First Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan

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The programmatic operation will support the Government of Rajasthan (GoR)’s program for the turnaround of the distribution sector in Rajasthan under the 24x7 Power for All program. A financially sound power distribution sector is a necessary condition to accomplish the objective of the 24x7 Power for All (PFA) initiative, which aspires to provide continuous, reliable power supply to all households in Rajasthan by 2019. This operation will support the comprehensive reform program, developed by the Government of India (GoI) and the State government that will improve the performance of the electricity distribution utilities of Rajasthan. The loan will be the first in a programmatic series of two operations and consists of an IBRD loan of US$250 million. During the previous decade, Rajasthan’s economy grew at 7.9 percent and poverty declined more rapidly than the national average. Electric power sector in Rajasthan has expanded and improved over time, but is now facing serious financial challenges5 that threaten the sustainability of supply going forward. The operation focuses on institutional and operational reforms of the distribution utilities of Rajasthan aiming to restore the viability of the power sector. The Country Partnership Strategy (CPS) for India FY13-17 focuses on assisting low income states, such as Rajasthan, while recognizing the importance of good quality electricity services to enable economic growth and fight poverty. A reformed power sector will require lower fiscal subsidies in the medium-term and result in reduced contingent liabilities that will create fiscal space for more poverty-targeted interventions. Improving the performance of the electricity distribution sector will ensure the provision of electricity and provide the necessary environment for further investments in the sector. Such investments will allow for funding to extend electrification to unserved rural and poor areas and further improve the quality of supply for a broader customer base, and commercial and industrial development.