The Asian Development Bank (ADB) has approved the use of Power Grid Corporation of India’s (POWERGRID) safeguard system as the benchmark for planning and implementing safeguards in ADB-financed projects.
The approval is based on ADB’s assessment that POWERGRID’s Environment and Social Policy and Procedures (ESPP) are well aligned with the objectives and principles of ADB’s Safeguard Policy Statement (SPS). It is the first time that ADB has approved the use of a borrower’s safeguard system in lieu of the SPS.
ADB also found that POWERGRID has sufficient capacity and track record to achieve the same safeguard standards as ADB’s SPS. POWERGRID has agreed to carry out an action plan to address minor gaps between the ESSP and the SPS.
This approval allows POWERGRID to use its ESPP for forthcoming ADB-financed projects. First application of ESPP will be for a planned solar transmission project.
“POWERGRID’s environment and social safeguard system has been recognized to match international good practice,” said Nessim J. Ahmad, Deputy Director General of ADB’s Sustainable Development and Climate Change Department. “The use of such safeguard systems in ADB projects is expected to build ownership, enhance capacity, and reduce transactions costs for borrowers.”
As laid out in the ADB Safeguards Policy, country safeguard systems constitute a country’s legal and institutional framework on environment and social safeguards. Use of country safeguard systems can be at national, subnational, sector, or agency level. The SPS supports the use of the borrower’s own system subject to assessment of policy equivalence and satisfactory capacity and track record of the agency.
ADB has been transacting with POWERGRID since 1995, providing eight government-guraranteed loans to India’s national power grid operator totaling $2.52 billion, and two nonsovereign loans totaling $750 million.