ISLAMABAD, Dec 20: The Asian Development Bank (ADB) will provide $1.7 billion to remove transmission bottlenecks to power delivery and help improve management of Punjab's water resources.

The $800 million financing facility has been approved for removing transmission bottlenecks, while $900 million will be offered for increasing productivity in the province's irrigated agriculture through a multi-tranche financing facility.

The funds will rehabilitate and expand parts of the country's transmission system to meet present and anticipated future demand and ensure that system's operation and maintenance continue.

Excess load on transmission lines at substations is one of the critical factors, causing transmission and distribution losses in Pakistan's power system. At the end of 2006-07, more than three quarters of the country's 500kv and 69 per cent of its 220kv transformers were overloaded.

According to an ADB announcement on Wednesday, Pakistan's present transmission system faces considerable risks and costly servicing because it is operating at or above rating limits. The system as it stands cannot keep up with present demand and risks major delivery constraints. Providing more reliable power is essential for growth and expansion of Pakistan's economy and, in turn, economic and social development, the bank said.

Recognizing these issues, the country's sole transmission company, the National Transmission and Dispatch Company, in coordination with the ministry of water and power, has prepared a transmission sector roadmap for 2007-16. Through an investment plan estimated at $3.9 billion, the new ADB funding is expected to address the system's current shortcomings.

The ADB's power transmission enhancement investment programme will meet about 20 per cent of this cost over a period of 10 years. Using the multi-tranche financing facility, the government can make period financing requests that will be converted to separate loans.

The ADB planned to fund 19 sub-projects to provide 26 transformers, two new substations, 50km of transmission line and one static variety compensator.

The programme for Punjab will meet about a quarter of the estimated total cost of $3.5 billion to upgrade the state's irrigation and water resources infrastructure to modern standards.

Irrigated agriculture in Punjab accounts for more than a quarter of the province's gross domestic product output, employs about half of the labour force, and uses more than 90 per cent of water resources. However, its service level has been adversely impacted by demographic pressures, new production technologies, climatic changes, cropping patterns, floods, etc.

To address such problems, the ADB loan programme will finance comprehensive rehabilitation and upgrading of the Punjab's irrigation infrastructure, improve strategies and practices for groundwater management and facilitate improved irrigation technology.