The investment would upgrade electricity distribution in Orissa, where the annual per capita income is less than $ 250 million and less than 20 per cent of people have access to electricity, a statement issued here on Thursday said.

This is IFC's first guarantee transaction of local currency loans in India, a mechanism that protects local companies against foreign exchange risks. BSES Limited, a leading private sector utility in India, is the sponsor, the statement added.

With the investment, WESCO and NESCO will improve the electricity distribution sector, including connections in rural areas, upgrading and expanding power lines, new metering and installation of transformers, capacitors, and aerial insulated cables.

The work will improve quality of supply and consumer services as well as economic and industrial activity. The project will help significantly reduce distribution losses over the next few years, which could lessen the demand for power generation and decrease the emission of greenhouse gases, it added.

Mr Vivek Talvadkar, director of IFC's power department, said the projects should encourage other Indian states and countries in South Asia to accelerate power sector reforms, privatise state-owned distribution systems, improve quality of service, and increase power connections to rural consumers.

"The strong commitment by the Orissa government and excellent cooperation shown by the Grid Corporation of Orissa, other state agencies, BSES Limited, and the World Bank group contributed to successful project structuring under difficult market conditions", he said.