Street lighting infrastructure in Bhubaneshwar, the capital of the indian state of Odisha, is outdated, inefficient, and in poor condition. Small streets and
residential areas have poor, if any, lighting. Resource inefficiencies also make it expensive, creating a burden on the city's budjet. The city's municipal
authority, the Bhubaneshwar Municipal Corporation, asked for IFC's assistance to desgin and structure the transaction, and manage a public private partnership
process to identiy a qualified private sctor partner to upgrade and manage the street lighting system.
Shah Investments, Financials, Developments, and Consultants Private Limited, an Indian Energy Services Company, was awared the tender. It will invest in and manage Bhubaneshwar's street lighting system and receive payments generated by realized energy savings. The city's citizens will benefit from better street lighting
without adding to the city's financial burden. The contract was signed on October 5, 2013.
Background
The Municipal authority of Bhubaneshwar, the capital of india state Odisha, knew it had a secret lighting problem. Although the main roads were well-lit, smaller
streets and residentials areas were lit with dim, patchy lighting or none at all. The city's street lighting fell far below national standards, leading to
constant complaints from the public. To make matter worse, owing to poor quality equipment, energy consumption of street lighting was exetrmely high, staining
the city's finances.
The cause of this problem was no secret. First, street lighting infrasturture was oudated.= and in poor condition. Second, the entire system was operated
manually and only with few personnel available, maintenance was insufficient. Only six people handled procurement, installation and replacement of luminaries and
customer complaints for a city with about 20,000 street lights. Third, no monitoring system was in place over 75% of the street lights lacked meters and
inventory records existed. The city could neither monitor nor control burning hours.
Bhubaneshwar Municipal Corporation (BMC), the responsible authority, understood that it did not have a techinical or financial capacity to modernize and manage
its street lighting system. It considered entering into performance based contract wit the private sector, whereby an Energy Service Company (ESCO) would
upgrade the street lighting infrasrtucture and improve management through metering, remote monitoring, compliance with national lighting standrads, and the use
of inventory records. ESCO would recover its inverstment by claiming a share of ebergy saving realized. But the track record of ESCO contracts in other Indian
cities were mixed. many failed because of poor prepartion and risk allocation.
IFC's role
IFC work closly with BMC throughout the process. The team carried out techincal, commercial and legal sue digilance, designed and transaction structure, drafted
bid documents, marketed the project, and provide the assistance throughout the bidding process.IFC also analyzed similar projects in Indiaand interaced with
several ESCOs to identify best practices and potential impediments. The findings were integrated in the project design.