PROPOSED SUPPORT TO HUSK POWER SERVICES IN BIHAR, INDIA

UNCLAS NEW DELHI 002943 SIPDIS SENSITIVE STATE FOR SCA/INS AND EEB USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD DEPT PASS TO USTR CLILIENFELD/AADLER/CHINCKLEY DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT DEPT PASS TO OPIC LYNN TABERNACKI SM/SMEF TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN E.O. 12958: N/A TAGS: EAGR ECON ECPS EFIN EINV ENRG EPET ETRD IN SUBJECT: PROPOSED SUPPORT TO HUSK POWER SERVICES IN BIHAR, INDIA REF: SECSTATE 00116185 ¶1. (SBU) This is in response to reftel, seeking Post input into proposed OPIC support of Husk Power Services ("HPS") for the construction and operation of a rice husk waste-to-energy project in rural villages of India. Kolkata EconFSN spoke with Gyanesh Pandey, one of three co-founders of Husk Power Systems (HPS),which produces electricity by burning rice husks. It currently has three plants that provide off-grid electricity to over 1300 households in eight villages. HPS has received public and private sector funding, including a grant from the Government of India's Ministry of New and Renewable Energy Resources, to set up an additional 20 rice husk plants in the state of Bihar. In 2008 the company also won several prominent American business school plan competitions. ¶2. (U) The rural energy scenario in India is characterized by inadequate, poor and unreliable supply of energy services. The Government of India launched a rural infrastructure program in 2005, one of whose targets is electrification of 125,000 villages. However, a November 2008 government assessment indicated that only 38% of the target had been achieved in the last three years, highlighting the need for supplementary measures to provide electricity to India's villages. In Bihar, only 40% of the villages are electrified and just 6% of households have access to electricity. In the absence of reliable grid power and continued use of traditional biomass, more and more villages and small industries are opting for their own energy production units. State governments are encouraging the market segment by promoting it as a carbon credit source under the Clean Development Mechanism. ¶3. (U) According to a report prepared by the Government of India's Special Task Force on Bihar, the state's market potential for biomass projects, including co-generation projects, is 200 MW. Farmers annually produce 6.5 million tons of rice and 2.2 million tons of rice husk; sufficient to generate nearly 200 MW of power. In Bihar, approximately 4000 medium and small rice mills currently run on diesel generating sets. In the last two years, thirteen rice husk based gasifier systems have been installed in rice mills and other industries for captive power requirement. In the neighboring state of West Bengal 120 rice husk based gasifier units currently generate 22 MW of power. ¶4. (SBU) Post's media contacts that know Gyanesh Pandey and have visited the project sites were unable to identify any derogatory information on the investors' possible links to terrorism, money-laundering, corruption or violations of law. Post recommends OPIC extend a loan to Husk Power Systems for future expansion. ¶5. (U) Kolkata contributed to this cable. WHITE