The World Bank will extend a loan of $648 million (about Rs 2,888 crore) to state-run THDC India for constructing the Vishnugad Pipalkoti Hydroelectric Plant on the Alaknanda river.
This hydro power plant on the Alaknanda river is expected to generate 1,665 million units of electricity annually.
"The project will help meet the sharp daily spurts in demand from households and industries at peak electricity consumption time. This will represent a valuable addition of peaking power to India's Northern Grid, which faces severe power shortages at high-consumption times," the World Bank said in a statement.
The 444 Mw Vishnugad Pipalkoti Project would also help reduce India's greenhouse gas emissions by 1.6 million tonne each year, compared to a thermal plant of the same capacity, the multilateral lender noted.
The project will build a 65-meter diversion dam near Helang village in Chamoli district of Uttarakhand to create a small reservoir in the Alaknanda River.
"Hydropower is one of cleanest means of electricity generation and the Vishnugad Pipalkoti Hydro Electric Project is a priority project that will help relieve power shortages in India," Joint Secretary in the Department of Economic Affairs (DEA) Venu Rajamony said.
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The negotiations for the loan, held between THDC and World Bank, concluded on June 9, 2011. With this, the project has achieved full financial closure.
"The project [Vishnugad] will also provide Uttarakhand with a royalty of 12% of the power generated, which is estimated to be around Rs 90 crore [$20 million] each year at expected tariffs," the statement noted.
THDC India is into hydro power generation.