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Bindu N Lohani, Vice-President, Knowledge Management and Sustainable Development, Asian Development Bank

15 Mar 2014

Regional equivalent of the World Bank in this part of the world, the Asian Development Bank is fast emerging as one of the important financiers of developmental activities in India. Its Vice-President, Knowledge Management and Sustainable Development, Bindu N Lohani, talks to Ankita Sharma about the bank’s vision and priorities in India. Excerpts.

How will businesses lead India’s energy, water and food security? How far do you think this mission can be accomplished?

India’s energy sector is facing challenges: energy security, energy access and climate change. The private sector’s participation is important. Policymakers have a critical role here to play in establishing the regulatory, policy and institutional frameworks needed to attract investment to the clean energy sector on the scale required. The government has to set the right benchmark for the companies, then scaling up should happen from the private sector. Regarding water, governments can do a lot to improve management of this precious resource. Water should be viewed as a resource to be managed effectively and as a service to be delivered efficiently. More water sector reforms and effective regulatory regimes are required. In the food sector, we are talking about the regional food value chain in which the private sector now has an enormous role to play.

What do you think is the role of PPPs in these sectors?

The suitability of public-private partnerships (PPPs) may vary from country to country. In quite a few cases where countries want to make something happen, such as building an airport for example, this endeavor cannot be left entirely to the private sector because they may not make the desired returns. So PPPs could be a very good tool to leverage the kind of resources we have and for stretching the ability to do certain projects beyond the government. Lessons from across the world should be reviewed in terms of where PPPs have been carried out and why they have been successful.

Enlighten us on the interest of ADB in this context. Is there specific interest in the energy sector?

When we talk about ADB’s interest, it is the same as the government’s interest. It is the partnership that is important. ADB-supported initiatives in the energy sector are helping promote economic growth in India and expand access to electricity. ADB’s energy sector investments have the largest share of ADB’s total investments in the country. ADB’s energy operations have taken into account greenhouse gas emissions since the 1990s. The maturing of renewable energy technologies, and the need to address Asia’s aging energy infrastructure, have in recent years led ADB to evolve its thinking. In 2010, we made our Clean Energy Program the umbrella program for all of ADB’s work in the sustainable energy sector – encompassing a number of technology-focused initiatives such as energy efficiency, wind, and solar – along with new and innovative approaches including renewable energy certificates, a clean technology marketplace, and work with the international carbon market.

What is the quantum of investment being considered for India?

India has been a member of ADB since its establishment in 1966. Over the years, ADB has aligned its India program with the government’s increasing focus on inclusive and sustainable growth. While continuing its support for infrastructure development in the energy, transport, and urban sectors, ADB is also now engaged in improving water resources management, agribusiness infrastructure development, promoting financial inclusion, and skills development. Since launching its lending operations in India in 1986, ADB has approved 168 sovereign loans amounting to $27.2 billion. The resource envelope for sovereign operations in India is likely to be about $2 billion per year for the next five years. ADB has been extensively involved in the energy sector in India and historically that has constituted nearly 30% of our total sovereign lending portfolio. When we look at the energy sector and especially the clean energy sector, out of our yearly lending of $14 billion, we invested about $2 billion in clean energy in Asia. Our clean energy portfolio features a range of renewable power and energy efficiency investments. This includes wind power, geothermal power, biogas and biomass systems, and hydropower projects of different sizes and energy efficiency projects in the industrial, urban and water sectors.

Do you think that better policies are required to to the energy sector?

To achieve energy security in a country like India, energy mix combinations– coal, gas, oil, renewable, nuclear are necessary. It is also clear that the government needs to develop the proper policy, regulatory, and institutional framework to encourage development of the energy sector. For example, if India is going to maintain its coal consumption, then it should consider the best technology. An additional issue in the energy sector is the pricing policy, which is a concern shared by and linked with the water sector. The way both electricity and water are sourced, treated, priced, and distributed can raise or lower energy and water demand.

Do you think subsidies are hampering growth in the energy sector?

In some cases, continued subsidy is impeding a number of newer and cleaner technologies from penetrating the energy sector and taking off. Government subsidies to coal, oil and gas can make renewable energy less viable because they become relatively more expensive when consumers pay below cost for fossil fuels. That is why policy and prices are critical. Subsidies are sometimes for all, with both rich and poor getting the benefits. It is for the country to decide who benefits most from those subsidies. Some countries have made it possible to offer selective subsidies, where everybody pays the complete price and then the poor are paid back. My view is that targeted subsidies may be needed to equitably distribute their benefits, depending on particular situations.

Where do you think India stands among this sustainability scenario?

I think that the consciousness towards sustainability certainly is there. The government is aware and taking notice. However, this realization needs to be present at all levels of society as well as in the private sector and elsewhere and could be implemented better.

Do you think India can leapfrog to the stage of becoming a major polluter like other developed countries? Is there enough money in the market to support the developing countries?

I think the approach of “grow and pollute now, clean up later” is very short-sighted and a very costly decision as well. It is certainly not an answer for big countries like India. We all need to move towards the right green growth path now. We need to think long-term because the path we take now will have lasting effects. Growth and environmental protection should not be seen as conflicting. Economies can grow responsibly, or they can fall behind. India has developed a low carbon growth strategy including mechanisms to promote green investment. These investments cover funding for low-carbon power generation and energy efficiency improvements— in short, the infrastructure of the future.

Are there any specific Indian states that ADB is working in?

ADB has had projects all over the country. In 1996, ADB began to shift its focus from central government to state governments to help maximize the developmental impact of its assistance. ADB gradually expanded operations to include low income and special category states to support the government in addressing inter-state disparities. Today, ADB operations cover more than 20 states in India. In the energy sector, ADB is supporting projects in Assam, Bihar, Gujarat, Himachal Pradesh, Madhya Pradesh, Rajasthan, and Uttarakhand.

What is your outlook for India?

I think the future of India is very bright and dynamic. However, there is a huge population in India working in informal jobs with little or no education. If we are not able to bring them to the next level, then there is an issue for concern. Inclusive growth is needed to help the poor move ahead as the social ladder moves forward.