USAID to fund DRUM project

Agency to give $30 million to the project

U S Agency for International Development (USAID) has signed a memorandum of understanding (MoU) with the Indian government to fund the distribution reform upgradation management (DRUM) project. The agency will grant $30 million to the project.

The project is aimed at increasing the energy efficiency in the rural areas and will be initially implemented in the seven of the Indian states.

"We have huge potential to increase the energy efficiency in the rural areas. As per estimates, we can save as much as 25 per cent to 30 per cent of the energy in the industrial sector. With the DRUM project over 40-60 per cent of the energy in the agricultural sectors can be saved," S Padmanaban, senior energy and environment advisor, USAID told Business Standard.

The DRUM project will be initially implemented in the six states "" Karnataka, Maharashtra, Gujarat, Orissa, West Bengal, Uttar Pradesh and Delhi "" to reduce the principal technical losses in the rural sectors.

With the DRUM project, best of technology, financial management system and best management practices will be applied to curve the energy losses in the rural sector.

USAID is in talks with few of the banks in the country to provide finance for conversion guarantee from old equipment, motors to the new technology, to increase energy efficiency. USAID has already tied up with Gujarat Energy Development Agency (GEDA) to support the small and medium enterprises in Gujarat state. Later the same model will be applied in other states to enhance the energy efficiency of the SME sector.

The DRUM project is implemented in respect of the increasing commercial losses of the state electricity boards (SEBs).Total commercial losses of SEBs in 1992-1993 was around Rs 5000 crore without subsidy, which increased to Rs 3,50,00 crore in 2001-2002.

DRUM will be implemented in the rural areas as agriculture sector is one of the biggest users of electricity. The probable technical losses in the agricultural sector include 62 per cent at generation thermal, 8 per cent at generation electrical, 6 per cent transmission, 10 per cent distribution and 50 per cent at end-user.

"While the government have a role in establishing the appropriate policy frame work, the implementation needs to be carried out by private businesses, with need of appropriate economic incentives.

"Long-term sustainablity of the mechanisms needs well functioning markets and establishing such markets requires some interventions, including provision of financing." said Padmanaban.

After being successful the seven states, the Project will be replicated to other Indian states as well.