the
EA’s capability and past performance to execute the project within schedule and budget.
52. The successful completion of infrastructure projects of this scale requires evaluation of
the EA’s preparedness and commitment to start project implementation as envisaged. Resident
Mission staff should participate more in the early phases of the project cycle.
53. Since 1991, the central and state governments have taken various measures to reform
and restructure the power sector (Appendix G).
4
As a result of adoption of supercritical technology units of 660 MW instead of 500 MW for the Sipat Power
Project, CEA estimated capital cost savings at $189 million.
Appendix 1 13
PROJECT SCOPE
The project scope as envisaged at appraisal in 1988, when Uttar Pradesh Rajya Vidyut
Utpadan Nigam (UPRVUN) was to be the executing agency (EA), was as follows. The Project
consisted of phase 2 (2 x 210 megawatt [MW]) of a three-phase program for the Unchahar
Power Station. Phase 1 (2 x 210 MW), begun in 1982 and financed entirely from government
resources, is completed, while phase 3 (1 x 210 MW) is being planned. The Project comprised
the following components:
(i) civil works for site preparation, foundation, power station building, cooling water
systems, and other facilities;
(ii) two coal-fired steam boilers, complete with auxiliaries;
(iii) two 210 MW reheat steam turbine-generators, complete with auxiliaries;
(iv) instrumentation and control systems;
(v) coal- and ash-handling systems;
(vi) water treatment and chlorination plants;
(vii) miscellaneous mechanical equipment and systems;
(viii) precipitators, cooling towers, and air pollution sampling equipment;
(ix) transformers, switchyard, and other miscellaneous electrical equipment;
(x) consulting services; and
(xi) training for UPRVUN staff.
In 1993, UPRVUN was replaced by the National Thermal Power Corporation (NTPC) as
EA. The project scope remained the same, except that the training and consultant components
were eliminated as NTPC had adequate trained personnel to operate the plant, and
experienced engineering staff who could execute the Project.
14 Appendix 2
CHRONOLOGY OF MAIN EVENTS IN PROJECT IMPLEMENTATION
Date Event
1988
2–18 Feb Fact-finding (1)1
16 May Management review meeting
8–23 Jun Appraisal
9 Aug Staff review committee meeting
29 Aug–2 Sep Loan negotiations
29 Sep Board approval
1 Dec Signing of loan and guarantee agreements
1989
30 Apr Declaration of loan effectivity
16–20 Oct Inception mission
1990
7–15 Mar Special Loan Administration and Review Mission (1). The executing
agency (EA) asked for help in major procurement exercises. The mission
also reviewed the financial status of Uttar Pradesh Rajya Vidyut Utpadan
Nigam (UPRVUN), the project EA.
10–12,19 Nov Review Mission (2).
1991
12–22 Feb Review Mission (3).
24 Sep–3 Oct Fact-finding (2). A mission visited New Delhi, following a request from the
Government and a visit to ADB headquarters by a delegation from the
National Thermal Power Corporation (NTPC) regarding the replacement of
UPRVUN with NTPC as EA. The mission studied the status of NTPC’s
proposed takeover of the Unchahar power plant and the possible transfer
of the ADB loan from UPRVUN to NTPC.
1992
13 Feb The Unchahar power plant was sold to NTPC to enable UPSEB to pay off
its debt to NTPC. With Government support, NTPC requested that the
ADB loan be re-lent by the Government to NTPC.
4–19 Feb A consultation mission visited India to discuss various issues related to the
proposed change in EA.
7 Sep Review Mission (4). The mission met with government and NTPC officials
in New Delhi to discuss the project.
1993
14–15 Jan Negotiations with the Government and NTPC were held at ADB
headquarters on amending the Loan Agreement and on a new project
agreement.
10 Jun The Public Investment Board approved Unchahar II.
12–29 Jul Review Mission (5). The mission visited New Delhi to discuss with NTPC
officials the change of project scope and implementation details.
16 Nov ADB approved the Government’s request that NTPC become the project
EA beginning 27 October 1993.
1
The first Fact-finding mission visited India when the executing agency was UPRVUN and the second Fact-finding
visited when it was proposed to change the executing agency to NTPC.
Appendix 2 15
1995
19 Apr The Cabinet Committee on Economic Affairs granted investment approval
for Unchahar II. As per Government approval, the first unit was to be
commissioned in January 2000, the second, in July 2000.
31 May The contract was awarded to supply a steam generator for $2.414 million
and turbine generator for $1.630 million.
Jul Before the revised Loan Agreement and Project Agreement were signed,
the Government of India requested that NTPC be allowed to borrow
directly from ADB. This major change required ADB Board approval. It
was agreed that the Subsidiary Loan Agreement (SLA) would be amended
to reflect the same.
28 Jul The Loan Agreement and Project Agreement were signed.
9 Sep The SLA was signed.
14 Nov The SLA became effective.
5 Dec The first disbursement under the Project was made.
1996
20 May NTPC requested ADB to finance packages for coal handling, ash
handling, and control and instrumentation as only the equipment cost of
the steam generator and turbine generator packages were covered under
the loan.
27 Sep A contract was awarded to supply the coal-handling plant for $775,000.
25 Nov–5 Dec Review Mission (6).
1997
29 Jul A contract was awarded to supply ash handling and disposal for $336,000.
18 Aug A contract was awarded to supply control and instrumentation for
$330,000.
Oct NTPC proposed that savings of $14.59 million be used to finance the
spare-generator package, and that the balance of savings be used to fund
erection packages of ADB-funded supply contracts.
1998
4–7,17,25 Mar Review Mission (7).
12 Jun NTPC proposed cancelation of $15 million from the loan proceeds.
30 Jul $15 million of the loan was canceled, reducing the balance to $145 million.
1999
27 Jan Unit 1 of the Project was synchronized.
11–15,25 Jan Review Mission (8).
8 Feb $5 million of the loan was canceled, reducing the balance to $140 million.
15 Feb ADB approved extension of the loan closing date to 31 March 2000.
27 Jul Unit 1 of the Project tripped due to an earth fault.
22 Oct Unit 2 of the Project was synchronized.
20–23 Oct Review Mission (9).
28 Dec $5 million of the loan was canceled, reducing the balance to $135 million.
2000
28 Jan ADB approved extension of the loan closing date to 31 December 2000,
and cancelation of identified savings of $5 million effective 28 December
1999.
1 Mar Unit 2 was declared commercially operational.
17–19 Jul Review Mission (10). The mission met with NTPC officials in Uttar
Pradesh to review the Project.
3 Oct $7 million of the loan was canceled, reducing the balance to $128 million.
16 Appendix 2
23 Oct ADB approved cancelation of savings of $7 million effective 3 October

2000.
Nov Unit 1 was resynchronized.
2001
1 Jan Unit 1 was declared commercially operational.
31 Mar Loan closing date
4 Apr The final disbursement was made under the Project.
4 Apr $1.324 million of the loan was canceled, reducing the balance to $126.676
million.
2002
17–19 Apr The Project Completion Review Mission.
Appendix 3 17
COST BREAKDOWN BY PROJECT COMPONENT

($ million)
A. Base Cost
1. Structural Steel 0.00 10.43 10.43 0.00 11.70 11.70
2. Civil Works 0.00 52.08 52.08 0.00 31.53 31.53
3. Steam Generator with 62.90 26.96 89.86 58.35 12.88 71.23
4. Turbine Generator with 49.15 21.05 70.20 42.82 4.76 47.58
5. Control and 10.38 4.45 14.83 6.52 1.22 7.74
Instrumentation
6. Coal Handling System 12.81 5.49 18.30 13.58 11.57 25.15
7. Ash Handling System 5.31 2.28 7.59 5.77 5.35 11.11
8. Miscellaneous Mechanical 14.96 6.41 21.37 0.00 16.74 16.74
Equipment
9. Transformers 2.45 1.05 3.50 0.00 4.15 4.15
10. Switchgears 3.96 1.70 5.66 0.00 5.63 5.63
11. Power Cables 3.03 1.30 4.33 0.00 4.34 4.34
12. Miscellaneous Electrical 4.76 2.04 6.80 0.00 6.94 6.94
Equipment
13. Tools and Plants, 3.46 26.42 29.88 0.00 27.66 27.66
Commissioning,
Engineering and
Administration
14. Taxes and Duties 0.00 41.50 41.50 0.00 Included Included
above above
Subtotal (A) 173.17 203.16 376.33 127.04 144.46 271.50
B. Contingencies
1. Physical Contingencies 8.66 13.28 21.94 0.00 0.00 0.00
2. Price Escalation 21.73 51.99 73.73 0.00 0.00 0.00
Subtotal (B) 30.39 65.27 95.67 0.00 0.00 0.00
C. Interest During 22.31 70.60 92.91 0.00 29.21 29.21

Construction
Subtotal (C) 22.31 70.60 92.91 0.00 29.21 29.21
Total 225.88 339.03 564.91 127.04 173.67 300.71
Source: Asian Development Bank estimates.

Project Costs and Summary of Contracts
18
NTPC PCSS Contract Description Contractor/Supplier ADB financing of Contract Amount Date of Date bid
Contract No. Currency Amount $ Equivalent NIT Documents
sent to ADB
Appendix 4
Category 01A - Equipment - Steam Boilers and Auxilliaries
CC-1430-101-8 0001 Supply of Steam Generator Bharat Heavy Electricals Ltd. Rs 1,701,547,791 45,410,091 30 Nov 1993 30 Jun 1993
$ 4,960,502 4,933,489
£ 807,216 1,304,359
DM 6,018,367 3,473,038
F 10,651,146 1,875,831
¥ 141,563,453 1,218,440
Category 01B - Equipment - Turbine Generators and Auxilliaries
CC-1430-110-8 0002 Supply of Turbine Generators Bharat Heavy Electricals Ltd. Rs 975,678,361 25,862,800 30 Nov 1993 16 Jun 1993
$ 2,773,009 2,773,009
DM 19,593,684 11,472,465
£ 987,378 1,614,254
¥ 105,018,603 874,812
Category 02 - Coal-Handling Plant
CC-1430-156-8 0003 Supply of Coal-Handling Plant TRF Ltd. Rs 549,355,723 13,576,296 1 Jun 1995 14 Nov 1994
Category 03 - Ash-Handling Plant
CC-1430-162-8 0005 Supply of Ash-Handling and Mahindra Ashtech Ltd. Rs 226,252,570 5,559,501 8 Sep 1995 23 May 1995
and Disposal Plant $ 212,175 212,175
Category 04 - Control and Instrumentation
CC-1430-405-8 0006 Supply of Control and Instrumentation Bharat Heavy Electricals Ltd. $ 1,135,045 1,135,045 3 Jul 1995 14 Nov 1994
£ 138,130 223,275
DM 282,692 156,157
Rs 210,684,909 5,000,770
ADB = Asian Development Bank, LOA = letter of acceptance, NIT = notice inviting tender, NTPC = National Thermal Power Corporation, PCSS = procurement contract
summary sheet.
Project Costs and Summary of Contracts
Date of ADB Date of ADB

NTPC PCSS Contract Description Approval of Date of Sale Date of Date Bid Approval Date of Date LOA
Contract No. Bid of Bid Bid Opening Evaluation of Contract Award of sent to
Documents Documents sent to ADB Award Contract ADB
Category 01A - Equipment - Steam Boilers and Auxilliaries
CC-1430-101-8 0001 Supply of Steam Generator 15 Sep 1993 15 Dec 1993 29 Mar 1994 16 Dec 1994 31 May 1995 31 May 1995 16 Jun 1995
Category 01B - Equipment - Turbine Generators and Auxilliaries
CC-1430-110-8 0002 Supply of Turbine Generators 15 Sep 1993 15 Dec 1993 29 Mar 1994 16 Dec 1994 31 May 1995 31 May 1995 16 Jun 1995
Category 02 - Coal-Handling Plant
CC-1430-156-8 0003 Supply of Coal-Handling Plant 29 Mar 1995 01 Jun 1995 20 Sep 1995 23 Jul 1996 04 Sep 1996 27 Sep 1996 22 Nov 1996
Category 03 - Ash-Handling Plant
CC-1430-162-8 0005 Supply of Ash-Handling and 29 Aug 1995 08 Sep 1995 15 Jan 1996 19 Jul 1996 31 Oct 1996 30 Jul 1997 07 Aug 1997
Disposal Plant
Category 04 - Control and Instrumentation
CC-1430-405-8 0006 Supply of Control and 19 Jun 1995 03 Jul 1995 10 Oct 1995 09 Jul 1997 15 Aug 1997 18 Aug 1997 24 Sep 1997
Instrumentation
Appendix 4
ADB = Asian Development Bank, LOA = letter of acceptance, NIT = notice inviting tender, NTPC = National Thermal Power Corporation, PCSS = procurement contract
summary sheet.
19
20 Appendix 5
ANNUAL AVERAGE EXCHANGE RATE

FOR THE RUPEE AND DOLLAR
Fiscal Year Rs per $a
1996 33.45
1997 35.50
1998 37.16
1999 42.07
2000 43.33
2001 46.50
a
The annual average exchange rates are as per
Reserve Bank of India published rates.
Appendix 6 21
PROJECT FINANCING PLAN
Cost Appraisal Estimatea Actual
A. Implementation Costs
2. ADB-Financed 150.00b 126.68
Subtotal (A) 472.00 271.50
B. IDC Costs
2. ADB-Financed 0.00 0.00
Subtotal (B) 92.91 29.21
Total 564.91 300.71

ADB = Asian Development Bank, IDC = interest during construction.
a
b
Excluding the unallocated $10 million out of the total loan of $160 million.
22 Appendix 7
PROJECTED AND ACTUAL DISBURSEMENTS OF LOAN PROCEEDS

($ million)
Disbursements
a
Calendar Year Projected Actual
1989 0.00 0.00

1990 6.00 0.00
1991 0.00 0.00
1992 0.00 0.00
1993 0.00 0.00
1994 6.90 0.00
1995 12.35 14.67
1996 9.30 14.78
1997 21.60 49.80
1998 27.80 32.70
1999 6.20 8.00
2000 8.00 2.20
2001 5.90 4.53
a
Projections as made in the annual Loan Financial Information System (LFIS).
Source: LFIS of Asian Development Bank.
IMPLEMENTATION SCHEDULE
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Activity I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III
Land Acquisition
Civil Works
Steam Generators
Turbine Generators
Control and Instrumentation
Coal-Handling System
Mechanical Services
Transformers
Switchgear
Switchyard Equipment
Electrical Services
Appendix 8
Note: The land was acquired during the first stage of the Unchahar Thermal Power plant.
Appraisal Estimate
23
National Theramal Power Corporation Estimate
Actual
24 Appendix 9
ORGANIZATION CHART - PROJECT IMPLEMENTATION STRUCTURE
Executive
Director
(Engineering)
Executive
Director
(Consulting & JV)
Executive Sr. Manager

Director
(Hydro) (Construction-I)
Executive Dy. General Sr. Manager

Director Manager
(Corporate Planning) (Construction) (Construction-II)

Director (Control &
(Finance) (Instrumentation)

Director (Equipment Erection
(Commercial) Electrical)
Executive Additional Dy. General Sr. Manager

Director General Manager (Turbine Generator
(Operations Services) (Project) (Erection) Erection)
Board Chairperson Executive General Additional Dy. General Sr. Manager

of and Director Manager General Manager (Steam Generator
Directors Director (NR) (Unchahar) (O&M) (Commissioning) Erection)

Director
(Environment & R&R) (off-site)
Executive
Director Sr. Manager Engineer (R&R)
(HR) Sociologist
(R&R)
Executive
Director
(Contracts & Materials)
Executive
Director
(Corporate Communication)
Executive
Director
(WR)
Executive
Director
(SR)
Executive
Director
(ER)
Executive
Director
(NCR)
Dy. = Deputy; ER = Eastern Region; HR = Human Resources; JV=Joint Venture; NCR = National Capital Region; NR = Northern Region;
O&M = Operations and Maintenance; R&R = Rehabilitation and Resettlement; SR = Southern Region; Sr. = Senior; WR = Western Region
Appendix 10 25
STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenant Reference in Remarks
Loan Documents
The National Thermal Power Corporation (NTPC) Project Complied with

will furnish to ADB quarterly reports on the Agreement (PA),
execution of the projects and on the operation and Schedule 2.08 (b)
management of the project facilities. Such reports
will be submitted in such form and in such detail
and within such a period as ADB will reasonably
request, and will indicate among other things
progress made and problems encountered during
the quarter under review, steps taken or proposed
to be taken to remedy these problems, and a
proposed program of activities and expected
progress during the following quarter.
Promptly after physical completion of the Project, PA, Schedule Complied with
but in any case not later than 3 months thereafter 2.08 (c)
or such later date as ADB may agree for this
purpose, NTPC will prepare and furnish to ADB a
report in such a form and in such detail as ADB
will reasonably request on the execution and
initial operation of the Project, including its cost,
the performance by NTPC of its obligation under
this Project Agreement and the accomplishment
of the purposes of the loan.
Furnish to ADB promptly after their preparation PA, Schedule Complied with (furnished until FY2001)
but in any event not later than 6 months after the 2.09
close of the fiscal year to which they relate,
unaudited copies of such accounts and financial
statements; and not later than 9 months after the
close of the fiscal year to which they relate or
such date as may be agreed by ADB, certified
copies of such audited accounts and financial
statements and the report of the auditors relating
thereto, all in the English language.
NTPC will take all necessary and timely action to PA, Schedule 2.2 Complied with
acquire all additional land required for proper
disposal of all coal ash to be generated by
operation of the project facilities.
Performance Monitoring. As part of its annual PA, Schedule 2.5 Complied with
auditing exercise, NTPC will carry out a
performance audit of the operations of the
Unchahar Station, a copy of the result of which
study will be furnished to ADB. Such performance
audit will include, but not necessarily be limited to
(i) plant availability and energy production; (ii)
staffing levels; (iii) maintenance procedures; (iv)
inventory levels, including spare parts and fuel;
and (v) environmental monitoring procedures.
26 Appendix 10

Loan Documents
Project Benefit Monitoring and Evaluation. PA, Schedule 2.6 Complied with
Within 6 months of the date of project completion
and thereafter on yearly basis, NTPC will provide
ADB a full range of information, as specified by
ADB, on the operation of the Project and the
revenues received by the Project, to enable ADB
to evaluate the impact on, and benefits of, the
project facilities.
Accounts Receivables. NTPC will maintain its PA, Schedule 2.7 Not complied with. Receivables as of
total current accounts receivables at a level not March 2002 were equivalent to 7.7
exceeding an amount equivalent to the proceeds months of billing. In an attempt to bail out
of its sale of power for the 2 preceding months for the central public sector utilities, the
the purpose of this covenant. NTPC’s total current Government in April 2002 approved a
account receivable (i) will not include the balance one-time settlement scheme based on
of accounts due from the state electricity boards the Ahluwalia Committee
to NTPC as of 31 May 1990 and of 31 May 1992 recommendations, for clearing
which were guaranteed by the Borrower, and (ii) outstanding dues and current payments
will be measured from the date of issuance of the from state electricity boards (SEBs) and
billing statements by NTPC. other power utilities. To ensure prompt
payment of current dues and settlement
of the outstanding dues by the SEBs
under this scheme, the Government has
proposed a tripartite agreement to be
signed between the central Government,
state government, and the Reserve Bank
of India. The Ahluwalia Committee’s
recommendations provide for
securitization of total dues as of 30
September 2001, including surcharge by
issue of tax-free bonds by respective
state governments with a coupon rate of
8.5% per annum. The recommendations
also envisage provision of full payment of
current dues (from 1 October 2001) by
opening irrevocable letters of credit with
SEBs and utilities for an amount equal to
105% of their average monthly billing for
the preceding 12 months, and failure to
open the requisite letters of credit will
attract regulation of power supply to
respective defaulters and suspension of
government assistance to SEBs through
the Accelerated Power Development
Reforms Program. NTPC informed ADB
that the Government and NTPC are
vigorously encouraging state
governments to sign tripartite
agreements. Once they are signed,
NTPC is expected to be able to comply
with the covenant.
Appendix 10 27

Loan Documents
Contracts for the Sale of Power from the PA, Schedule 2.8 Complied with. With the beneficiaries,
Project. NTPC will, prior to the commencement of NTPC signed the Power Purchase
generation of power from the Project, conclude Agreement (PPA) for power supply from
contracts for the sale of power from the Project Unchahar II, wherein the establishment of
with beneficiaries purchasing power from the letters of credit for payment of monthly
Project. In case a particular beneficiary has owed bills in full, with the provision to provide a
more than 2 months of accounts payable to NTPC back-up escrow account equivalent to
at the end of the preceding fiscal year, NTPC will 110% of 1 month billing at normative
ensure that the contract with that beneficiary plant load factor of 68.5%, has been
provides for the establishment of an irrevocable provided.
letter of credit covering the anticipated value of
power sales to that beneficiary. NTPC will also The PPA also provides for state
ensure that in the event of noncompliance of said government guarantee that bulk power
provision, NTPC will reallocate the sale of power customers will regularly pay energy bills
from the Project to other beneficiaries purchasing presented by NTPC from various power
power from the project who have a record of stations.
satisfactory payment.
To safeguard against nonpayment of bills
and nonestablishment of letters of credit,
escrow account, and government
guarantee, the PPA gives NTPC the
authority to discontinue and/or reduce
power supply from Unchahar II and
various other power stations of NTPC to
defaulting bulk power customers under
intimation to the concerned regional
electricity board.
The Borrower will by the date the project facilities PA, Schedule 4, Complied with. Installed by Powergrid.
are commissioned ensure that all necessary prior para 2
transmission facilities are installed and in (Amendments)
operating condition. The Borrower will also ensure
that such power transmission facilities are
adequate to carry and deliver the full electricity
output to be generated by the project facilities.
The Borrower will set NTPC’s tariffs for power PA, Schedule 4, Complied with
supplied from the Project so as to achieve an para 3
annual rate of return of not less than 16% on
NTPC’s equity investments in the Project.
Except as ADB may otherwise agree, the PA, Schedule 4, Complied with
Borrower will set NTPC’s tariff for power supplied para 4
from NTPC power plants other than these under
the Project so as to achieve an annual rate of
return as follows: (i) not less 16% on NTPC’s total
equity investments for power plants approved for
development by the Borrower on or after 1 April
1992, and (ii) not less than 12% on NTPC’s total
equity investments for power plants so approved
before 1 April 1992.
28 Appendix 11
ECONOMIC AND FINANCIAL EVALUATION
A. Introduction
1. The Project was for the construction of two 210-megawatt (MW) units under the second
stage of the Unchahar Thermal Power Station. The economic evaluation considers the Project
in the context of the national economy, and the financial evaluation considers the Project from
the perspective of the Executing Agency, the National Thermal Power Corporation (NTPC).
Prices are at March 2001 values. For the financial analysis, the financial costs of the Project are
compared with the revenues NTPC is expected to earn for electricity generated under the
Project.
2. For the economic analysis, project costs plus an estimated investment for transmission
and distribution costs are compared with the estimated economic benefits of consumption by
end users. Economic costs are calculated by (i) adjusting financial values to exclude taxes and
duties; (ii) expressing domestic values of nontradable items in the border values by applying a
standard conversion factor of 0.8; and (iii) expressing the values of all tradable items in terms of
their (free on board/cost including insurance and freight [FOB/CIF]) border equivalents
(distribution and marketing margins are included as local costs). The economic benefits of
power supply to end users are estimated on the basis of a weighted average of current
prevailing tariff levels and the alternative costs of small generators or alternative energy
sources.
B. Project Costs
3. Capital Costs. The capital cost of the Project is estimated at $379.5 million in 2001
prices, as against an appraisal estimate of $398 million in 1993 prices. At 2001 prices, the
appraisal cost estimate would have been $700.0 million, reflecting a net saving of $320.5 million
or about 46%. Additional transmission and distribution investments at 43% of the generation
cost have been estimated at $108 million, based on average investments in India.
4. Operations and Maintenance (O&M). Incremental O&M expenditure has been

estimated at 2.5% per annum of the capital cost of generation, and 1.0% per annum of the
capital cost of transmission and distribution assets.
5. Fuel cost includes coal and fuel oil (required as a supplement for start-up and as a
support for coal). Fuel specifications are in Table A11.1.
Table A11.1: Fuel Specifications
Station Heat Rate 2,464 Kcal/kWh

Heat Value
Coal (Grade F) 3,400 Kcal/Kg
Fuel oil 10,000 Kcal/l
Oil Consumption 0.92 ml/kWh
Coal Consumption (including transit losses) 0.680 Kg/kWh
Kcal = kilocalorie, kg = kilogram, kWh = kilowatt-hour, l = liter, ml = milliliter.
Appendix 11 29
6. The government sets coal prices on an administered basis. The consumer prices of coal
include, in addition, excise duties, sales taxes and royalties, and transportation cost for about
600 kilometer on an average from the coal mines to the site. Local coal supply is nontradable
given its low heating value and the high inland transportation costs of exporting it. Economic
costs have been calculated as 80% of the pithead price as increased by the transportation cost,
to adjust for the standard conversion factor.
7. The financial cost of fuel oil is Rs10 per liter, and the economic cost is estimated at
Rs3.03 per liter, based on the international market price of $71 per ton. Fuel costs per kilowatt-
hour (kWh) are in Table A11.2.
Table A11.2: Fuel Cost
Item Financial Economic

Price Price
Coal (0.680 kg) 0.92 0.69
Oil (0.92 ml) 0.09 –
Total Fuel Cost (Rs/kWh) 1.01 0.69
Total Fuel Cost ($/kWh) 0.02 0.01
Kcal = kilocalorie, kg = kilogram, kWh = kilowatt-hour, l = liter, ml = milliliter, Rs = rupees.
C. Generation
8. Generation from the Project is based on actual generation data for the FY2001 and
FY2002, and projected at an average plant load factor (PLF) of 85% from 2003 onward. A
system auxiliary use of 9.5% is assumed to arrive at net generation available at bus bar. An
average system loss of 26.8% of net available generation for the northern region has been
adopted.
D. Economic Benefits
9. The economic value of power supply to end users is based on a weighted average of (i)
economic costs of the project electricity displacing alternatives available to individual
consumers; and (ii) the economic value to consumers of additional energy consumption due to
the Project, which is estimated on the basis of average willingness to pay. Estimated willingness
to pay, in turn, is based on the average of (i) the minimum willingness to pay for power, which is
equal to the current retail tariff levels for each consumer category; and (ii) the maximum
willingness to pay for public power supply, based on the estimated alternative financial costs of
small private power generators or alternative energy sources for various consumer categories.
1. Current Average Tariffs
10. Generation from the Project is allocated to a number of northern state electricity boards,
each with different retail tariffs. The average tariff level in 2001 to end users to be served by the
Project in the northern region is Rs2.04 per kWh.
30 Appendix 11
Table A11.3: Electricity Use and Average Tariff In Northern Region

Sectoral Use of Generation Average Tariff (p/kWh)
2000/01
State Allocation Domestic Agri/Irr Industry Comm
Domestic Agri Total
Other
Haryana 6.0% 22.8% 44.6% 19.8% 12.8% 280.00 29.47 214.91
Himachal Pradesh 4.0% 19.6% 0.4% 41.7% 38.2% 92.48 50.00 203.04
Jammu & Kashmir 8.0% 31.7% 14.7% 14.7% 38.9% 125.00 250.00 194.16
Punjab 19.0% 18.9% 30.8% 37.8% 12.6% 190.16 - 176.42
Rajasthan 11.0% 16.2% 32.6% 37.3% 13.8% 138.00 34.85 195.79
Uttar Pradesh 39.0% 30.5% 34.0% 19.4% 16.2% 129.53 49.97 183.35
Delhi 13.0% 44.4% 0.9% 18.4% 36.3% 273.91 276.00 320.00
Weighted Average 27.7% 26.7% 25.3% 20.4% 174.12 44.70 204.71
Agri = agriculture, Comm = commercial, Irr = irrigation, kWh = kilowatt-hour, p = paise
Source: Annual Report on the Working of the State Electricity Boards and Electricity Departments, Planning
Commission (Power and Energy Division), Government of India, June 2001.
2. Costs of Alternative Energy Sources
11. For the economic analysis, estimates were made of costs of alternative energy sources
available to the northern domestic, industrial, agricultural, and commercial users, based on the
costs of kerosene consumption by domestic consumers, autogeneration for industrial
consumers, diesel pumping for agricultural consumers, and diesel generation for commercial
and other consumers. The average consumer surplus is estimated to be half the difference
between the financial tariff and the alternative cost of energy supply.
12. The cost of autogeneration for industry with medium-sized diesel generators is estimated
at Rs4.83 per kWh in financial terms and Rs2.48 per kWh in economic border prices. For
agricultural consumers, the equivalence is established at Rs8.18 per kWh in financial prices in
comparison to the operation of diesel pumps. This works out to Rs4.23 per unit in economic
border prices. For consumers in the commercial and other categories, the alternative source is
assumed to be a mix of generators. The financial cost of such generation is Rs5.31 per unit and
Rs2.81 at economic border prices.
13. For domestic consumers, maximum willingness to pay is determined by the cost saving
arising from the substitution of kerosene lamps by incandescent lights. The cost of kerosene
lighting is based on the use of efficient petromax lamps, which require 0.7 liters of kerosene to
produce 1 kWh equivalent of electric lighting. At the kerosene price of Rs9.60 per liter, the
maximum willingness to pay for domestic consumers is computed at Rs6.72 per kWh, which is
Rs5.71 per kWh at economic border prices. Details are in Tables A11.4 and A11.5.
Appendix 11 31
Table A11.4: Cost of Autogeneration

(Amounts in rupees)
Item 350 kW 5 kW
Financial Capital Cost per kW 6,000 7,000
Plant Life 15 10
Average Plant Factor 30% 30%
Discount Rate 12% 12%
Capital Recovery Factor 0.147 0.177
Fixed Annual Cost (Financial)

Capital Recovery 881 1239
O&M (5% of capital cost) 300 350
Total 1,181 1,589
Annual Operation (hours) 2,628 2,080
Equivalent Unit Cost (Financial terms) 0.45 0.76
Equivalent Unit Cost (Economic terms) 0.36 0.61
Fuel Cost (diesel)
Financial Price Rs/liter 17.50 17.50
Specific Fuel Consumption liters/kWh 0.25 0.26
Fuel cost per unit 4.38 4.55
Total Financial Cost 4.83 5.31
Economic Fuel Cost per Rs/liter 8.48 8.48
Economic Fuel Cost per Unit 2.12 2.20
Economic Cost at Border Prices
Fixed Cost 0.36 0.61
Fuel Cost 2.12 2.20
Total Cost 2.48 2.81
kW = kilowatt, kWh = kilowatt-hour.
Notes: For smaller 5 kW units, the operating hours is calculated for 260 working days at 8 hours per day.
For larger 350 kW units, the operating hours is based on a 365-day working year at 30% plant load factor.
Table A11.5: Comparison of Electric and Diesel Irrigation Pumps

Item Electric Diesel
Motor/Engine Size (HP) (1 HP = 0.746 kW) 5 6
Life in Years 15 10
Investment Cost, Motor 18,000 19,600
Investment, Entire Pump Set 33,500 36,300
Annual Costs
Capital Recovery at 12% 0.147 0.177
Capital Recovery Cost 4,918.61 6,424.53
O&M Rate 5% 10%
O&M Cost, Motor 900.00 1,960.00
Fixed Annual Cost (Financial) 5,818.61 8,384.53
Fixed Annual Cost (Economic) 4,654.89 6,707.62
Fuel Costs
Financial Price Rs/liter 17.50
Specific Fuel Consumption(liters per hour) at 0.26 liter/HP 1.56
Cost Per Hour 27.30
Economic price of fuel Rs/liter 8.48
Energy Costs
Operation Hours per Year 800 800
Fuel Cost 21,840
No. of kWh per annum (3.73 * 800) 2,984
Economic fuel costs 10,583.04
Total Annual Financial Cost 30,224.53
Total Annual Economic Cost 17,290.66
Cost of Electricity at which Diesel and Electricity are Equivalent 8.18
Economic Cost at which Diesel and Electricity are Equivalent 4.23
HP = horse power, kW = kilowatt, kWh =kilowatt-hour.
32 Appendix 11
3. Weighted Average Values
14. For each consumer category, current tariff levels represent the minimum willingness to
pay, and the costs of alternative energy supply represent the maximum willingness to pay for
additional electricity use. The average of these two values is considered the average willingness
to pay for additional electricity consumption. The weighted average of willingness to pay,
weighted according to the relative size of each consumer category, is Rs4.09 per kWh at local
financial prices. Some proportion of electricity supply from the Project will displace alternative
energy sources that would otherwise be used with the Project. This is estimated at 31%, based
on discussions with NTPC and Central Electricity Authority as shown in Table A11.6. The
weighted average economic cost of these alternative energy sources is estimated at Rs3.91 per
kWh. The significant difference between local financial prices and economic border prices arises
due to the incidence of a substantial tax element included in local financial prices. The overall
weighted economic value of electricity supplied by the Project is estimated to be Rs3.27 at
border prices. Details are in Table A11.6.
Table A11.6: Economic Value of Electricity Consumption

(Rs/kWh at 2001 prices)
Economic Value of Electricity Consumption
Item Domestic Agriculture Industry Commercial Weighted

Average
Share in Total Consumption 27.70% 26.70% 25.30% 20.40%
Current Tariffs 1.74 0.45 3.34 2.91 2.04
Willingness to Pay
Maximum, based on financial 6.72 8.18 4.83 4.26 6.14
Cost of alternatives
Average, at local prices 4.23 4.32 4.09 3.59 4.09
Average, at border prices 3.38 3.46 3.27 2.87 3.27
Estimated Use of Alternatives 1.00% 12.50% 15.00% 2.50%
Economic Cost of Alternatives
at border prices 5.71 4.23 2.48 2.81 3.91
Weights in Total Evaluation
Additional Consumption 69%
Alternative Energy 31.00%
Displacement
Weighted Average Value 3.27
kWh = kilowatt-hour.
E. Economic Evaluation
15. The annual cash flows of estimated economic costs and benefits for this Project are
shown in Table A11.7. The economic internal rate of return (EIRR) is estimated at 19.4%,
significantly higher than the 13.6% estimated at appraisal. The higher EIRR is due to a
substantially lower project cost, which is estimated at Rs16.1 billion in 2001 prices, as against
the appraisal estimate of Rs27.6 billion (in 2001 prices), a saving of 41.7%. In addition, the
significant tax element on fuel, which is excluded in economic border prices, has also
contributed to the higher EIRR. The EIRR indicates that the Project is expected to provide an
adequate return to the economy.
Appendix 11 33
F. Financial Evaluation
16. The financial evaluation of the Project is from the perspective of NTPC, and is in Table
A11.8. Tariffs charged for the new facilities have been worked out on an estimated basis using
the tariff model usually applied at a PLF of 68.50%, as the Central Electricity Regulatory
Commission is yet to finalize the tariff award for the new facilities. The costs and benefits are
stated in 2001 prices. The project financial internal rate of return (FIRR) while operating at a
PLF of 85.00% is 10.97%, as against the weighted average capital cost (WACC) of about 9.00%
for this Project. This compares well with the appraisal estimate of 11.26% FIRR, when the
WACC was 15.20%. As NTPC receives a cost-plus tariff, any increase or decrease in cost of
capital would be automatically reflected in higher or lower tariff. The break-even FIRR occurs at
76.50% PLF. A sensitivity analysis indicates that, if NTPC were to operate the plant at 80.00%,
the FIRR would drop to 10.00%, and would increase to 11.50% if the PLF were 90.00%. In
general, NTPC has been operating at above 85.00% PLF in this Project.
Table A11.7: Economic Evaluation of Unchahar Thermal Power Extension Project

(All Figures in 2001 Prices and in Rs million, unless otherwise stated)
Year Generation Transmission Distribution O&M Fuel Total Net Net Revenue Net
Generation Sale Cash
GWh GWh Flow
1995 6.9 6.9 (6.9 )

1996 1,562.0 1,562.0 (1,562.0)
1997 1,847.4 1,847.4 (1,847.4)
1998 3,325.7 3,325.7 (3,325.7)
1999 2,583.2 1,152.1 1,152.1 4,887.4 (4,887.4)
2000 1,742.9 1,152.1 1,152.1 322.8 4,369.9 (4,369.9)
2001 453.1 334.1 1,355.9 2,143.1 1,778.3 1,312.4 4,396.5 2,253.5
2002 334.1 2,259.8 2,593.9 2,963.9 2,187.4 7,327.7 4,733.9
2003 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2004 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2005 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2006 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2007 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2008 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2009 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2010 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2011 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2012 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2013 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2014 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2015 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2016 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2017 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2018 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2019 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2020 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2021 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2022 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2023 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2024 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
2025 334.1 2,157.8 2,491.9 2,830.2 2,088.7 6,997.1 4,505.2
Economic Internal Rate of Return 19.4%
GWh = gigawatt-hour, O&M = operations and maintenance.

34 Appendix 11
Table A11.8: Financial Evaluation of Unchahar Thermal Power Extension Project

(All Amounts in Constant 2001 Prices and Rs million Unless Otherwise Stated)
Year Cost Operating Costs Incremental Revenue Sales Net Cash

O&M Fuel W. Cap. Total Gen. Sales Rs/kWh Flow
Interest GWh GWh
1995 8.6 (8.6)
1996 1,952.5 (1,952.5)
1997 2,309.2 (2,309.2)
1998 4,157.1 (4,157.1)
1999 3,229.0 (3,229.0)
2000 2,178.6 (2,178.6)
2001 566.4 311.1 1,984.7 164.5 2,460.3 1,965.0 1,778.3 2.320 4,125.7 1,099.0
2002 216.2 311.1 3,307.8 164.5 3,783.4 3,275.0 2,963.9 2.240 6,639.1 2,639.5
2003 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.230 6,311.3 2,677.1
2004 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.220 6,283.0 2,648.8
2005 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.210 6,254.7 2,620.5
2006 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.150 6,084.9 2,450.7
2007 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.110 5,971.7 2,337.5
2008 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.090 5,915.1 2,280.9
2009 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.080 5,886.8 2,252.6
2010 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.060 5,830.2 2,196.0
2011 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.050 5,801.9 2,167.7
2012 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.040 5,773.6 2,139.4
2013 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 2.040 5,773.6 2,139.4
2014 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.730 4,896.2 1,262.0
2015 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2016 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2017 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2018 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2019 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2020 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2021 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2022 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2023 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2024 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
2025 311.1 3,158.6 164.5 3,634.2 3,127.3 2,830.2 1.660 4,698.1 1,063.9
Financial Internal Rate of Return 10.97%

O&M = operations and maintenance, Gen. = generation, GWh = gigawatt-hour, kWh = kilowatt-
hour, W. Cap. = working capital.
Appendix 12 35
ENVIORNMENTAL MONITORING DATA AND COMPLIANCE FOR ENVIRONMENTAL

CLEARANCE
Table A12.1: Environmental Monitoring Data
A. Ambient Air Quality (microgram per cubic meter [µg/m3])
Pollutant Standard Monitoring Data

Sulphur dioxide 120 6.6–8.2
Oxides of nitrogen 120 14–32
Suspended particulate matter 500 111–218
B. Stack Emission (milligram per normal cubic metre [mg/Nm3])
Pollutant Standard Monitoring Data

Suspended particulate matter 150 70–140
C. Liquid Effluent
Parameter Standard Limits Monitoring Data

PH 5.5–9.0 8–8.4
Total suspended solids 100 mg/liter 39–87
Oil and grease 10 mg/liter 3.5–4.2
Iron 1.0 ppm < 0.1
Zinc 1.0 ppm < 0.04
Mercury 0.01 ppm < 0.001
Arsenic 0.2 ppm < 0.005
Fluoride 2.0 ppm 0.381–0.559
pH = A logarithm of the reciprocal of hydrogen ion concentration in moles per liter of a solution
giving a measure of its acidity or alkalinity, mg = milligram, ppm = parts per million.
Source: National Thermal Power Corporation.

36 Appendix 12
Table A12.2: Compliance with Conditions Stipulated by the

Ministry of Environment and Forests
S. Condition Action Taken
No.
1. The electrostatic precipitators should have an High-efficiency (over 99.5%) electrostatic precipitators keep
efficiency of more than 99.5%. The efficiency emission of suspended particulate matter below 150 mg per
3
of electrostatic precipitators should be normal m , the limit prescribed under the Environment
monitored and recorded. (Protection) Act, 1986.
2. A common stack for all the three units of not A 220 m stack has been provided for 2 x 210 units under
less than 220 m should be installed. stage 2.
3. A flue gas desulfurization plant having The Ministry of Environment and Forests (MOEF) vide letter
efficiency of 90% should be installed. dated 4 January 1995 has waived this stipulation.
4. A closed cooling system should be provided A closed cycle cooling system has been provided for
for condensers instead of a once-through condenser and auxiliary cooling for stage 2.
cooling system.
5. Liquid effluents from different plants of the Treatment of all liquid effluents, and the final effluent
power station should be collected and treated conform to UPPCB standards.
according to Uttar Pradesh Pollution Control
Board (UPPCB) standards.
6. No fly ash should be thrown into the ravines For ash disposal from stage 1, environment clearance was
of the River Ganges. The ash dumping area accorded 264 ha on the banks of the River Ganges.
should be far from the Ganges, and proper National Thermal Power Corporation (NTPC) sought
bunds should be built for the adequate environment clearance for an additional 164.8 ha for ash
settling of the fly ash. disposal from stage 2, about 10 km from the Ganges.
However, MOEF has accorded clearance for 80 ha only
(away from the Ganges) and considered 264 ha and 80 ha
collectively for stages 1 and 2 (Vide MOEF letter, 15
October 1996). Accordingly, ash from both stages is being
disposed off in the ash dyke on the bank the Ganges. The
construction of ash dyke on the additional 80 ha is ongoing.
The ash dyke is well designed, constructed, and maintained.
7. The supernatent water coming out of the ash The ash pond overflow conforms to UPPCB standards.
bund should meet UPPCB standards.
8. At least 60% of the fly ash generated should This stipulation was further modified by MOEF Vide Office
be utilized for constructive purposes such as Memorandum, 8 October 1992. NTPC should ensure 100%
manufacturing bricks, blocks, cement, etc. fly ash utilization within 9 years of commissioning of plant.
However, NTPC has communicated to MOEF from time to
time that it is not possible to achieve 100% fly ash
utilization. A fly ash utilization plan with a maximum
utilization of 10% in first 5 years, 15% in the next 5 years,
and 25% afterward has been submitted to MOEF.
m = meter, m3 = cubic meter, mg = milligram.

Appendix 12 37
S. Stipulation Status of Implementation

No.
9. Adequate infrastructure to monitor emissions Infrastructure to monitor emissions and ambient air quality
of pollutants from the stacks of the power has been established at site and the data is regularly
plant should be provided. Ambient levels of submitted to UPPCB.
sulphur dioxide and particulate matter should
also be collected from different locations in a
radius of 5 km from the power plant,
especially residential areas. Emissions should
conform to UPPCB standards.
10. A greenbelt should be planted all around the Stage 2 is in the premises of stage 1, and no additional land
power plant to trap dust particles. has been acquired for the plant and township of stage 2.
Large-scale afforestation and tree plantation have been
undertaken in all available spaces of the plant and township.
More than 700,000 trees have been planted at site.
11. The workers in the coal-handling areas, Workers undergo periodic medical examinations.
particularly in the wagons tippling operations,
conveyor transfer points, crushing mills, coal
storage areas, fly ash dumping areas, etc.
should be medically examined periodically.
Adequate facilities should be provided for
medical surveillance of workers engaged in
other plants of the power station, the
occupational health status of the workers
recorded, and proper treatment given, if
needed.
12. Disaster planning for fire and explosions An onsite disaster management plan is being implemented
should be done. at site.
38 Appendix 13
RESETTLEMENT AND REHABILITATION MEASURESa
A. Infrastructure Development
S. No. Activity No. of Villages/ Length/Unit Amount

Locations (Rs million)
1. Kharanja Road 7 13.5 km 3.40
2. Brick drain 4 9.5 km 2.40
3. Culverts 3 10 0.25
4. Hand pumps 6 18 0.30
5. Primary School 1 1 0.25
6. Renovation and 6 33 0.33
modification of wells
7. Community 2 2 1.00
halls/Panchayat Bhawan
8. WBM road 2 7.5 km 4.50
9. Miscellaneous Works 1.50
10. Sanitary latrines 8 480 0.24
Total 14.17
B. Rehabilitation Schemes
S. No. Scheme PAPs to be Total cost

benefited (Rs million)
Income Generating Schemes
1. Dairy 15 5.14
2. Shops/Kiosks 8 0.12
3. Poultry 15 0.82
4. Piggery 30 1.03
5. Goat keeping 30 1.03
Self-employment Schemes
1. Carpentry 15 0.55
2. Electrical welding 15 0.51
3. Plumbing 15 0.51
4. Motor mechanic 10 0.34
5. TV repairing 10 0.34
6. Electrical 15 0.51
7. Computer hardware 5 0.17
8. Other SESs 157 4.71
Total 480 15.77
PAP = project-affected persons, SES = self-employment schemes
Source: National Thermal Power Corporation
a
Infrastructure development and rehabilitation schemes undertaken by National Thermal Power Corporation
(NTPC) as per its rehabilitation action plan (RAP). The RAP was prepared as per NTPC’s rehabilitation and
reconstruction policy, which was endorsed by World Bank as conforming to its guidelines.
Appendix 14 39
UNCHAHAR STAGE-2 PLANT PERFORMANCE (TWO UNITS)
Fiscal Genera- Availability Plant Load Auxiliary Specific Coal Specific Oil Heat Rate
Year tion (MU) Factor (%) Factor (%) Consump- Consump- Consump- (Cal/kWh)
tion (%) tion tion
(kg/kWh) (ml/kWh)
2000 472.27 97.53 97.53 7.19 0.703 1.02 -
2001 2,091.89 85.98 84.42 8.31 0.688 1.21 2,473
2002 3,355.84 95.03 91.21 8.56 0.675 0.48 2,464
MU = million units, Cal = kilocalorie, kg = kilogram, kWh = kilowatt-hour, ml = milliliter.
Note: The first unit was declared to be under commercial operation from 1 January 2001, the second unit, from 1
March 2000.
Source: National Thermal Power Corporation.

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ASIAN DEVELOPMENT BANK

PROJECT COMPLETION REPORT

UNCHAHAR THERMAL POWER PROJECT

Currency Unit – rupee/s (Re/Rs)

At Appraisal At Project Completion

ADB – Asian Development Bank

WEIGHTS AND MEASURES

V (volt) – unit of electrical pressure

(ii) In this report “$” refers to US dollars.

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

III. EVALUATION OF PERFORMANCE 7

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 10

3. Date of Board Approval 29 September 1988

4. Date of Loan Agreement 1 December 19881

5. Date of Loan Effectiveness

Initial Disbursement Final Disbursement Time Interval

Effective Date Original Closing Date Time Interval

30 Apr 1989 30 Sep 1995 6 years, 5 months

Last Net Amount Undis-

1. Steam Boilers and 90.00 58.22 58.22 0.00

10. Local Costs (Financed) 0

1. Project Cost ($ million)

Cost Appraisal2 Actual

Foreign Exchange Cost 225.88 127.04

2. Financing Plan ($ million)

Cost Appraisal Estimate3 Actual

Subtotal (A) 472.00 271.50

Subtotal (B) 92.91 29.21

Total 564.91 300.71

3. Cost Breakdown by Project Component ($ million)

Appraisal Estimate4 Actual

Component Foreign Local Total Foreign Local Total

Appraisal Estimate5 Actual

Component Foreign Local Total Foreign Local Total

C. Interest During 22.31 70.60 92.91 0.00 29.21 29.21

Total 225.88 339.03 564.91 127.04 173.67 300.71

Appraisal Estimate NTPC Estimate6 Actual

Item Start End Start End Start End

Land Acquisition Jan 1989 Jan 1989 Jan 19897

5. Project Performance Report Ratings

D. Data on Asian Development Bank Missions

II. EVALUATION OF DESIGN AND IMPLEMENTATION

6. The main events in project implementation are given chronologically in Appendix 2.

A. Relevance of Design and Formulation

Table 1: Allocation of Loan Proceeds at Appraisal

Category Item Description Amount Allocated

Table 2: Revised Allocation of Loan Proceeds

Category Item Description Amount Allocated

Unallocated (transferred to A) 0.0

G. Conditions and Covenants

H. Consultant Recruitment and Procurement

I. Performance of Consultants, Contractors, and Suppliers

J. Performance of the Borrower and Executing Agency

III. EVALUATION OF PERFORMANCE

Table 3: Allocation of Power to Northern States

B. Efficacy in Achievement of Purpose

C. Efficiency in Achievement of Outputs and Purpose

29. The Project is rated efficient.

1. Financial Internal Rate of Return

2. Economic Internal Rate of Return

D. Preliminary Assessment of Sustainability

E. Environmental, Social, and Other Impacts