Asian Development Bank (ADB) has agreed to provide a loan of $500m to India’s power connectivity project which will facilitate power transmission from the northern to the southern regions.

The project will enhance inter-regional power connectivity as well as make rooms for integration of renewable energy in the power system.  

The loan will meet 19% of the project cost which is being built at an investment of $2.58bn. Power Grid Corporation of India is investing $2.08bn in the project.

ADB’s loan comes with a 20-year term which also includes a five year grace period.  The yearly interest rate has been determined in compliance with the Manila headquartered bank’s London Interbank Offered Rate (LIBOR) based lending.

ADB’s deputy country director of India Resident Mission Leonardus Boenawan Sondjaja said: “Expansion of inter-regional connectivity enables bulk power transfer to the southern region which has, at times, been affected by power shortages.

“This loan will also help strengthen the transmission system to accommodate renewable energy-generation capacity.”

The inter-regional power connectivity expansion project will be completed by 2020.

It will feature two high voltage direct current (HVDC) converter stations of 800kV and 320kV along with 765kV power transmission systems.

The project will help Power Grid to add transmission capacities of 2,000MVA between Pugalur in Tamil Nadu and North Trichur in Kerala, 6,000MVA between Raigarh in Chhattisgarh and Pugalur in Tamil Nadu.

It will also help in boosting transmission capacities of 3,000MVA to facilitate renewable energy integration through Bikaner in Rajasthan.

Department of Economic Affairs joint secretary (Multilateral Institutions) Raj Kumar said: “The program will facilitate power transfers among states and regions, and stabilize electricity supply and improve the quality of power.

“It will also help connect renewable energy to interstate power system and enhance energy security in India.”