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The Government of India and the German Government’s Development Bank KfW recently signed
a loan agreement for 150 million euros (around Rs.1,050 crore) for the construction of the
Shongtong Karcham hydropower project in Himachal Pradesh.
The 450-mw Shongtong project is being developed by Himachal Pradesh Power Corporation
Ltd as a run-of-river plant on the Satluj River in Kinnaur district. In addition to the financial
resources provided by Himachal Pradesh and the loan from KfW, the project is co-financed through
a $315-million loan from Asian Development Bank.
The KfW Loan will primarily finance the electro-mechanical equipment of the 450-mw power
plant, while the funds committed by ADB will be used for the civil and hydro-mechanical works and
supplies. KfW’s loan forms part of the Financial Cooperation between India and Germany. It
symbolizes the enduring partnership of India and Germany, a KfW statement noted.
Himachal Pradesh has a hydropower potential of about 20 GW which is roughly one-fourth of
the explorable hydropower potential of India. So far, 7 GW have been developed primarily by
central/joint sector undertakings and the private sector. Due to various factors like the technical
complexity of hydropower plants, sensitive social and environmental issues, lengthy procurement
and construction procedures, commercial banks are hesitant in extending long-term financing to
such projects, the statement observed.
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