INDIA: ASSAM POWER SECTOR ENHANCEMENT INVESTMENT PROGRAM Tranche 1

Project Administration Memorandum Project Number: 41614 Loan Number: 2592 March 2010 INDIA: ASSAM POWER SECTOR ENHANCEMENT INVESTMENT PROGRAM Tranche 1 The project administration memorandum is an active document, progressively updated and revised as necessary, particularly following any changes in project or program costs, scope, or implementation arrangements. This document, however, may not reflect the latest project changes. Asian Development Bank

CURRENCY EQUIVALENTS (as of 5 September 2009) Currency Unit = Indian rupees/s (Re/Rs) Re1.00 = $0.0206228 $1.00 = Rs48.49 ABBREVIATIONS ADB Asian Development Bank AEGCL Assam Electricity Grid Corporation Limited AERC Assam Electricity Regulatory Commission APGCL Assam Power Generation Corporation Limited APSDP Assam Power Sector Development Program ASEB Assam State Electricity Board CAEDCL Central Assam Electricity Distribution Company Limited CEA Central Electricity Authority DDG distributed decentralized generation EARF environmental assessment and review framework EIA environmental impact assessment EIRR economic internal rate of return EMP environmental management plan FFA framework financing agreement FIRR financial internal rate of return FRP financial restructuring plan GOA government of Assam IEE initial environmental examination IPDF indigenous people development framework APDCL Assam Power Distribution Company Limited LIBOR London interbank offered rate MFF multitranche financing facility PFR periodic financing request PGCIL PMU Power Grid Corporation of India Limited project management unit PPP public private partnership SPPS single point power supply T&D transmission and distribution TA technical assistance UAEDCL Upper Assam Electricity Distribution Company Limited WACC weighted average cost of capital WEIGHTS AND MEASURES km kilometer kv kilovolt MW megawatt (1,000 kilowatts) MWh megawatt-hour MVA megavolt ampere tco 2 tons carbon dioxide equivalent

NOTES (i) (ii) The fiscal year (FY) of the Government of India and its agencies begins on 1 April and ends on 31 March. FY before a year denotes the year in which the fiscal year ends, e.g., FY2010 begins on 1 April 2009 and ends on 31 March 2010. In this report, "$" refers to US dollars.

i CONTENTS PURPOSE OF THIS DOCUMENT LOAN PROCESSING AND ADMINISTRATION HISTORY DESIGN AND MONITORING FRAMEWORK Page ii ii iii I. PROJECT DESCRIPTION 1 II. COST ESTIMATES AND FINANCING PLAN 1 III. IMPLEMENTATION ARRANGEMENTS 2 IV. CONSULTING SERVICES 3 V. PROCUREMENT 3 VI. DISBURSEMENT PROCEDURES 4 VII. PROJECT PERFORMANCE MANAGEMENT SYSTEM 4 VIII. ACCOUNTING, AUDITING AND REPORTING REQUIREMENTS 5 IX. SAFEGUARDS 6 X. MAJOR LOAN COVENANTS 6 XI. KEY PERSONS INVOLVED IN THE PROJECT 7 XII. GOVERNANCE AND ANTICORRUPTION 9 XIII. CONCURRENCE 9 APPENDIXES 1. Detailed Cost Estimates and Financing Plan 10 2. Organizational Structure for Project Implementation 11 3. Project Implementation Schedule 13 4. TOR for Consulting Services for Project Implementation Support (Firm) 14 5. TOR for Consulting Services for Support in Safeguard Issues (Individual) 20 6. Procurement Plan 23 7. Disbursement Procedures 27 8. Imprest Account Procedure 28 9. Suggested Format of Progress Report 29 10. Suggested Calculation Method of Project Implementation Progress 33 11. Format of Contract Awards and Disbursement Projections 34 12. Copy of Audit Letter 35 13. Outline of Project Completion Report 37 14. Summary of Short Resettlement Plan 39 15. Major Loan Covenants 43 16. List of ADB Reference Materials 49

ii PURPOSE OF THIS DOCUMENT This Project Administration Memorandum (PAM) provides a reference for the Government, its executing agency and implementing agency, and ADB. It indicates the Project implementation arrangements which have been agreed and the monitoring and control procedures which are to be used to help ensure that the intended Investment Program objectives are realized. ADB's LOAN PROCESSING AND ADMINISTRATION HISTORY Chronology of Important Events A. Processing of the Loan Events 1 Approval of Project Preparatory Technical Assistance 10 July 2008 Date 2 Fact-Finding Mission 28 April 12 May 2009 3 Management Review Meeting 22 May 2009 4 Appraisal Mission 1-6 June 2009 5 Staff Review Committee Meeting 27 July 2009 6 Loan Negotiations 14-15 September 2009 7 RRP Board Circulation 28 October 2009 8 Board Consideration and Loan Approval 18 November 2009 9 Signing of Loan Agreement 15 February 2010 10 Loan Effectiveness on or before 16 May 2010 B. Project Administration 1 Project Inception Mission 25 March 1 April 1 2010 2 Project Review Mission(s) 3 Midterm Review Mission 4 Project Review Mission(s) 5 Project Completion Review Mission 6 Loan Closing (Original) 31 August 2013

iii DESIGN AND MONITORING FRAMEWORK For Components under Tranche 1 Design Summary Impact A sustainable state power transmission sector to support inclusive economic growth Performance Targets and/or Indicators Increase in the in-state availability of power at the transmission output interface relative to 2008 baseline of 0.9 GW meeting the demand increase as per the estimate for 2014 Data Sources and/or Reporting Mechanisms AERC tariff orders Assumptions and Risks Assumptions GOA remains committed to the Investment Program and power sector reforms with the objective of providing power to all. Outcome Enhanced transmission capacity and quality with physical and institutional capacity development Outputs Physical Investments 1. Access to power (transmission) Constructed new transmission lines and substations, augmented existing substations, and miscellaneous transmission system improvement activities 2. Energy efficiency enhancement (transmission loss reduction) Extended and augmented existing substations Nonphysical investments: 1. Project implementation support Improvement in the state gross domestic product per capita relative to baseline of 2009 (Rs18,598/capita) Increase in transmission system active power carrying capacity from 766 MW in 2008 to 1,883 MW in 2014 (Among the targeted 1,117MW increase, 513 MW will be attributed to the tranche 1 investment) Transmission transformation capacity of 6 transmission substations enhanced to reduce transformer loading to less than 80% from the current 95% System losses reduced from 6% transmission in 2008 to 4% transmission in 2014 (Among the targeted 2% reduction, 0.08% will be attributed to the tranche 1 investment) 1. Creation of 1 new substation of 220/132 kv 2. Creation of 5 new substations of 132/33 kv 3. Creation of 180 km of 220 kv transmission line 4. Creation of 82 km of 132 kv transmission line 1. Extension and augmentation of 2 existing transmission substations Timely and relevant tranche 1 project implementation, e.g., procurement, disbursement, and adherence to safeguards Planning Commission reports Annual reports of AEGCL Load-flow studies conducted by third parties Tariff orders of AERC AEGCL annual reports AEGCL annual reports AEGCL and APDCL annual reports Significant proportion of energy for Assam will be from clean sources. Assumptions Operation and maintenance of the installations are according to standard requirements. Adequate number of competent staff is available in the companies. Load growth in Assam is as projected. Regulatory mechanisms and intervention are consistent. Risk Project delays are due to capacity and communication constraint in ASEB and AEGCL. Assumptions Counterpart funds for timely project implementation are made available. Approval of contract awards by relevant authorities is timely. Land acquisition and regulatory approval of construction of transmission lines and substation is timely. Risks Regulatory approval for rights-of-way in forest areas is not obtained in a timely manner. Increase in prices of raw materials exceeds contingency and inflation

iv Design Summary 2. Institutional and/or capacity development of ASEB, APGCL, AEGCL, and APDCL Performance Targets and/or Indicators Strengthened financial and human resource management capacity of APGCL, AEGCL, and APDCL Timely preparation of annual audited financial statements and other relevant reports Data Sources and/or Reporting Mechanisms APGCL, AEGCL, and APDCL annual reports APGCL, AEGCL, and APDCL annual reports APDCL annual reports Assumptions and Risks forecasts. 3. Distribution franchising Number of consumers under franchisees doubled from May 2009 to December 2014 through empowerment and strengthened institutional capacity with training APDCL annual reports 4. Renewable energy development Identification and development of pilot off-grid rural electrification projects with renewable energy Activities with Milestones Transmission Substations 1.1 Procurement of major equipment: Issuance of bidding documents by December 2009 and contract awards by August 2010 1.2 Construction of substation packages started by September 2010 1.3 Commissioning of substation packages by July 2012 Inputs Total: $95.0 million ADB: $60.3 million GOA: $34.7 million Transmission Lines 2.1 Procurement of major equipment: Issuance of bidding documents by December 2009 and contract awards by July 2010 2.2 Construction started by August 2010 2.3 Commissioning by July 2012 Consulting Services 3.1 Issuance of EOI by June 2009 and contract awards for individual consultant by November 2009 and for consulting firm by May 2010 3.2 Mobilization for individual consultant by November 2009 and for firm by June 2010 3.3 Conclusion of consulting services for individual consultant by May 2011 and for firm by October 2013 ADB = Asian Development Bank, AEGCL = Assam Electricity Grid Corporation Limited, AERC = Assam Electricity Regulatory Commission, APGCL = Assam Power Generation Corporation Limited, ASEB = Assam State Electricity Board. CO 2 = carbon dioxide, CPSU = central power sector undertakings, GOA = government of Assam, kv = kilo Volt, APDCL = Assam Power Distribution Company Limited, LT = low tension, MFF = multitranche financing facility, MVAR = mega volt ampere reactive, MW = megawatt, O&M = operation and maintenance.

1 A. Project Area and Location I. PROJECT DESCRIPTION 1. The transmission lines and substations to be constructed under this Project are located in various locations across the State of Assam. B. Impact and Outcome 2. The impact of the Investment Program is to promote sustainable provision of electricity in the state with increased T&D capacity to support inclusive economic growth. The outcome is enhanced quality and expanded service delivery of electricity in Assam through improved technical, commercial, and financial performance and capability of ASEB and the power utilities. C. Project Components 3. The Project aims to assist in transmission capacity expansion, transmission loss reduction, and capacity building, comprising the following components: (i) Access to Power (Transmission). This component includes capacity addition in transmission lines, transformation capacities and communication system. Transmission lines will be expanded by 180km at 220 kv and 82 km at 132 kv. One new 220/132 kv substation and five new 132/33 kv substations will be constructed. (ii) Energy Efficiency Enhancement (Loss Reduction). The transmission loss reduction component includes extension and refurbishment of two existing transmission substations. (iii) Capacity Development. The component includes consultancy services and training programs for ASEB, APGCL, AEGCL, and APDCL, among others, to develop their institutional capacity for project planning and management. II. COST ESTIMATES AND FINANCING PLAN A. Detailed Cost Estimates 4. The Project investment cost under Tranche 1 is estimated at $95.0 million, including taxes, duties, commitment charges, and interest during construction as shown in Table 1. Details of the cost estimates are presented in Appendix 1. Table 1: Project Investment Plan ($ million) Item Amount A. Base Cost (Investment Component) a 77.4 B. Contingencies b 11.3 C. Financing Charges During Implementation c 6.2 Total (A+B+C) 95.0 a In mid-2009 prices. Includes taxes and duties estimated at $9.5 million. b Physical Contingencies computed at 10% transmission lines and 2% for the rest of the equipment. Price Contingencies computed at 10% of costs c Includes interest and commitment charges. Source: Asian Development Bank estimates based on transmission detailed project report

2 B. Financing Plan 5. The Project financing plan is shown in Table 2 and details are presented in Appendix 1. ADB will provide $60.3 million (about 63.5% of the total cost) from ADB s ordinary capital resources (OCR), while the Government will finance $34.7 million (about 36.5% of the total cost). Table 2: Financing Plan ($ million) Source Amount ($ million) Percent of Total Project Costs Asian Development Bank 60.3 63.5 Government 34.7 36.5 Total 95.0 100.0 Source: Asian Development bank estimates based on transmission detailed project report C. Allocation and Withdrawal of Loan Proceeds 6. The allocation and withdrawal of loan proceeds on the basis of categories of expenses has been established in the Loan Agreement as shown in Table 3. Table 3: Allocation and Withdrawal of Loan Proceeds CATEGORY ADB FINANCING Number Item Amount Allocated ($) Percentage and Basis for Withdrawal from the Loan Account 1 Equipment 50,000,000 100 percent of total expenditure claimed 2 Consulting Services 2,000,000 100 percent of total expenditure claimed* 3 Unallocated 8,300,000 Total 60,300,000 *Excluding taxes and duties imposed within the territory of the Borrower. III. IMPLEMENTATION ARRANGEMENTS A. Executing Agency and Implementing Agency 7. GOA and ASEB will be the executing agencies with overall responsibility for carrying out and execution of the Project. AEGCL will be the Implementing Agency responsible for day-today coordination, implementation, and administration of the Project. B. Project Management Unit (PMU) 8. ASEB has established its project management unit (PMU), which will be responsible for processing appraising, and implementing the subprojects under the Project, covering the development and completion of technical reports, feasibility studies, preliminary design reports, IEE/EIAs (with EMP), RPs, IPDPs, and detailed design reports to ensure their compliance with requirements of the Government, GOA, and ADB. The PMU will consist of the following staff: (i) Director, PMU [Technical Staff] (ii) Deputy General Manager

3 (iii) Senior Manager [2 Staff] (iv) Environment Officer (v) Resettlement/Social Officer (vi) Assistant Manager (vii) Junior manager [Accounting staff] (viii) DGM (Accounts) (ix) Senior Manager (Accounts) (x) Deputy Manager (Accounts) (xi) Assistant Account Officer (xii) Others (Accounts) [3 staff] 9. The organizational structure for project implementation is in Appendix 2. C. Implementation Schedule 10. The Project will be implemented over 4 years, inclusive of procurement and preconstruction activities, and the transmission components are expected to be completed by August 2013. The implementation schedule is presented in Appendix 3. IV. CONSULTING SERVICES 11. ASEB will recruit one international consulting firm using the quality and cost-based selection method to provide ASEB and implementing agencies with assistance for project implementation, including design, construction supervision, and management of the projects. As normal procedures of advance contracting approved by ADB, ASEB has already taken necessary actions to engage a consulting firm in accordance with ADB s Guidelines on the Use of Consultants (2007, as amended 7from time to time). The outline terms of reference for the consulting services are in Appendix 4. About 47 person-months of international consultants and about 42 person-months of national consultants will be required. 12. In addition to engagement of a consulting firm, ASEB has recruited an international individual consultant to support ASEB and implementing agencies for their implementation of social, environment, and resettlement issues. The outline terms of reference for the consulting services are in Appendix 5. The contract has been signed on 5 November 2009 for about 300 days' intermittent services until 10 May 2011. V. PROCUREMENT 13. Procurement to be financed from the ADB loan will be carried out in accordance with ADB s Procurement Guidelines (2007, as amended from time to time). International Competitive Bidding (ICB) will be used for all six procurement packages on turnkey basis, out of which five bids have been advertised in December 2009 as advance contracting action approved by ADB. Advertisement of the remaining one bid for procurement of upgradation of ground wire to OPGW is expected in June 2010. The Procurement Plan (including list of contract packages) is in Appendix 6. 3

4 VI. DISBURSEMENT PROCEDURES A. Disbursement Arrangements 14. Loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2007, as amended from time to time). ADB's direct payment, reimbursement, and commitment procedures will be used where applicable. Brief narrative description of each disbursement procedure to be used under the Project is presented in Appendix 7. 15. For this loan, the Government may establish, immediately after the Effective Date, an imprest account at the Reserve Bank of India. A second generation imprest account (SGIA) may also be opened by GOA/ASEB in a commercial bank, current account. The imprest account and SGIA shall be established, managed, replenished, and liquidated in accordance with ADB's Loan Disbursement Handbook, and detailed arrangements agreed upon between the Government, GOA/ASEB, and ADB. Brief narrative description of imprest fund procedure to be used under the Project is shown in Appendix 8. The ceiling for the imprest account and SGIA shall each not exceed the lower of (i) the estimated expenditure for the next 6 months of Project implementation, or (ii) the equivalent of 10 percent of the loan amount. B. Statement of Expenditures 16. ADB's statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures and to liquidate advances provided into the imprest account in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Government, GOA/ASEB, and ADB. Any individual payment to be reimbursed or liquidated under the SOE procedure shall not exceed the equivalent of $100,000. C. Retroactive Financing 17. Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the Effective Date, but not earlier than 12 months before the date of Loan Agreement in connection with items to be retroactively financed, subject to a maximum amount equivalent to 20 percent of the loan amount. VII. PROJECT PERFORMANCE MANAGEMENT SYSTEM A. Project Performance Monitoring 18. ASEB will, within 3 months of the Effective Date, establish for the Investment Program as well as for the Project the Project Performance Monitoring System (PPMS) in a form and with a composition acceptable to ADB in accordance with the performance indicators and targets stipulated in the Design and Monitoring Framework. ASEB will undertake periodic project performance review for the Project and also for the Investment Program in accordance with the PPMS to evaluate the scope, implementation arrangements, progress and achievements of objectives of the related Project and the overall Investment Program. B. Inception Mission 19. A loan inception mission was fielded on 25-29 March 2010 to discuss this PAM, and to ensure that all administrative matters pertaining to the Project are properly in place and working relationships are established between concerned ADB staff, ASEB and AEGCL staff. Details

5 relating to report requirements, accounting system, compliance with loan covenants, disbursement procedures, and withdrawal applications were clarified during the mission. C. Review Missions 20. Semiannual review missions will be conducted to monitor overall progress of the Project, review expenditures, operation and maintenance and most importantly discuss problems and issues causing delays in project implementation. The first review mission will be conducted in September 2010 and succeeding review missions will be fielded by ADB as and when required. 21. A midterm review, to be carried out 2 years after loan effectiveness, will focus on engineering, resettlement, and environmental and social aspects of the Project, and reviewing the financial status of ASEB and AEGCL. The review will allow for any necessary midcourse corrections to ensure successful Project implementation and achievement of objectives of the Project and overall Investment Program. A. Quarterly Progress Reports VIII. ACCOUNTING, AUDITING AND REPORTING 22. ASEB will prepare and provide ADB with quarterly project progress reports, including a description of physical progress, any change to the implementation schedule, problems or difficulties encountered and remedial actions taken, anticipated problems and the proposed remedial measures, and work to be undertaken in the following period. The reports will include a summary of financial accounts that will consist of loan expenditures during the period, year to date, and total to date. Progress on environmental and social compliance, overall progress and compliance with covenants under the loan and project agreements will also be reported in the progress reports. 23. ASEB will submit the quarterly progress reports to ADB within 45 days from the close of each quarter. Suggested format of progress report is in Appendix 9. Calculation method of project progress was discussed and agreed during the inception mission as presented in Appendix 10. B. Annual Contract Awards and Disbursement Projections 24. ASEB will submit to ADB an annual contract awards and disbursement projections for the following year in order to monitor project implementation and to help identify impediments to implementation progress. The projection is submitted to ADB by 15 December each year. The form is in Appendix 11. C. Audited Project Accounts and Audited Financial Statements 25. ASEB will maintain separate accounts for the Project and for ASEB's overall operations. ASEB will have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB. ASEB will provide ADB with certified copies of audited accounts and financial statements, and the relating report of the auditors no later than 6 months after the close of the fiscal year. This will include the auditors' opinion on the use of the loan proceeds and compliance with the covenants of the loan 5

6 agreement as well as on the use of the procedures for imprest accounts, SGIA, statement of expenditures as applicable. A copy of the Audit Letter is attached as Appendix 12. D. Project Completion Report 26. A project completion report will be submitted by ASEB within 6 months following physical completion of the Project. The report will provide a detailed evaluation of the Project, covering the design, costs, contractors' and consultants' performance, social, environmental, and economic impact, economic rate of return, and other details relating to the Project as may be requested by ADB. The outline of the report is in Appendix 13. IX. SAFEGUARDS A. Land Acquisition and Resettlement 27. As presented in Appendix 14, a short resettlement plan, including compensation packages, was prepared, in accordance with ADB s policy on Involuntary Resettlement (1995) and the resettlement framework (RF), in full consultation with stakeholders and affected people. Compensation for indigenous people is also provided in the resettlement plan since its impacts are not significant. The resettlement framework and IPDF were disclosed to the affected people in their local language. As covenanted in the Loan Agreement, GOA will cause ASEB, and through ASEB the AEGCL to undertake the Investment Program and the Project in accordance with ADB s policy on Involuntary Resettlement (1995), the RF, and applicable laws and regulations of the Government and GOA. B. Environmental 28. ADB classifies the Project as environment category B in accordance with ADB's Environment Policy (2002) and Environmental Assessment Guidelines (2003). An environmental assessment and review framework (EARF) was prepared for the Investment Program, outlining the policy, procedures, and institutional requirements, and the IEE for the Project was also prepared. As covenanted in the Loan Agreement, the Project will be undertaken in accordance with all applicable laws, and regulations of the Government, GOA, and ADB s Environment Policy (2002), Environmental Assessment Guidelines (2003), and the EARF. ASEB is required to submit Compliance Reports to ADB as appropriate during the Project implementation. X. MAJOR LOAN COVENANTS 29. In addition to the standard assurances, the Government, GOA, ASEB, and AEGCL agreed to the additional assurances and the summary on status of compliance is shown in Appendix 15.

7 XI. KEY PERSONS INVOLVED IN THE PROJECT A. Executing Agency The Government of India Ministry of Finance Project Executing Agency Dr. Anup K. Pujari Joint Secretary (MI) Department of Economic Affairs New Delhi, India Tel: +91-11- 2309-2684 Fax: +91-11-2309-2039 Dr. A. K. Bhutani Commissioner and Secretary Finance Department Government of Assam Dispur, Guwahati-781006 Tel: +91-361-2237235 Fax: +91-361-2337235 Mr. A. K. Sachan Chairman Assam State Electricity Board (ASEB) Bijuli Bhawan, Paltan Bazaar Guwahati -781001 Tel: +91-361-273-9525 Fax: +91-983-273-9527 Project Implementing Agency Mr. S. K. Handique Managing Director Assam Electricity Grid Corporation Limited (AEGCL) Bijuli Bhawan, Paltan Bazaar Guwahati -781001 Tel: +91-361-273-9520 Fax: +91-361-273-9513 B. ADB Staff Energy Division (SAEN) South Asia Regional Department (SARD) Mr. Thevakumar Kandiah Director, SAEN Tel: +63-2-632-6301 E-mail: tkandiah@adb.org Mr. Naoki Sakai Senior Climate Change Specialist Tel: +63-2-632-5461 E-mail: nsakai@adb.org 7

8 Mr. Kiyoshi Takebayashi Energy Specialist Tel: +63-2-632-5914 E-mail: ktakebayashi@adb.org Ms. Ma. Carmen G. Nunez Assistant Project Analyst Tel: +63-2-632-6358 E-mail: mcnunez@adb.org Controller s Department Loan Administration Division (CTLA1) Address & Fax No. (SAEN): Mr. Francis Mathew Financial Control Specialist Tel: +63-2-632-5947 E-mail: fmathews@adb.org Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Fax: +63-2-636-2338 (SAEN) India Resident Mission (INRM) Mr. Hun Kim Country Director E-mail: hkim@adb.org Mr. Shigehiko Muramoto Head, Project Administration Unit E-mail: smuramoto@adb.org Mr. Vallabh Rao Karbar Senior Project Implementation Officer (Energy) E-mail: vkarbar@adb.org Mr. J. Srinivasan Senior Control Officer, E-mail: jsrinivasan@adb.org Address and Contact Nos. (INRM) Website Address of ADB India Resident Mission (INRM) 4 San Martin Marg Chanakyapuri New Delhi 110021, India Tel: +91-11-2410-7200 Fax: +91-11-2687-0955 Email: adbinrm@adb.org www.adb.org

9 XI. GOVERNANCE AND ANTICORRUPTION 30. ADB defines corruption as "abuse of public or private office for personal gain". ADB will systematically identify, in consultation with its member countries opportunities for reducing corruption as part of its broader emphasis on improving good governance and sound development management. ADB's Anticorruption Policy has sent the guidelines and procedures in addressing fraudulent corrupt practices. Anyone coming across evidence of fraud or corruption associated with the Investment Program must contact ADB's Office of Anticorruption and Integrity, who will investigate such allegations. 31. ADB's Anti-Corruption Policy (1998, as amended to date) was explained to and discussed with the Government. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to inspect, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB's Anti-Corruption Policy are included in the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Investment Program shall include provisions specifying the right of ADB to audit and examine the record s and accounts of the Executing Agency, the Implementing Agencies, and all contractors, suppliers, consultants, and other service providers as they relate to the Project. XIII. CONCURRENCE 32. We have reviewed the Project Administration Memorandum and concur to implement the Investment Program according to the agreed requirements. A. K. Bhutani Commissioner and Secretary Finance Department Government of Assam Kiyoshi Takebayashi Energy Specialist Project Officer for Loan 2592-IND Asian Development Bank A. K. Sachan Chairman Assam State Electricity Board S.K. Handique Managing Director Assam Electricity Grid Corporation Limited Date: 29 March 2010 9

10 Appendix 1 DETAILED COST ESTIMATES FOR TRANCHE 1 PROJECTS Table A1.1: Detailed Cost Estimate by Expenditure Category Rs Million $ Million Foreign Local Total Foreign Local Total % of Total Item Exchange Currency Cost Exchange Currency Cost Base Cost A. Investment Costs a 1. Civil Works 0.0 312.9 312.9 0.0 6.5 6.5 8 2. Equipment 2,427.0 0.0 2427.0 50.0 0.0 50.0 65 3. Environment Management Plan 0.0 49.5 49.5 0.0 1.0 1.0 1 4. Land Acquisition and Resettlement Cost 0.0 49.5 49.5 0.0 1.0 1.0 1 5. Consulting Services (Project Implementation) 66.4 30.6 97.0 1.4 0.6 2.0 3 6. Taxes and Duties 0.0 463.1 463.1 0.0 9.5 9.5 12 7. Freight and Insurance 0.0 76.4 76.4 0.0 1.6 1.6 2 8. Overheads 0.0 280.4 280.4 0.0 5.8 5.8 7 Subtotal (A) 2,493.4 1,262.3 3,755.6 51.4 26.0 77.4 100 Total Base Cost 2,493.4 1,262.3 3,755.6 51.4 26.0 77.4 100 B. Contingencies 1. Physical b 148.2 24.6 172.8 3.1 0.5 3.6 5 2. Price c 252.4 123.2 375.6 5.2 2.5 7.7 10 Subtotal (B) 400.6 147.8 548.4 8.3 3.0 11.3 15 C. Financing Charges During Implementation d 1. Interest During Implementation 298.7 0.0 298.7 6.2 0.0 6.2 8 2. Commitment Charges 3.2 0.0 3.2 0.1 0.0 0.1 0 Subtotal (C) 301.9 0.0 301.9 6.2 0.0 6.2 8 Total Project Cost (A.+B.+C.) 3,195.9 1,410.1 4,605.9 65.9 29.1 95.0 123 a In mid-2009 prices. b Computed at 10% transmission lines and 2% for the rest of the equipment. c Computed at 10% of costs. d Includes interest and commitment charges. If imprest account if created, the multitranche financing facility will finance bank charges. Source: Asian Development Bank estimates based on transmission detailed project report. Table A1.2: Detailed Cost Estimate by Financier ($ million) ADB Government % of Cost % of Cost Item Cost Amount Category Amount Category A. Investment Costs 1. Civil Works 6.5 0.0 0% 6.5 100 2. Equipment 50.0 50.0 100% 0.0 0 3. Environment Management Plan 1.0 0.0 0% 1.0 100 4. Land Acquisition and Resettlement Cost 1.0 0.0 0% 1.0 100 5. Consulting Services (Project Implementation) 2.0 2.0 100% 0.0 0 6. Taxes and Duties 9.5 0.0 0% 9.5 100 7. Freight and Insurance 1.6 0.0 0% 1.6 100 8. Overheads 5.8 0.0 0% 5.8 100 Total Base Cost 77.4 52.0 67% 25.4 33 B. Contingencies 11.3 8.3 73% 3.0 27 C. Financing Charges During Implementation 6.2 0.0 0% 6.2 100 Total Project Cost (A.+B.+C.) 95.0 60.3 63% 34.7 37 % Total Project Cost 100 63 37 ADB = Asian Development Bank. Source: Asian Development Bank estimates based on transmission detailed project report.

MULTITRANCHE FINANCING FACILITY IMPLEMENTATION STRUCTURE Implementation Arrangements For Tranche 1 Government of Assam Assam State Electricity Board Asian Development Bank Decision and approval of all procurement issues Social and Environment Cell Safeguards Project Management Unit Project Coordination Finance and Accounts Accounting AEGCL MD APDCL MD Project Administration (Transmission) Project Administration (Distribution) CGM (Transmission) CGM (Projects) Procurement Committee Project Monitoring Project Monitoring Procurement Committee Recommendation on Procurement Issues (Transmission) Recommendation on Procurement Issues (Distribution) Accounting Proj. Mgmt. (Transmission Upper Assam Circle) Proj. Mgmt. (Transmission Lower Assam Circle) Proj. Mgmt. (Transmission Tezpur T&T Circle) CGM = chief general manager, MD = managing director, proj. mgmt. = project management Source: Discussions with Assam State Electricity Board Proj. Mgmt. (Transmission Silchar T&T Circle) Proj. Mgmt. (LDC) Accounting Proj. Mgmt. (Lower Assam) Proj. Mgmt. (Upper Assam) Proj. Mgmt. (Central Assam) Appendix 2 11

12 ORGANIZATION STRUCTURE OF THE IMPLEMENTING AGENCY Assam Electricity Grid Corporation Limited Managing Director Company Secretary CGM (Finance and Accounts) DGM (HR) CGM DGM (Finance and Accounts) GM (HQ) GM (LA) GM (UA) GM (SLDC) DGM (Design) DGM (MRT) Accounts, Taxation, Cash Book and Banks - External Funding, Budget, Contracts, Concurrence and Cost - Audit DGM (Lines) DGM (S/Stn.) DGM (LA) DGM (Silchar) DGM (UA) Personnel and Administration, Administration and human resources, policy and training - Electrical design Department, Electrical Contracts Department Quality Assurance, Inspection and Control Department, Information Technology and Communication, Corporate Planning, Corporate Monitoring Civil Design Department, Corporate Contract and Procurement Department, Corporate Design and Quality Control Department CGM = chief general manager, DGM = deputy general manager, HR = human resources, HQ = headquarters, S/Stn. =substation, LA = lower Assam, UA = upper Assam, SLDC = State Load Dispatch Centre, MRT = meter and relay testing. Source: Assam Electricity Grid Corporation Limited.

TRANCHE 1 IMPLEMENTATION SCHEDULE 2009 2010 2011 2012 2013 Description J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Part 1: Transmission Capacity Expansion LA TF CACW C One 220/132 kv substation LA TF CACW C Five 132/33 kv substations TF CACW C 180 km. of 220 kv Transmission TF CACW C 82 km. of 132 kv Transmission TF CACW C Upgradation to OPGW Part 3: Loss Reduction (Transmission) Extension & Refurbishment TF CACW C Part 4: Capacity Development (Project Implementation Support) Consulting Services (firm) (Project Implementation Support for transmission and distribution) Consulting Services (individual) (project implementation support for social, environment) EOI RFP CA M CO EOI CA M CO LA = land acquisition, TF = tender float, CA = contract award, CW = commencement of work, C = commissioning, EOI = expression of interest, RFP = request for proposal, M = mobilization, CO = conclusion. Extension = extension and refurbishment of existing transmission substations. Source: ADB estimates based on Assam State Electricity Board inputs Appendix 3 13

14 Appendix 4 Project Implementation and Supervision Consultant OUTLINE TERMS OF REFERENCE 1. A consulting firm (Project Implementation and Supervision Consultant) will be recruited under Tranche 1 to provide consulting services and training programs for ASEB, AEGCL and DISCOM, among others, to develop their institutional capacity as required for project planning and management and to develop and implement a comprehensive project management plan to ensure the most efficient, timely and economical implementation of each project under the MFF. The plan should take into account the engineering technology required, the resources and costs involved, and the critical time frame for the completion of each project under the MFF. The consulting firm will be recruited using the quality and cost based selection method. The proposal will be full technical proposal. The team composition of the international and national experts along with their estimated person months is shown in the table below: Consultants Team Composition A. International Consultants No. of Experts International/ National Total P-M 1. Team Leader/Transmission Engineer 1 International 22 2. Transmission Line Engineer 1 National 14 3. OPGW Specialist 1 International 10 4. Distribution Engineer Lower Zone 1 International 15 5. Distribution Engineer Central Zone 1 National 14 6. Distribution Engineer Upper Zone 1 National 14 Scope of Works Total 3 3 International National 2. The primary responsibilities of the Project Implementation and Supervision Consultants is to advise and assist the EA/IAs in management of sub-projects, providing technical support, administration and implementation of the Loans financed under the ADB s MFF and capacity development for EA/IA staff. 3. The Terms of Reference for the international experts are provided herein: a. Team Leader/Transmission Line Engineer (22 person-months) 4. The Team Leader/Transmission Line Engineer must be primarily a qualified civil engineer having wide experience in examining structural designs of super structures (towers) and buildings and their foundations. He should preferable have working knowledge of computer aided software for checking and design calculations. He should have minimum 15 years of experience in design and construction of large construction work and at least 5 years of experience in transmission line related projects. Apart from above, he should have at least 5 years experience in externally aided projects of similar nature in managing and monitoring. He should also have substantial work experience in similar geographical, climatic and cultural conditions as that of EA s country. 5. The Team Leader/Transmission Line Engineer will undertake the following: (i) Overall responsibility of supervising the team of consultants, capacity building, coordinating and communicating with EA/IA and preparing regular project reports. 47 42

Appendix 4 15 (ii) Project Preparation: Procedures- review the project management (including administration) procedures of the EA/IA for the implementation of the projects and, as appropriate recommend changes and or new procedures in keeping with ADB and modern international practice. (iii) Preparation of sub projects: Advice and assist, at a project management level, in the preparation of each sub project (studies, investigations, designs, specifications and drawings, contract conditions, commercial conditions, Bill of Quantities) to properly define the work. (iv) Procurement: Review existing tender documents and assist in preparation of new tender documents, as required, in accordance with ADB s standard procedures and guidelines. Assist with advertisement, pre bid meetings, evaluation of technical and financial bids, preparation of bid evaluation reports, contract negotiations and preparation of documents for contract signing, and advice on submission of documents to ADB for review and approval. (v) In the review of the tender documents, the expert shall particularly consider completeness of the scope of work, coherence between sections, constructability, cost, risk/shared risk and consequences thereof, and compliance with ADB s procurement procedures and guidelines. (vi) Contract Management: Advice and assist EA/IA in management of the contracts for civil works, plant and equipment. Advice on quality control programs, checking of design details of the structures and civil construction (submitted by contractors) as and when referred by EA/IA and speedily advising on acceptability of such designs and suggesting corrective measures to be undertaken. (vii) Design Checking and Clarification: Checking for transmission line tower, structures, civil buildings, foundations related to transmission lines and substations subprojects. Provide recommendation for approval of all civil, structural designs and drawings pertaining to transmission lines and substations. (viii) Project Scheduling and Monitoring: Review project schedules submitted by the contractors, analyze progress and suggest corrective measures at management level. (ix) Monitoring Project Disbursement: Quarterly updating and comparative reporting on overall project disbursement and advising EA/IA on rescheduling of budget against subprojects. b. Transmission Line Engineer (14 person-months) 6. The Transmission Line Engineer will have at least a Bachelor s degree in Electrical Engineering with wide exposure in high voltage transmission and transformation system and having 10 years of working experience in execution of transmission and transformation projects in developing countries. Experience in India is a basic requirement and experience of other Asian countries may be added preference. 7. The Transmission Line Engineer will undertake the following: (i) Provide assistance and support to the Team Leader/Transmission Engineer in carrying out the function of the Team Leader as stated in items (ii) to (viii) above.

16 Appendix 4 (ii) Perform other functions as may be assigned or delegated by the Team Leader. c. OPGW Specialist (10 person-months) 8. The OPGW Specialist must be primarily a qualified communication engineer having wide experience in large communication network. He should have minimum 15 years of communication experience in communication network and at least 5 years experience in optical fibre communication. He should also have substantial working experience in similar geographical, climatic and cultural conditions of the EA s country. 9. The OPGW Specialist will undertake the following in coordination with the Team Leader: (i) Project Preparation: Procedures- review the project management (including administration) procedures of the EA/IA for the implementation of the upgradation to OPGW and, as appropriate recommend changes and or new procedures in keeping with ADB and modern international practice. (ii) Preparation of details of the Upgradation to OPGW : Advice and assist, at a project management level, in the preparation of the upgradation to OPGW (studies, investigations, designs, specifications and drawings, contract conditions, commercial conditions, Bill of Quantities) to properly define the work. Advice EA/IA on future line of action in the field of communication suitable for EA/IA. (iii) Preparation of bid document:- Preparation of bid document for the upgradation to OPGW in accordance with ADB s standard procedures and guidelines and forward the same through the EA/IA for ADB approval. Modify the bid document as advised by EA/IA/ADB. (iv) Procurement : Assist with advertisement, pre bid meetings, evaluation of technical and financial bids, preparation of bid evaluation reports, contract negotiations and preparation of documents for contract signing, and advice on submission of documents to ADB for review and approval. (v) In the review of the tender documents, the expert shall particularly consider completeness of the scope of work, coherence between sections, constructability, cost, risk/shared risk and consequences thereof, and compliance with ADB s procurement procedures and guidelines. (vi) Contract Management: Advice and assist EA/IA in management of the contracts for civil works, plant and equipment. As the optical fibres (OPGW) will be laid on existing transmission lines, to minimize shutdown of transmission lines, the consultant will advice on issues related to Live line laying and execution of these fibres, inform intricacies, fore warn risk factors. The consultant will also scrutinize Guaranteed Technical Particulars, drawings and specifications of optical fibres and other connected equipment including exchanges and advice EA on acceptability. The consultant will also advice EA/IA on quality control to be adopted by the contractors. d. Distribution Engineer 1 - Lower Zone (15 person-months) 10. The Distribution Engineer 1 Lower Zone will have at least a Bachelor s degree and preferably 10 years of experience working in a transmission and distribution power projects. He should also have substantial working experience in similar geographical, climatic and cultural conditions of the EA s country.

Appendix 4 17 11. The Distribution Engineer 1 Lower Zone will undertake the following for distribution network expansion and rehabilitation in Lower Zone in coordination with the Team Leader: (i) Assist Team Leader, as a sub-team leader for distribution subprojects, in monitoring, supervising, coordinating overall activities of Distribution Engineer 2 Central Zone and Distribution Engineer 3 Upper Zone. (ii) Conduct site visit, verify required voltage, distribution area, number of connection, capacity of the system, etc. (iii) Identify technical problems of current distribution network, advice remedial technical solutions, and propose appropriate replacement schemes (iv) Preparation of bid document for the distribution component (Central Discom) in accordance with ADB s standard procedures and guidelines and forward the same through the EA/IA for ADB approval. Modify the bid document as advised by EA/IA/ADB. (v) Assist EA/IA during the tendering period, including but not limited to organization of site visits, assistance during the pre-bid meeting, clarification of tender documents, bid opening and bid evaluation. (vi) Assist EA/IA in preparation of contract documents. (vii) Assist EA/IA in supervising the construction of the project distribution networks in Central Discom and provide guidance to the contractors so as to conform to the specifications. (viii) Identify any problem during project implementation, propose remedial actions and promptly report any outstanding issues to EA/IA (ix) Advice EA/IA on any contractual or technical disputes that may arise between contractor and EA/IA during the implementation phase. (x) (xi) Preparing overall disbursement plan, monitoring cost and project accounts. Undertake project monitoring and evaluation during the project implementation. (xii) Provide input on the field of responsibility to required monthly, quarterly progress reports and other reports as may be required. e. Distribution Engineer 2 - Central Zone (14 person-months) 12. The Distribution Engineer 2 Central Zone will have at least a Bachelor s degree and preferably 10 years of experience working in a transmission and distribution power projects. He should also have substantial working experience in similar geographical, climatic and cultural conditions of the EA s country. 13. The Distribution Engineer 2 Central Zone will undertake the following for distribution network expansion and rehabilitation in Central Zone in coordination with the Distribution Engineer 1 Lower Zone and the Team Leader:

18 Appendix 4 (i) Conduct site visit, verify required voltage, distribution area, number of connection, capacity of the system, etc. (ii) Identify technical problems of current distribution network, advice remedial technical solutions, and propose appropriate replacement schemes (iii) Preparation of bid document for the distribution component (Central Discom) in accordance with ADB s standard procedures and guidelines and forward the same through the EA/IA for ADB approval. Modify the bid document as advised by EA/IA/ADB. (iv) Assist EA/IA during the tendering period, including but not limited to organization of site visits, assistance during the pre-bid meeting, clarification of tender documents, bid opening and bid evaluation. (v) Assist EA/IA in preparation of contract documents. (vi) Assist EA/IA in supervising the construction of the project distribution networks in Central Discom and provide guidance to the contractors so as to conform to the specifications. (vii) Identify any problem during project implementation, propose remedial actions and promptly report any outstanding issues to EA/IA (viii) Advice EA/IA on any contractual or technical disputes that may arise between contractor and EA/IA during the implementation phase. (ix) (x) Preparing overall disbursement plan, monitoring cost and project accounts. Undertake project monitoring and evaluation during the project implementation. (xi) Provide input on the field of responsibility to required monthly, quarterly progress reports and other reports as may be required. f. Distribution Engineer 3 Upper Zone (14 person-months) 14. The Distribution Engineer 3 Upper Zone will have at least a Bachelor s degree and preferably 10 years of experience working in a transmission and distribution power projects. He should also have substantial working experience in similar geographical, climatic and cultural conditions of the EA s country. 15. The Distribution Engineer 3 Upper Zone will undertake the following for distribution network expansion and rehabilitation in Upper Zone in coordination with the Distribution Engineer 1 Lower Zone and the Team Leader: (i) Conduct site visit, verify required voltage, distribution area, number of connection, capacity of the system, etc. (ii) Identify technical problems of current distribution network, advice remedial technical solutions, and propose appropriate replacement schemes (iii) Preparation of bid document for the distribution component (Central Discom) in accordance with ADB s standard procedures and guidelines and forward the same through the EA/IA for ADB approval. Modify the bid document as advised by EA/IA/ADB.

Appendix 4 19 (iv) Assist EA/IA during the tendering period, including but not limited to organization of site visits, assistance during the pre-bid meeting, clarification of tender documents, bid opening and bid evaluation. (v) Assist EA/IA in preparation of contract documents. (vi) Assist EA/IA in supervising the construction of the project distribution networks in Central Discom and provide guidance to the contractors so as to conform to the specifications. (vii) Identify any problem during project implementation, propose remedial actions and promptly report any outstanding issues to EA/IA (viii) Advice EA/IA on any contractual or technical disputes that may arise between contractor and EA/IA during the implementation phase. (ix) (x) Preparing overall disbursement plan, monitoring cost and project accounts. Undertake project monitoring and evaluation during the project implementation. Outputs (xi) Provide input on the field of responsibility to required monthly, quarterly progress reports and other reports as may be required. 16. The Consultant will prepare monthly, quarterly progress reports based on field data and preparation of progress reports in a format and detail acceptable to ASEB and the ADB. 17. The Consultant will maintain records documenting decisions made at meetings, progress on project implementation, financial records and changes to the contract plans. The consultant will assist ADB in preparing a project completion report and monitoring and evaluation reports as required. 18. All documents and reports would be made available on electronic format to ADB. 19. All reports will be in the English language.