The World Bank has assured continued assistance to Andhra Pradesh in various sectors though it is reportedly upset with the new government's decision on supplying free power to farmers. Chief Minister Dr Y S Rajasekhar Reddy told newsmen this assurance came during a meeting with World Bank officials on Saturday.

"No doubt, they are unhappy with [the] free power policy [for farmers] announced by my government, but they have decided to give assistance for various projects, particularly for urban poverty alleviation and infrastructure, irrigation and upgradation of road network," he said.

Currently, six World Bank-funded projects are being implemented in the state with a total assistance of $1,587 million. These ongoing projects include AP Irrigation III project ($325 million), AP State Highway project ($350 million), AP Economic Restructuring project ($543 million), AP District Poverty Initiatives project ($111 million), AP Community Forest Management project ($108 million) and AP Rural Poverty Reduction project ($150 million).

The state government has posed the AP Urban Reform and Municipal Services project to the World Bank for assistance. The $100 million project is awaiting sanction. The government is formulating more projects for World Bank approval.

The previous Telugu Desam government under Chandrababu Naidu had taken up the controversial AP Power Sector Restructuring Project, funded by the World Bank. The World Bank had promised to provide $1 billion for power sector reforms in five phases. The government availed the first tranche of $210 million and implemented the reforms. 

However, this project was already "closed" during the tenure of the TDP regime after the government repaid the first instalment of $210 million and refused to take the project forward by meeting preconditions for availing subsequent instalments. The World Bank sought to reimpose some of these conditions through the AP Economic Reform Loan but both phases of APERL, too, were "closed" in 2002 and early 2004.

The power sector restructuring project stipulated the unbundling of the AP State Electricity Board through the creation of AP Genco (generation corporation) and AP Transco as well as four power distribution companies. The AP Electricity Regulatory Commission was also set up to fix power tariffs annually. But the previous government did not take up privatisation of distribution companies.

Rattled by a protracted agitation against the steep hike in power tariffs in 2000, the TDP government refused to effect tariff hikes in subsequent years or to phase out subsidies for the power sector as stipulated in the restructuring project.