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LESSONS:

India: Gujarat Paguthan Wind Energy Financing Facility

sector: Energy | country: India

The basic errors and omissions in the economic and financial evaluations raise issues of analytical failings and shortcomings in ADB’s quality control processes. Many issues are within spreadsheets and are not necessarily obvious: (i) the absence of information on the project’s merits as a least-cost addition to India’s generation capacity, (ii) the oversimplified methodology used by the Private Sector Operations Department (PSOD) for the economic cost–benefit analysis (no baseline ‘without project’ scenario); (iii) the presentation in the report and recommendation of the president (RRP) of inflated nominal financial internal rate of return (FIRR), which was stated to have been calculated in ‘real’ terms; and (iv) simple errors in transposition of figures into spreadsheets. They bring ADB’s analytical work and quality control into question and undermine confidence in the results.

Economic evaluation issues are not unique to this project. The shortcomings of the PSOD’s efforts to simplify economic analysis of power projects are most evident in wind power projects, particularly in situations such as in India where the volumes and value of output are influenced by the monsoon season and vary markedly throughout the year.

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